App.io’s journey to a valuable customer segment after dropping 10,000 Apps
App.io’s journey to a valuable customer segment after dropping 10,000 Apps
In this podcast series we ask experienced Appreneurs for one success story and one fail.
In this episode of Mobile Engagement Podcast: Ed Dowling, Co-Founder of App.io (was Kickfolio). App.io is a platform for App Developers to stream instances of their App in the cloud.
Ed talks about how they “went-wide” initially and attracted thousands of App Developer customers to their platform. The use-cases were very broad from developers “kicking the tyres” to others like me who wanted to show early iterations of products to paying customers – a very useful tool for development shops. But over time they evolved to 2 products that delivered better revenues and provided greater value for their customers.
For all our interviews we ask the interviewee to score their own anecdote based on 3 axes of: acquisition, UX and retention. Because Ed’s story wasn’t a classic App story because they are a platform. But his “ah-ha” moment to uncover a valuable customer segment by understanding their customers is a classic component of any retention strategy. With that in place they knew how to engage their most valuable customers. So Ed’s anecdote scores 0,0,8.
Let us know on our Twitter account how you score it.
The App.io story is a great roller-coaster ride starting with launch out of 500 Startups with a novel product that allowed App Developers to show demos of their Apps on the cloud. It attracted thousands but revenues were flat. Eventually they segmented and converged on a set of App Owners who would pay a premium price for a very tightly scoped product featureset.
DAVID: Hi, this is David from Street Hawk. I’m here with Ed Dowling. He’s the co-founder of Kickfolio, now called App.iO. I first used Kickfolio when we were doing an app for retailer and I heard about these 500 Startups Company that sounded really cool. They were basically allowing you to actually run apps on the cloud. We wanted to get early reviews from the stakeholders of this retail company without having to go through a completely traumatic test flight ordeal. I’m sure many of you developers out there know what I’m talking about. So we used Kickfolio for that, and it was a really great experience.
Ed was telling me there’s been some kibitz in the business since those days, so I’ll hand it over to Ed and get him to introduce himself. How are you, Ed?
ED: Oh, good. Thank you, David. Yes, thank you for being an early customer. Kickfolio, now App.io, has gone through quite a few transitions since we started up in 2012. We’ve been trying to find the right business model and the right pricing model to try to fit what we do, which is essentially stream mobile apps from the cloud to any web browser instantly and on demand. Just like Netflix and Spotify do for movies and music, we do for apps.
So it’s been a really interesting journey because a lot of the initial assumptions you made about who would find the most value from this product have been proved wrong, and so it’s been a really interesting journey to try and get revenue and increase revenue and growth in that and find the product market fit for the company.
DAVID: So back in the day, I guess the assumption that you made was it was people like us who wanted to actually do early demonstrations, and then the second thing was basically that you could actually have somebody arrive at your website and just play around with the app. Is that the starting hypothesis?
ED: Oh, absolutely. As app developers ourselves, we envisaged that there’s a way for app developers to put their portfolio online. That’s where the Kickfolio name came from. It was being able to have your app portfolio there for anyone to view. We put the beta version of this streaming technology there as an alternate to screenshots and to text and video. But what we found is that people gravitate to that. That was a huge thing to be able to stream and play apps right there at the web browser – no need to download anything, no need to worry about certificates or any of the traditional hassle involved with distributing pre-release builds. People loved that.
Around the same time we got into 500 Startups, we basically said, “Well, this is our focus. This is what we’re all about.” Because it is hard to monetize small developers and we just found it wasn’t a compelling use case, it wasn’t what we were really passionate about just doing portfolio. We were really extremely passionate about the potential this technology had, so we really honed in and focused on that.
DAVID: And where have you landed today?
ED: We raised venture capital, and that’s really enabled us to build out the technology and to build out the infrastructure around it. Today we serve two main verticals: what we call our enterprise customers who use the platform for testing and customer support, and advertisers who let users try an app as part of an ad unit.
One of the big learnings for us over the past six months has been around that enterprise use case, where we knew that people were using it for demonstrations and pre-release builds, like yourselves. There was also this huge group of customers who were getting a lot of value out of it by letting key people within the company test their apps and easily distribute them internally before releasing them.
Likewise we’ve been gob-smacked by how many people were using it for customer support. To give you an example, one of our customers, eBay, has rolled out App.io to 200 people in their call center. So when you call up eBay and you say, “Hey, I’m having trouble with mobile app, I’m having issues here,” someone at the eBay call center would traditionally have to have a physical device, an iPhone or an Android device to actually walk you through the app. But now they can simply spin an App.io webpage and they’re able to get a copy of the eBay app running and they’re able to walk their users through the app, live from the phone.
