Every startup entrepreneur wants to design an app like Uber and make it big in the sharing economy but very few do. In total there are more than 4 million apps available to download but you’ll probably struggle to name more than 15 and only use 6 to 10.
The rate of mobile app failure is huge but nobody who makes an app believes that it will happen to them. That their app is different and will beat the odds. But then it fails and startup failure hits fast and hard. We take a look at why so many apps that adopt the Uber business model fail to make it in the sharing economy.
#1 Zero Market Demand
A lot of mobile app startups fail because there’s simply no demand for what they’re making. It’s easy to get trapped in your own bubble of self belief and assume that because you think your app is essential the world will too. A staggering 42% of startups fail because there’s no market demand for them.
Just because your “idea” uses the Uber based model doesn’t mean that it’s bound for success in the startup world. Mobile apps fail because the entrepreneur fails to do some very basic market research. If you are going to stand a chance of competing with the best sharing economy apps then you need you need to supply a solution for a market demand.
You need to ask yourself why you’re building an app and whether your idea provides the solution. It starts with asking yourself why, or as Simon Sinek puts it: “start with why” to discover “the purpose, cause, or belief that inspires you to do what you do”.
Even providing a solution doesn’t necessarily guarantee success. Some mobile apps fail not because they’re not resolving a problem but because the problem isn’t big enough. Your idea can’t survive on a few hundred downloads that will be used once or twice. Do your homework by establishing if there’s a sustainable market demand for your app.
#2 Your Idea isn’t Scalable
The internet has made the sharing economy possible because it has made it scalable. Borrowing something for a fee was possible way before the likes of Uber or other sharing economy apps, but data and app interfaces have allowed sharing to happen on a large scale.
Scalability matters. Your idea needs to be scalable to be successful. Scalability means that your app can be used by hundreds of thousands of people and that your idea can adapt to market demands. This means your Uber like app needs to be able to adapt to local markets on a global scale.
This made sound a little obvious but a sharing economy business is based on sharing and your product needs to be shareable. Cars and drivers are commodities that can be shared easily and that’s why Uber is so successful.
The product needs to be easily shared by people. It’s difficult to imagine that somebody would be willing to share something so personal as a pair of sneakers, jewelry or furniture.
#4 Conservative Client Base
Ideally your target audience will be well connected, early tech adopters. Consumers that will do your marketing for you by spreading the word online. However this is not always the case. Some potential target groups are not as well connected and easy to reach as you would like.
We made an app for a senior’s home called Wendy’s Team and run into a number of consumer behavior issues, like users who didn’t have access to mail that meant signing up was difficult.
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#5 Market Saturation
There are a lot of Uber like apps already on the market and the chances are that there’s already an app similar to your idea. If your app is going to make it in this highly competitive market then it needs to standout from the crowd. It needs to offer your consumers something different.
#6 Wrong Business Model
Your startup can fail because your business model is way off. Sam Altman believes that tech startups fail because their unit economic are wrong. Unit economics are the direct revenues and costs associated with a particular business model expressed on a per unit basis.
“One of the jokes that came out of the 2000 bubble was ‘we lose a little money on every customer, but we make it up on volume’,” explains Altman. A lot of young startup companies don’t even they plow money into user acquisition and buy downloads only to be out competed by a cheaper alternative.
#7 Bad Marketing Strategy
Expect to spend a lot of money on post-launch marketing. Typical startups spend between 30-60% of their post-launch budget on marketing and in general start-up businesses should devote between 20 and 30 percent of their total annual budget to advertising and marketing during the first and second years.
Ultimately, it’s not how much you spend on marketing but how you spend your marketing budget that matters. Choose your distribution channels carefully. Stefan Maeascher found that the best distribution channels for marketing apps were social media. Hire a publicist or marketing agency if you don’t have experience in marketing strategy.
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#8 Knowing When to Scale
Scaling without forethought or scaling too fast can kill a business. Things in the app world are fast-paced and startups can get in over their heads at alarming rates. Scaling too fast can come in the form of taking on too many hires or spending too much on advertising.
“About 74 percent of Internet startups fail because of premature scaling, while those who scale properly typically see growth that’s 20 times faster,” according to a report by Startup Genome.
90% of startups fails are self-inflicted. They fail because of self-destruction not because of the competition. A lof of this comes down to inexperience and a startup’s self-deluded sense of how great their model is. You should have a clear sense of how the mechanics of the business works, make the right contacts and know the pitfalls. It all comes down to doing your homework, knowing your client and understanding the above dangers.