Mobile App Usage Driven by Conversations

Urban Airship CEO sees mobile apps disrupting business models in an ecosystem that will remain fractured.

You’ve developed a killer mobile app and people are downloading it thousands of times a day from the Apple App Store or Google Play. That sounds impressive, but the reality is that most apps stop being used within a month.

Scott Kveton, co-founder and CEO of Portland, Ore.-based Urban Airship says that “you have to actually create a conversation” to keep those apps from gathering digital dust on people’s iPhone and Android smartphones. Kveton speaks from experience. When Apple introduced push technology to iOS in 2009, he and his three co-founders launched a service for app developers to push updates. Today the company’s push messaging platform offers a range of backend services to mobile developers, including location targeting and in-app purchasing.

Scott Kveton CEO Urban Airship

"The first generation of mobile apps and the way that mobile was taking advantage of [them] was taking what worked on the Web, and just shoved it at mobile. It was really ineffective, sort of brochure wear. The next generation is really taking advantage of the inherent nature of the device," said Scott Kveton, co-founder and CEO of Urban Airship.

The company has attracted funding from Intel Capital, Salesforce.com and Verizon, and has made several acquisitions, including SimpleGeo and Tello just last month. In a recent interview, Kveton talked the future of the mobile ecosystem, the freemium business model and how Steve Jobs changed the relationship between brands and consumers.

What do you think of the way that mobile applications have evolved?

The first generation of mobile apps and the way that mobile was taking advantage of [them] was taking what worked on the Web, and just shoved it at mobile. It was really ineffective, sort of brochure wear. The next generation is really taking advantage of the inherent nature of the device. The fact is that this is an intent-driven device. It knows who I am, it knows where I am and it knows what I do. And that’s exciting to me. The fact that you have this computer that you’re carrying with you that knows all these things is super, super powerful, and really, to me, it’s going to be significantly more impactful than the PC or Internet ever was.

What do you expect to see next?

More disruptive apps that really take out existing business models. You think about Airbnb [an online vacation rental service], that’s seen a huge uplift in engagement with users through mobile. You see something like Uber, that’s having this huge impact on the town car industry. I think we’re going to see more types of those things, because we finally have this computing platform that’s with us everywhere we go and knows who we are, where we are, and those kinds of things.

We’re seeing a huge increase in the engagement of apps. The big problem with apps today is you install it, and within 30 days users tend not to use the app. And you can’t just use notifications to say, “Hey, you have this app installed.” You have to actually create a conversation. One of my favorite examples is [snowboarding company] Burton’s “Pow Alarm.” So if you’re a big skier and you want to know where there’s going to be powder, you can actually pick the venue, pick the mountain, and you can say, “Hey, when there’s 4 inches of snow, I want you to send me a notification at say, 4:30 in the morning.” So, that way, you can actually say, “Hey, great, there’s powder up in the mountain, I’m going to take the day off, and call in sick.” To me, that’s a really, really awesome use. Now, Burton doesn’t make any money from that directly, but what they do is rebrand their users on Burton. Get them excited on Burton, and they will see an uplift from that. So it’s almost like a different kind of marketing, that’s informational marketing, right to the users.

How has the smartphone changed the relationship between consumers and brands?

Scott Kveton Urban Airship

“You can’t be a $100 billion company and just be an app on a device,” said Scott Kveton, co-founder and CEO of Urban Airship.

We couldn’t have done what we’re doing, I don’t know, 5 years ago, 4, even 3 years ago. And the reason that is, and you know, is Steve Jobs. What he did is create this platform that really broke up that relationship between how brands reach consumers. Before, the operators and the carriers would arbitrate that relationship because they decided what went on the device. But when this new platform came along, and then Android went behind it, and everybody else followed, it created a huge opportunity for brands to directly engage users on this device. So, now they have the most intimate of computing devices that’s never more than an arm’s length away from the user, and they’re giving them the permission to actually, sort of, interrupt them. And if they do it effectively, it’s not an interruption, it’s actually content, and something they want.

One of the things that we found was that we keep pushing to be able to send notifications faster and faster. We started at 10,000 notifications a second, then 25,000, now 75,000 notifications a second. And what we found in talking to customers was they’re willing to pay for that, but they’re also willing to pay to slow it back down. Because what they want to be able to do is throttle it. What happens is if you have 75,000 people open up their apps, all in a second, they hit other parts of their infrastructure. That will melt down the social components or the backend payment components, which is bad. So it’s interesting to hear that from customers, get that feedback, and go, OK, great. You mean like dial over, and throttle this, or send it at the exact rate you want, so you can bring your other pieces up to speed.