So, yes, that use case has become huge over the past six months for us. It’s really awesome to see the product evolve into these markets that we’ve never originally envisaged. I think as companies, like eBay, are seeing more and more of their traffic come from mobile, it’s harder and harder for them to provide customer support. So, we’re filling that void there; we’re filling that gap. Where traditionally a website was a fairly uniform experience and very easy to replicate in a customer support environment, it’s harder when you start involving native mobile devices and all the different types of mobile devices that are out there.
DAVID: Wow, that’s a really amazing pivot in that sense. Just thinking back to the Walmart interviews, Stuart was saying about how very small problem could end up generating a huge amount of support ticket loads when you’re actually operating at that kind of scale. So, you know, eBay is an example of a great enterprise customer with really huge user base that they could pick up a lot of efficiencies on that.
ED: Oh, absolutely. And the cost savings that they get on that, you know, they don’t have to equip their agents with physical devices. It’s this instant, on-demand thing that they can spin up in a web browser. So, for them, it really helps them serve their customers better and much more efficiently than they previously could.
DAVID: Right. So does that mean that the customers that are really liking this new pivot or this new way of using the product are typically the top end enterprise guys or is it also gamers that might have half a million users?
ED: Yes. So, it’s interesting. For this enterprise product, we think of them as two different types of customers because I think you have to, in terms of how you market to them, how you acquire them. They have very different needs.
The enterprise customers—eBay is one example, Sales Force is another example, who use it for internal testing—these are large companies who, for them, apps are becoming how they do business. So we are finding that the product is appealing and is valuable to that, I guess, higher end segment (valuable customer segment).
Previous and still extremely popular, we have a number of app building platforms, like business apps and Cvent who use the platform, you know, people build the apps through a website and then they’re able to preview them as it would appear on the device without having to put a build on their phone.
So we’re definitely seeing those high-end use cases come out. To be honest, they’re the ones that are the most valuable to us in terms of that nexus of customer support time and sales time and all of that that you need to spend with customers. Those use cases and those companies, you get a lot of value from it, and we love serving those guys.
DAVID: This is a really interesting thing, because listening to the Andreessen Horowitz podcast on mobile, really they’re starting to talk about how we don’t see it but the shift to mobile is not a shift to novelty but it’s a fundamental shift in terms of things that you’ve been using at desktop today. So today you may generate a 40-page Power Point once a month on your desktop. Well, they think that what’s going to happen is all of these apps are going to be rewritten so that mobiles and tablets won’t purely be consumption devices; they’ll be creation devices as well.
Then you combine that with the massive footprint of potentially four billion people who can be using this globally, then the actual opportunity on mobile to actually redo your business to mobile devices. Like you’re just saying there about Sales Force is actually shifting their processes to be fundamentally mobile-oriented, that just seems to be an incredible game-changer in terms of how mobile goes from being a consumption thing to a creation thing and very deeply embedded in enterprises.
ED: Yeah, absolutely. I think IBM’s move, in partnership with Apple, in that direction is a huge sign of where things are going. There’s a lot of support infrastructure internally with companies that is built around a traditionally desktop environment where you can call up IT with a problem when you’re with a large company and they can screen-share into your desktop and solve any problem remotely. That solution doesn’t really exist at the moment for mobile, so that’s definitely where we see potential. As more and more “real work” shifts to mobile devices, there needs to be an ecosystem there that can support it, and we see ourselves as being absolutely pivotal to that ecosystem.
DAVID: All right. Well, coming back to the key question in regards to what we’re doing with this podcast series is about, where did startups, particularly mobile app developers and product managers or mobile marketers, actually have some sort of “aha moment that change the way they engage users or some kind of user inflection point.
ED: I think it’s really interesting. As a company, we had a very big “aha” moment over the last six to seven months, and it’s been around where does this product fit? What’s the product market fit of this service we’re operating?
You’re right. We had 10,000 unique apps on the platform, we had thousands of users, people were really enjoying it, and all of the metrics that traditionally matter were going up into the right, you know, growth and engagement. All of that were phenomenal, but revenue was stagnant. That was really fascinating because how can it be stagnant when everything is going up and more and more people are using it and there’s more and more usage happening?
We tried multiple different pricing models and strategies to fit all of the use cases and all of the customers that we have on the platform. When we started looking at the data, we were basically faced with we can’t afford to keep this operating from the infrastructure and support standpoint for thousands of users and tens of thousands of apps.
ED: Yeah, it becomes huge. But it’s nowhere near profitable for us in its current form, so what do we do? We looked at the data with a fresh set of eyes and we realized that we were delivering a tremendous amount of value to a really small fraction of the users, like Sales Force and eBay and Cvent and business apps. But we were only delivering moderate and little value to others. We failed to adequately segment and understand our users. So that was a huge realization where we started to think, “Hey, hang on a second. A very large percent of our usage is actually coming from a small percentage of our users. What does that mean?”
