Pre-industrial economies did not favour large scale, oligopolistic or monopolistic economic structures (power structures are an entirely different matter).
The rise of industrial, hand in hand with what we now call “Capitalist” economies (the word is an invention of the 19th Century) economies saw the rise of oligopolies – think of the “big three” US auto makers, or closer to home for Australians, our “big four” banks.
But if we look at the largest companies in the world today, the top five of which now are all what we still (but will less and less) call technology companies (Apple, Alphabet/Google, Microsoft, Facebook, Amazon) we can start to see a new pattern emerge.
Between them, Google and Facebook in 2016 captured two thirds of total online advertising spend, and 99% of the increase in advertising spend for the year.
In mobile devices, Apple is estimated to take as much as 91% of total profit.
As more business categories are atomised and reconstituted by technology, and we move to a network economy, these “winner take all” models, with one or two big winners, and fewer and fewer hyper-niche players will appear in more and more parts of the economy.
In networked economies, as Metcalfe, the inventor of ethernet, observed about physical networks (his initial observation had to do with networked printers), the value of a network is a polynomial function of the number of nodes.
Which roughly translates to the idea that as the number of people, or devices, on a network (be that Facebook or the internet, or…) increases, the value of the network doesn’t increase in step (twice the number of nodes, twice the value), but more or less as the square of the number of nodes (twice as many nodes means two squared the value, or 4 times the value).
Which for small numbers doesn’t seem all that important. But as those numbers increase (4 times the size, is 16 times the value, 8 times the size is 64 times the value). You get the picture.
The lesson is most businesses must embrace network economics, and aim to reach as many customers as possible. And of course, the lowest marginal cost for doing so (coupled with the approach that yields the most data and greatest insights into your customers, collectively as much as individually) lies in using what a certain category of folks call “digital channels”.
This has meant, for many (particularly, but not exclusively) larger companies, one thing: Native Apps.
But, in recent years, after the initial app goldrush, we see the power law distribution of network economics emerge once more.
- the top 1 percent [of app publishers] accounted for 70 percent of all downloads.
- Mobile Users Spend 80 Percent of Time in Just Five Apps
- “Most smartphone users download zero apps per month”
- a “staggering 42% of all app time spent on smartphones occurs on the individual’s single most used app,” comScore reports
- “13 percent of smartphone owners accounting for more than half of all download activity in a given month”
- 60% of apps have never been downloaded
- 94% of U.S. App Store Revenue Comes from the Top 1% of Monetizing Publishers
In short, using native apps as a path to reaching a large number of potential customers and benefitting from crucial network effects is close to impossible.
But, in the meantime, the Web has responded to the very significant impact that native apps had on user behaviour.
Progressive Web Apps, the ability for web content to work offline, to be installed on the user’s device and be treated as first class citizens, to hook into the native platform notification system (a critical aspect of maintaining ongoing engagement with users), and other device capabilities (cameras and microphones , among other things) are increasingly a reality, even on iOS (Service Worker is now under development in WebKit, WebRTC and sophisticated access to cameras and microphones is in iOS11, shipping in weeks).
And, of course, as platforms fragment across operating system, device type, input modality, screen size and resolution, the underlying Web technologies and practices that have emerged around “Responsive Web Design” bring down the cost of reaching a far larger audience, something we’ve observed that is critical in a networked, winner takes all economy.
Something that is both increasingly expensive to achieve via the path of native apps, and increasingly unlikely – if not impossible – following that path.
In the “native is always better” mania of the past few years, we’ve focused so much on one aspect – our personal aesthetics, an obsession with janky scrolling, or buttery smooth animations – over many others.
Now no-one is downloading new apps anyway, perhaps we can overlook these trivial concerns and embrace the opportunity the Web presents in a networked economy.