But we’re not judged by the first notification that goes out when a customer makes the API [application programming interface] call; we’re judged by the very last notification that reaches the device. So for us, hitting half a million notifications a second is where we’re headed and we’ll be there really soon.

How’s the freemium model working for you?

We have a freemium model because we started early on as an independent company that was small, and so we’ve always seen the strength of having a strong dialogue with [the development community]. We also found that a lot of those developers happen to be the head of mobile for some large company and might work on their app over the weekend. So they get familiar with our service and are happy with our service. They end up bringing us in-house through the back door. And while the target for us is now becoming more the VP of marketing, or the VP of mobile, we’re finding that the grassroots developer approach has been super, super effective for us in reaching our customers and growing business. We’ve seen that be really successful. I think people will always be willing to pay for apps. The ecosystem has shown that over time.

Where do you see the mobile ecosystem heading?

I think it is going to be fractured for quite some time. Android continues to have a lot of momentum. By the end of 2011, I think they had about 51 percent of the total market share, with iOS around 25 percent, but Amazon’s out there now with the Kindle Fire. It’s not Android, but it’s Android. Google just bought Motorola, and you got everybody else who’s making Android devices going, “Wait a minute, what does that mean for us?”

You can’t be a $100 billion company and just be an app on a device. I think that there’s only going to be more questions about ecosystems, and where to go. And for a company like us, it’s great. We can be Switzerland. We can help brands reach any of these devices and do it effectively. I think the ecosystem is only going to get more complicated in the next couple of years.

I don’t think we’ll ever get to the point where you have one app that works everywhere. The idea of HTML5 is a hope for that. I do think you’re always going to want to have a native container, even if it has HTML5 inside of it. Because there are things that you want to be able to take advantage at the device level, whether it’s accelerometer’s, GPS, other forms of navigator, or I should say, location. And those are things that won’t come from a generic app.

Mobile App Usage Driven by Conversations

Urban Airship CEO sees mobile apps disrupting business models in an ecosystem that will remain fractured.

You’ve developed a killer mobile app and people are downloading it thousands of times a day from the Apple App Store or Google Play. That sounds impressive, but the reality is that most apps stop being used within a month.

Scott Kveton, co-founder and CEO of Portland, Ore.-based Urban Airship says that “you have to actually create a conversation” to keep those apps from gathering digital dust on people’s iPhone and Android smartphones. Kveton speaks from experience. When Apple introduced push technology to iOS in 2009, he and his three co-founders launched a service for app developers to push updates. Today the company’s push messaging platform offers a range of backend services to mobile developers, including location targeting and in-app purchasing.

Scott Kveton CEO Urban Airship

"The first generation of mobile apps and the way that mobile was taking advantage of [them] was taking what worked on the Web, and just shoved it at mobile. It was really ineffective, sort of brochure wear. The next generation is really taking advantage of the inherent nature of the device," said Scott Kveton, co-founder and CEO of Urban Airship.

The company has attracted funding from Intel Capital, Salesforce.com and Verizon, and has made several acquisitions, including SimpleGeo and Tello just last month. In a recent interview, Kveton talked the future of the mobile ecosystem, the freemium business model and how Steve Jobs changed the relationship between brands and consumers.

What do you think of the way that mobile applications have evolved?

The first generation of mobile apps and the way that mobile was taking advantage of [them] was taking what worked on the Web, and just shoved it at mobile. It was really ineffective, sort of brochure wear. The next generation is really taking advantage of the inherent nature of the device. The fact is that this is an intent-driven device. It knows who I am, it knows where I am and it knows what I do. And that’s exciting to me. The fact that you have this computer that you’re carrying with you that knows all these things is super, super powerful, and really, to me, it’s going to be significantly more impactful than the PC or Internet ever was.

What do you expect to see next?

More disruptive apps that really take out existing business models. You think about Airbnb [an online vacation rental service], that’s seen a huge uplift in engagement with users through mobile. You see something like Uber, that’s having this huge impact on the town car industry. I think we’re going to see more types of those things, because we finally have this computing platform that’s with us everywhere we go and knows who we are, where we are, and those kinds of things.