We did something that was hugely difficult and kind of the antithesis of growth, which was we emailed those thousands of people who were using it and said, “Sorry, in eight weeks, we’re shutting it down. We’re discontinuing the product. We’re sorry about that but we can’t afford to keep it going,” which was a very hard thing to do. But since making that call and since really focusing on our core customers or on the core value that we deliver them, we’ve been able to increase our revenue by orders of magnitude. It has gone up more than ten times in a very short space of time, which has just been incredible.
DAVID: That’s great. That’s a great story. I know for me that when I received that email, I went “Oh, that’s a shame,” but I didn’t actually cry. I think that’s like a startup has to identify. My friend Mick says, “When customers want to walk over broken glass to use your product, that’s when you know you actually got the right customers.” So I presume that your enterprise customers were more like that, whereas guys like me that sort of came and went based on a project, you know, we didn’t really shed a tear.
ED: Yeah, absolutely. Although it is hard to hear that people didn’t care as much about the product as we thought they would, it’s been amazing since we’ve just been able to focus on the core customer and it’s just been incredible from a company growth standpoint. It’s allowed us to shed a lot of time that would typically have been with support and it’s allowed us to make the entire infrastructure more reliable and faster and more optimized because it’s a more focused use case.
DAVID: What do you think about this? I got like a hypothesis which is that startups need to go wide initially in order to actually have enough data, because if you try and actually make a decision based on the absence of data, you know, you got two or three customers or 200 or 300 end users in a consumer type situation, that’s not enough data to actually understand where you should be going. So you went wide first and then you said, “What we failed to do was actually segment our customers and understand where the sort of quantum value was there.” Do you agree with basically going wide was the right thing to do, but you could have actually gone narrower based on the data earlier?
ED: Yeah, I definitely think that going wide was necessary for what we were doing because it’s such a unique concept and a unique technology, but there are so many different potential use cases that we needed to gather as many of them as possible before we could say, “Well, here are the ones that make sense.” It was actually Guy King who’s part of AngelCube who suggested that to us. “Make it wide, just put it out there and see what people do with it.”
I think though that our failure was not to go narrower sooner, as you mentioned. I think that we could have gone narrower a lot sooner once we saw those stronger use cases emerged. But I guess with the second vertical that we operate in the advertising vertical, we had an assumption that getting a lot of growth on the testing and demonstration platform would mean that those customers and most users would then come across the ads customers, which would be more lucrative. But reality is those two different user bases didn’t have enough cross-over for it to work that way.
So that was an incorrect assumption that we had, that we had about the reason for putting up with those low revenue numbers from the one product, hoping that that would just bubble across into ads customers for us. But it just didn’t work out that way. We should have made that realization a lot sooner.
DAVID: Right. So do you think that the delay that it took for you to make that decision to segment and focus on the more highly valued customers was you were afraid to actually alienate the great unwashed masses that you had attracted or was it just other things like you were just too busy trying to provide support to them and stuff like that?
ED: No. I think it’s definitely the former, definitely afraid to alienate and piss people off. We’re incredibly proud of what we’ve built, and so I guess the idea that you’d take it away from people, as a creator, is a really hard thing to wrestle with. But it’s an absolute necessity when you’re building a startup company. I think we were probably a little bit too precious on that for too long.
DAVID: I had that with ThreatMetrix too. The earlier incarnations of the product that took us years to end-of-life something because we ended out having one customer on that particular capability, and nobody else wanted that. But, yeah, we just hung on to it, and it’s kind of partly because also you’re not willing to have the hard conversation with them, which is kind of crazy.
ED: Yeah, it is. You know, David McClure, said, “As part of 500, don’t be afraid to piss off your early customers.” We should have taken that advice, to be honest. I think though it’s come to the right time for us. The technology has really stabilized as well, so although we should have done it sooner, it is working out quite well now.
DAVID: Okay. So if you come back and look at the way we kind of rank things in these podcasts to do with acquisition, user experience and retention, really what you’re saying there is you ultimately found a way of slicing the user base down and actually segmenting that and understanding who were the valuable customers there. Did you double down in terms of giving those guys a better experience or a finely tuned experience to what they’re actually looking for, or were there no changes required?
ED: Initially there were no changes required but what it’s meant in the long term has been – I’ll give you one really clear example. When we’re trying to deal with thousands of different apps potentially that can be loaded onto the platform at any one time and run in the cloud, the system has to get that app and it has to load up the app and then present it to the user on demand. So one of the things that we’re able to do now that we have a smaller group of customers with a smaller group of apps is that for the more commonly used apps, we have a constant supply of those apps running in the background.
