Small Beginnings guarantee Big Returns

In a reversal of conventional wisdom, start-ups are establishing themselves on mobile platforms before tackling the vastness of the internet

It has become clear that we are at the beginning of a new age in the internet business. Where once personal desktops and laptops were central to experiencing the World Wide Web, increasingly, mobile technology is invading this space, thanks to the prevalence of smart phones. It is not surprising then, that internet start-ups are following suit. Conventional wisdom dictates that these start-ups should first establish their reputation on the web first, and then move into the mobile market. This more traditional approached is now being eschewed: internet start-ups are increasing following the reverse route by first establishing their presence on mobiles, and then getting on the web.

Perhaps the biggest indicator of this new trend is the sale of the mobile start-up Instagram to Facebook for a whopping $1 billion. This is a sale that would not have been possible a few years ago. Today, it’s a different story with smart phones being more ubiquitous than ever before and making it possible for new start-ups to focus entirely on developing for mobiles. This is a market where internet giants like Facebook are trying to find their footing, and are increasingly looking at integrating their services with a more ‘mobile’ approach. In such a scenario, it is possible for mobile-only social networking sites like Path and Foursquare to successfully create niches for themselves.

It’s not just the technology end of the business that is looking more closely at the mobile platform: funds are now increasingly being directed towards company that have adopted the new approach. According to data released by the research firm CB Insights, American venture capitalists put 10 per cent of their investment into mobile apps and companies during the last quarter of 2011, while 12 percent of the deals in the market were mobile-related, as opposed to the usual 7 or 8 percent in previous quarters.

There have been many successes to back these investment decisions. OMGPop, which created the overnight sensation Draw Something, an inventive twist on the popular board game Pictionary which was created for the iPhone, was recently bought up by gaming giant Zynga for $200 million. This was a timely deal for both OMGPop and Zynga: the former had been on the verge of shutting down before it hit pay dirt with Draw Something. The latter, on the other hand, have noticed the user migration towards mobile platforms, was looking for a way to reduce its dependence on Facebook app games, like Farmville and Cityville.

One of the main reasons that the current technology environment is prompting a re-think, is because mobile phones have made instant sharing possible. It’s no longer enough for people to upload an entire album at the end of an event: applications like Instagram have made it possible for events to be shared as they are unfolding. There is a sense of immediacy to this technology that desktop computing lacks

This urgency is amplified by the fact that mobile apps which have been customized to fit certain devices run faster than their web counterparts. The whole rationale behind using mobile apps is that they create instant gratification, which is why the apps themselves have to be pretty quick to deliver. This is something that cannot be achieved with personal computers. Also, apps are easier to market and distribute thanks to the simple mechanism of app stores, where a number of apps can jostle side-by-side to get the user’s attention

To fit into this mobile-friendly market, existing web applications have to be shrunk down to a more stream-lined and uncluttered look and feel. For start-ups like Rovio, makers of Angry Birds, this question does not arise because they began with mobiles and then moved onto the Web. On the other hand, companies that started with websites and that are now moving into the mobile market, its a big challenge to produce a service or product that is simple, fast and efficient, not to mention well-designed and user-friendly.

While some pundits have claimed that the mobile technology is the future, there are sceptics who question the staying power of mobile apps. Their main complaint is that mobile apps tend to be self-contained and limit users from experiencing the no-holds-barred kind of interconnectivity that the Web offers. Their self-contained nature is more convenient for the companies themselves which have more control over how the apps will be monetized; while for the users, it simply feels limiting. It would be far easier if a link tapped in one app would allow it to launched smoothly in another app, but this is a future that is still far. Interconnectivity between apps is right now limited to simple data syncing.

Given this division of opinion, it’s a fair debate as to whether its wise for start-ups to invest all their energy and talent into developing for the mobile market. It’s not yet easy to say what the future will hold for them, but at the moment, the mobile market has the shine of a billion dollars and it is looking bright.