We’re seeing a huge increase in the engagement of apps. The big problem with apps today is you install it, and within 30 days users tend not to use the app. And you can’t just use notifications to say, “Hey, you have this app installed.” You have to actually create a conversation. One of my favorite examples is [snowboarding company] Burton’s “Pow Alarm.” So if you’re a big skier and you want to know where there’s going to be powder, you can actually pick the venue, pick the mountain, and you can say, “Hey, when there’s 4 inches of snow, I want you to send me a notification at say, 4:30 in the morning.” So, that way, you can actually say, “Hey, great, there’s powder up in the mountain, I’m going to take the day off, and call in sick.” To me, that’s a really, really awesome use. Now, Burton doesn’t make any money from that directly, but what they do is rebrand their users on Burton. Get them excited on Burton, and they will see an uplift from that. So it’s almost like a different kind of marketing, that’s informational marketing, right to the users.

How has the smartphone changed the relationship between consumers and brands?

Scott Kveton Urban Airship

“You can’t be a $100 billion company and just be an app on a device,” said Scott Kveton, co-founder and CEO of Urban Airship.

We couldn’t have done what we’re doing, I don’t know, 5 years ago, 4, even 3 years ago. And the reason that is, and you know, is Steve Jobs. What he did is create this platform that really broke up that relationship between how brands reach consumers. Before, the operators and the carriers would arbitrate that relationship because they decided what went on the device. But when this new platform came along, and then Android went behind it, and everybody else followed, it created a huge opportunity for brands to directly engage users on this device. So, now they have the most intimate of computing devices that’s never more than an arm’s length away from the user, and they’re giving them the permission to actually, sort of, interrupt them. And if they do it effectively, it’s not an interruption, it’s actually content, and something they want.

One of the things that we found was that we keep pushing to be able to send notifications faster and faster. We started at 10,000 notifications a second, then 25,000, now 75,000 notifications a second. And what we found in talking to customers was they’re willing to pay for that, but they’re also willing to pay to slow it back down. Because what they want to be able to do is throttle it. What happens is if you have 75,000 people open up their apps, all in a second, they hit other parts of their infrastructure. That will melt down the social components or the backend payment components, which is bad. So it’s interesting to hear that from customers, get that feedback, and go, OK, great. You mean like dial over, and throttle this, or send it at the exact rate you want, so you can bring your other pieces up to speed.

But we’re not judged by the first notification that goes out when a customer makes the API [application programming interface] call; we’re judged by the very last notification that reaches the device. So for us, hitting half a million notifications a second is where we’re headed and we’ll be there really soon.

How’s the freemium model working for you?

We have a freemium model because we started early on as an independent company that was small, and so we’ve always seen the strength of having a strong dialogue with [the development community]. We also found that a lot of those developers happen to be the head of mobile for some large company and might work on their app over the weekend. So they get familiar with our service and are happy with our service. They end up bringing us in-house through the back door. And while the target for us is now becoming more the VP of marketing, or the VP of mobile, we’re finding that the grassroots developer approach has been super, super effective for us in reaching our customers and growing business. We’ve seen that be really successful. I think people will always be willing to pay for apps. The ecosystem has shown that over time.

Where do you see the mobile ecosystem heading?

I think it is going to be fractured for quite some time. Android continues to have a lot of momentum. By the end of 2011, I think they had about 51 percent of the total market share, with iOS around 25 percent, but Amazon’s out there now with the Kindle Fire. It’s not Android, but it’s Android. Google just bought Motorola, and you got everybody else who’s making Android devices going, “Wait a minute, what does that mean for us?”

You can’t be a $100 billion company and just be an app on a device. I think that there’s only going to be more questions about ecosystems, and where to go. And for a company like us, it’s great. We can be Switzerland. We can help brands reach any of these devices and do it effectively. I think the ecosystem is only going to get more complicated in the next couple of years.

I don’t think we’ll ever get to the point where you have one app that works everywhere. The idea of HTML5 is a hope for that. I do think you’re always going to want to have a native container, even if it has HTML5 inside of it. Because there are things that you want to be able to take advantage at the device level, whether it’s accelerometer’s, GPS, other forms of navigator, or I should say, location. And those are things that won’t come from a generic app.