So, if I’m eBay, I visit the webpage and I click a button, and within half a second, the demo is loaded because it doesn’t have to go through all of those different steps. So that has enabled us to dramatically improve the user experience as a result of that solid focusing on those users. It’s allowed us to really make user experience stronger.
DAVID: Right, yup. Okay, so basically they’re on the support call, they get instant gratification, they can get into the process with the user, which is a happy experience for the end user as well too.
ED: Absolutely. It just flows through if we make it easier and faster and more efficient than, you know, happy days for everyone.
DAVID: Yup, okay. I’m sorry, you may have answered this question before but just coming back, are you actually going to go after gamers, like with really large user bases? Do they actually have the need or are they just completely outside your focus?
ED: Yeah, game publishers, we really target with the ads product. So this product, what you actually use is the streaming demo as an in-app mobile app. So you’re playing Angry Birds and then an ad for Clash of Clans pops up as a banner. Traditionally that would take you either straight to the apps or play a video when you tapped it. Now you tap it and instantly a demo Clash of Clans starts playing that you can play with it, you can try a 30-second demo of it. So that product is really appealing to games publishers now for acquisition.
DAVID: Oh, I would think so. The interesting thing about that would be is that you’d have to pre-load those things as well too. I have a colleague who works at “Incoming Media“, which is basically they pre-load videos on mobile so that you can actually get a faster display that can be used in advertising on media, but there’s a lot of “smarts” that have to go into actually figuring out what’s the right video that a particular user is going to actually want to see, like a trailer of a movie or something like that. So does that mean you’ve had to, for those large amount of consumer-users in the advertising thing you’ve got to have those instances running as well too?
ED: Oh, absolutely right. If we don’t have a game streaming to them within half a second, it’s all over, you know.
DAVID: Yeah, exactly.
ED: You’ve got to put it there straightaway. So that, I guess, “warm-session” functionality was built originally for ads but it’s been something that we’d been able to roll out for our enterprise customers now. But, yeah, we definitely got to have to load it. You know, if we can’t deliver a great ad, we’d rather not deliver an ad at all. That’s the very simple thing. So we have fallbacks in place for when network connectivity is bad, or if we can’t, for whatever reason, get them a session straightaway, we have a fallback, which can be a video or an image.
DAVID: Yeah, it’s interesting. You’ve got an enterprise product but you’ve also got this thing for the gaming sector. I just found that really interesting that in the Super Bowl this week, there were basically three mobile games that were advertised pretty heavily, so clearly the economics of actually speaking to a hundred million users, that you can acquire users to get them to use your game and get enough purchase or ad displays to actually make that a worthwhile acquisition spin for those gaming companies.
ED: Yeah, I would love to see the breakdown. Here I’ve noticed Clash of Clans ads on trams, and certainly when I was last up in Sydney, I think I saw a Clash of Clans advertised on the train billboards on the stations. It’s awesome to see this infiltration of mobile games into traditional advertising. I think it’s truly fascinating. I’d love to see the metrics behind them. Of course, we’re evolving the in-game mobile ad, but I think it says a lot that advertising is evolving so much with gaming now.
DAVID: That’s a beautiful way of acquiring users, where you can actually get a play, a really great acquisition technique. Is that something that you really see that that’s going to be the future, with much more live things rather than just static banners and things like that?
ED: Oh, absolutely. I think when you look at how much money is being spent on per-user acquisition cost through all the different advertising mediums, that price is going up a lot. It’s becoming more and more expensive using traditional banner ads and text ads to get people to download. And I think there has to be a focus on quality. I think consumers are becoming more discerning about the games they download, and that’s where we come in. By letting people actually have this risk-free hands-on experience with it, we think that that’s going to really power the next stage of user acquisition for mobile.
DAVID: How did you come across this particular idea, going from demonstrating the app to stakeholders? What was the “aha” moment that said, “Hang on, we can actually do that for a broader audience”?
ED: Well, to be honest, it was a very natural evolution of the product. It’s something that we always knew that we wanted to try and do. What we’ve essentially built means that these apps can be streamed to any web environment, whether that’s a web view that’s inside a mobile ad or whether it’s on a desktop browser. So with that common technological base, it gives us a lot of flexibility about where the apps are displayed. So even though we have these two verticals, there’s actually no difference at all in the code between them, and all the products are essentially exactly the same product, there’s no difference at all. It’s just one is presented in an ad unit, and the other is presented through a webpage. That’s really the only difference.
DAVID: Right. All right, I think that’s terrific. I think we’ve got some really great information there for app users. Even if it’s not purely from an app itself, it’s a great set of experience as a startup and just also a really big opportunity in the app ecosystem.
ED: Yeah. Well, thank you very much.
DAVID: And thank you very much for your time.
ED: Thank you. Thanks for having me.