Super Apps

Context 

My phone has become an integral part of my life. It has happened not because I am talking to people on the phone all the time but because the phone has many applications (apps) that I use for various purposes. These days there is an app for everything - buying coffee, getting a ride, ordering food, paying bills, investing in stocks, health, social networking, news, etc. There are over 2 million apps in the Apple App Store. Most apps are free to use. Some apps have to pay 15-30% of their revenue to Apple and Google (two main providers of Application Platforms) if they are selling digital content like movies, games, books, etc. Apps like Uber, eBay, DoorDash, etc. do not pay anything to Apple and Google because they are selling physical goods like food, rides, consumer goods, etc. Just the apps on the Apple App Store generated $519B in 2019 revenue. If the App Store were a country, it would be number 24 on the GDP list right behind Sweden. 

Two major drivers of success for the apps are User Experience (UX) and Customer Acquisition Cost (CAC) i.e. how people feel when they use your app compared with the alternatives and how much marketing money do you have to spend to acquire new customers. To understand how the tech ecosystem works with apps see my previous blog post on the dynamics of the tech ecosystem.  

Generally, apps are designed to fulfill a single purpose. For example, all you can do with the Lyft App is get a ride, Google Maps is used for direction, Weather app is used to check the weather, etc.  This creates a better UX compared with using a mobile browser. 

Most apps, even the ones with good UX, don’t become sustainable businesses because of the high CAC. 

What are Super Apps? 

Enter Super Apps. Basically, these are apps that can do multiple things as compared to apps that can only do one thing. The best example of Super App is WeChat (owned by Tencent), which you can use to chat with friends, send/receive money, make payments at retail stores, order a ride, pay bills, invest money, read the news, play games, etc. The apps within WeChat are called Mini Programs and WeChat has 2 million of these Mini Programs which do more than one billion daily transactions. Ironically, Apple App Store also has 2 million apps. 

Super App

WeChat is mainly used in China. Other Super Apps include Alipay, Grab, Gojek, and Zalo. All popular in Asia. 

Super Apps can be divided into two categories: Open Super Apps (OSA) and Closed Super Apps (CSA). OSA allow third-party developers to develop and publish Apps within their App. WeChat is an example of OSA. CSA, like Grab, are multi-purpose but everything is built in-house, they don’t allow third-party developers. OSA are more like platforms because they have to build a developer community to build Mini Programs. From here on I will refer to OSA as Super Apps and to CSA as Multi-Purpose Apps. 

Developers like Super Apps because of three main reasons: 

1. They get customers for their apps with minimal CAC because Super Apps have large audiences and developers don’t have to spend money on acquiring customers.

2. The development of the apps is easy and straightforward using HTML5. Hence, the integration and deployment of the apps within the Super App is fast and easy. They don’t have to worry about creating two separate apps - one for iOS and another for Android. Also, they don’t have to think about approvals from Apple and Google and maintaining two separate codebases. 

3. Even if the developers feel that they need a stand-alone App, they can test the concept inside another app without spending much money. Quibi might have benefited by launching as a mini program before they launched their full app. 

Users benefit from Super Apps because of three main reasons:

1. They don’t have to go through the process of downloading new apps.

2. Mini programs require fewer clicks to do a task than a stand-alone app because users don’t have to go outside the Super App and launch the stand-alone app, log in, etc.  

3. It is easier to plan group activities together inside the Super Apps with friends. For example, two friends can plan to go to a concert and choose seats next to each other but pay separately. 

The basic idea to keep people inside your platform is not new. AOL (a dial-up Internet Service Provider)  tried to do it in the 1990s, wireless operators like AT&T, Vodafone, and others  tried in the early 2000s, and Nokia tried with Ovi in the late 2000s. Apple finally succeeded with the App Store in 2008 and Google copied their success shortly after. 

Why are Super Apps more popular in Asia and not popular in the West (so far)?

There are many possible reasons why Super Apps are popular in Asia and not in the West. Following are a few: 

1. Evolution - The Internet and the browser were widely adopted in the US in the late 1990s. People got used to doing things online on Personal Computers (PCs). Internet usage did not really take off on the phones until the late 2000s when iPhone and Android came to market. In the US and Europe, people got used to doing things online using PCs. Then they slowly migrated to apps in the 2010s when companies that had websites such as Amazon, Google, Facebook, Twitter, Netflix, Bank of America, American Express, Paypal, etc. launched apps. Then came app-only companies like Uber, DoorDash, etc. So, the users have an app for everything today.  

In Asia, PCs were not widely adopted for personal use because they were expensive, so, for most people, their first exposure to the Internet was on  mobile phones. Tencent, the parent company of WeChat, had many products for  PC users and the QQ chat for mobile users. Both Apple and Google had stronger developer networks in the US than in Asia so in the early days, and most Apps were developed for the American and  European audiences. On the other hand, Tencent had developer relationships and an ecosystem through its gaming business and QQ. WeChat was launched by Tencent in 2011 and added payments to the app in 2013. One year after the launch of WeChat it had 100 million users, and one year after the launch of WeChat Pay, it had 400 million users. The first Mini Programs on WeChat were games. The company used this fast adoption and built in payment availability to entice developers to develop other Mini Programs. The users quickly adopted the Mini Programs because the UX was better than what was available on a browser or stand-alone app. Often, the only way to access a service electronically was on WeChat. 

