According to VC Fred Wilson, one big reason consumer startups are not very attractive to venture capital investors at the moment is that "the consumer is moving from desktop/web to mobile/app" and startups that are built for mobile are "more expensive and time-consuming" to launch."
Distribution is much harder on mobile than web and we see a lot of mobile first startups getting stuck in the transition from successful product to large user base. Strong product market fit is no longer enough to get to a large user base. You need to master the "download app, use app, keep using app, put it on your home screen" flow and that is a hard one to master.
Cristina Cordova, who works in business development for $200 million payments startup Stripe, says that this problem – user retention – is "the biggest problem in mobile."
Cordovoa would know. Stripe helps mobile developers accept payments, and it probably has lots of data about spikes in user payments followed by fall-offs.
"Companies and the press often talk about downloads, flips, check-ins or even activity among active users. They avoid discussing monthly active users. Why? By far, the biggest problem facing mobile companies today is retaining the users that download their applications."
"An app is only a long-press away from being dismissed to the second, third or fourth page of apps on a user’s device. How mobile companies aim to defeat the retention problem in a world of fickle social users will be their true test."
She cites four startups that managed to get a lot of initial traction, but quickly fell off:
Socialcam: In June, Socialcam had 83.6M monthly active users connected to Facebook. Today, it has 4.3M. This is a decrease of 95% in 5 months.
Viddy: In June, Viddy had 20.9M monthly active users connected to Facebook. Today, it has 660K. This a decrease of 97% in 5 months.
Draw Something: In April, Draw Something had 36.5M monthly active users connected to Facebook. Today, it has 9.1M. This is a decrease of 75% in 7 months.
Path: In December, Path had 250K monthly active users connected to Facebook. Almost one year later, they have about 780K monthly active users. While the 2.0 version of their app led to much initial growth, that growth has not been sustainable.
