Apps / Internet / Technology

Brooklyn devs on doomsday predictions for mobile entrepreneurship

Will "zero ratings" for incumbent apps stifle the market for new mobile apps? Four Brooklyn CEOs weigh in.

What's to come of the mobile marketplace if certain apps are favored by data plans? (Photo by Lionel Allorge, via Wikimedia Commons)
Is mobile entrepreneurship due for doom thanks to new data plans that carve out exemptions for the most popular apps? That’s what legendary venture capitalist Fred Wilson recently wrote on his blog, which led to a followup post from Wired.

The skinny: Sprint is offering unlimited data for certain apps under its pre-paid plan and T-Mobile is offering it for certain music apps under its Simple Choice plans. Wilson calls these “zero ratings.”

Wilson argues that “zero ratings” amount to serious incumbent protection and will make it very hard for anyone to get an app noticed if they don’t somehow achieve zero rating. We’re a little skeptical of this last point. Apps that we’ve covered here, like TunnelX and Enquire probably aren’t burning enough data for users to really even notice their impact. However, if you wanted to enter into a data-heavy field, like Montaj is, it could be a serious obstacle.

Wired, however, argues that anything that discourages app making hurts us all, writing:

It’s important to consider this version of the digital divide from the point of view of app makers as well. The more they’re cut off from potential users, the less likely they’ll be to continue making apps. In that event, it’s not only users with the most limited data plans who will suffer from lack of choice and opportunity. We all will.

We reached out to some mobile devs to get their take. Maxime Leroy, CEO of Enquire, agrees with Wilson’s take, comparing mobile data providers to the companies that control the two main app stores:

Today, even the gatekeepers (Apple and Google) don’t promote big money. Their algorithms rewards downloads, and quick popularity, which entrepreneurs can get out of their hard work … Now the mobile plan providers are saying: we want to be the new gatekeepers, we want to change the rules, and we want money now. And who can give them that much money? The incumbents.

Scott Kolber, CEO of Roadify, sees the hurdles getting higher for companies like his, but isn’t sure that we’ll all be so badly off in the long run:

But the cable TV analogy in the article is a good one- 40 years ago all TV was over the air and free, now we pay for more choices. Similarly, better content and user experiences are what drive app take-up and retention. So while Zero Rated mobile apps would be an additional competitive hurdle for developers, more choice, and better content and experiences will ultimately prevail.

Eric Liftin, CEO of TunnelX, reminds us that once upon a time much of of the Internet was similarly closed off into its approved rooms, when AOL provided most of the access anyone had:

This is another approach to the “malling” of the net, another attack (so to speak) on net neutrality. It’s been an inevitable development for a long time. I remember back at Firefly in ’96 wondering when the media companies would try to bundle up the web to resemble the URL-less world of AOL (back when that service still existed!). I think we’ve been pretty lucky that it hasn’t happened already. Many would say that the demand for an open internet has prevented mallification to this point. It’s a big question how much people out there really care about an open internet.

Then mobile app shop, Tendigi, weighed in, by way of its CEO, Jeff Soto, also an Apple alum, who sees it as a natural progression from the tiered approach to mobile data that telecoms have been using to increase revenue. He writes:

Innovation is happening on multiple fronts and this idea of zero rating apps will stifle that progress allowing only big companies to showcase their work.

It would be a bold move for the big telecom companies to try charging for access to specific services. New services are born every day and that’s what makes the mobile app market so exciting. There is always something new and exciting to try out. If these companies decide to “package” access to certain services, I think this will greatly backfire as most people are used to being able to browse and “shop” for new apps and services online.

We also went looking for someone with a 20,000-foot view of the mobile marketplace to give us their take. We found Ph.D. candidate Ryland Sherman, working in the Telecommunications Department at Indiana University. He wrote us, pointing out that the “better deal” of zero rated apps might not last:

Ultimately, with ‘zero rating’ options, consumers may get a better deal from the pre-existing apps, but only as long as the threat of competition puts pressure on the prices of successful services. My concern would be whether certain markets will become ‘winner-take-all,’ with a company like Spotify dominating subscription music, then increasing its prices to consumers while reducing its payments to artists without strong label negotiations support. Most internet services naturally benefit from network effects, wherein the value of the service to consumers increases with the number of other users or wherein the cost of providing each consumer the services decreases with the number of users. Competition regulators must always watch markets with network effects closely to ensure today’s efficiency is not tomorrow’s monopoly.

It remains to be seen whether zero-rating is a trend or a blip. Or whether the Internet community will buy into the marketing or become galvanized against it in such a way that companies back off.

Companies: Tendigi / Union Square Ventures
Series: Brooklyn

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