Google, Facebook, Twitter, and many other US based apps were never allowed by the Chinese government to fully launch in China and that influenced how things evolved in favor of WeChat.

2. Application Platforms: In the US, Apple and Google moved to launch their application platforms where third-party developers could publish apps. Other popular tech companies with millions of users like Microsoft, Nokia, and Blackberry (Research In Motion) could not get their act together and they disappeared from the application platforms space. Apple and Google have had no incentive to be Super Apps since they are the Application Platforms and make money from their app stores. 

3. Advertising: Facebook and Twitter emerged in the 2000s as popular social networking apps. They went after the advertising market as their revenue model. The global advertising market is over $600 billion so it made sense as a business model. Hence, they did not want to become Super Apps until Facebook tried in 2015 by separating Facebook Messenger as a separate app. Snapchat came out in 2011 and in June 2020 announced its intent to become a Super App. 

4. Homogenous Market: WeChat is mainly a Chinese app and Facebook, Twitter, Snap, are global apps. It is much more complex to serve heterogeneous markets because the product has to be adapted to multiple languages and cultures, sales offices have to be set up all over the world, people with different backgrounds have to be hired and trained, government regulations have to be dealt with for every country. As these companies continue to grow and continue to capture a bigger share of the global advertising market, there was no need to think of anything but advertising. In contrast, in a homogeneous market, expanding into new categories is relatively easier and that is what WeChat did in China. 

Apple and Google are trying to grow by expanding into new markets with the Magnet Strategy. 

Snap Minis 

A few days ago, Snap announced Snap Minis at its partner summit. The concept is a copy of WeChat Mini Programs. However, UX is different from WeChat. There is much tighter integration with the Keyboard and the chat experience. At the launch, Snap Minis are focused on planning and doing activities together with friends. For example, sharing notes for studying, meditating together, going to the movies, etc. 

Snapchat - trying to be a Super App

Snap shared 7 Minis at the launch. We will see how many third-party developers adopt the program. A big limiting factor is that Snap does not have payments. Furthermore, the UX will have to change if Snap goes from 7 Minis to 700+ Minis. 

Facebook attempts to be a Super App

Watching the success of WeChat as a platform, Facebook separated the messenger feature from the Facebook app in 2015. The plan was to copy WeChat and use the Facebook messenger app as a platform for third party developers to build Mini Programs on. Forty third-party apps were part of the Facebook Messenger launch. None of them panned out. The only app that people use is calling which is not a third party app. Facebook has not been able to gain the trust of the developer community. Zynga, a gaming company that used Facebook as a platform, lost its business overnight when Facebook changed its policies. This left a bad taste in developers' mouths. Then, starting in 2016, Facebook started seeing a backlash from the community for its data breaches, and its role in the elections, etc. so many third-party developers might have wanted to stay away from Facebook and continue developing apps for iOS (Apple) and Android (Google). 

Facebook - continues to struggle with becoming a Super App

Last year, Facebook launched Libra, a blockchain project, where third-party developers can develop new money-related applications. As expected, it has run into regulatory trouble. If they succeed, the first applications are planned to be people on Facebook being able to send money to each other and that might become a first step to becoming a Super App, however, I doubt it. 

Facebook is also trying to make Whatsapp a Super App, again following WeChat lead by first adding payments to the app. The attempts in India are slow and ongoing. It launched payments with Whatsapp in Brazil a few days ago.  Facebook Pay has been around for a few months. We will see how these efforts pan out. 

Facebook is doing spectacularly well in advertising, and their early experiments with ecommerce have been somewhat positive. We shall see how they continue to evolve. Facebook might be more suited to become a Closed Super App than an Open Super App. 

Obstacles to Super Apps in the West 

Three issues hinder the adoption of Super Apps in the West. They are: 

1. Dominant ecosystems: Apple and Google have dominant developer ecosystems. If another company tries to threaten their dominance with Super Apps then they can easily change the App Store (or Play Store - Google’s equivalent of Apple’s App Store) policies and limit the “superness” of the apps. For example, an extreme scenario might be that developers start developing mini apps for Snap, Facebook, etc. and stop building apps for iOS and Android. If that happens, Apple and Google might block third-party Mini Programs or something like that. Wechat is successful in China because Google Play store is not present in China and Apple always makes exceptions in China. If something like WeChat begins to dominate the US and the European markets then we will see how Apple reacts. Furthermore, if people stay inside a Super App most of the time, it diminishes the value of the underlying Operating System and hardware. 

2. Payments: People in the West have already adopted Apple Pay or Google Pay, it would be tough for an app to get users’ credit card or bank account information if they are already using Apple Pay, Google Pay, Venmo, PayPal, and Square, etc.  Facebook and any new app will face trust issues and the incremental value of having payments on another app is limited. And, without payment information, it would be hard to create a UX better than a standalone app. 

3. Privacy and Regulations: The western governments are not happy with Apple, Google, Twitter, and Facebook because of their dominant positions. Consumers are concerned that Google and Facebook have data on almost all of their online activities. Western consumers might be wary of allowing another app to have all their data including payment information. If Facebook increases its market dominance by becoming a Super App, it will most likely face regulatory hurdles,and, if another company becomes a Super App, it might face regulatory hurdles down the road. 

Summary 

Super Apps are good for developers and users but it is hard to create new developer ecosystems when familiar and well-established alternatives are available. In the meantime, the tech community is closely watching Snap Minis.