Interview, Fireside Chat
a16z Podcast | The Topic That's Lasted the Entire History of Computing -- Bundling and Unbundling
- The trend of unbundling features into standalone apps is projected to persist globally, with expectations that products will repeatedly split into modules once perceived as bloated, though this may involve competitors extracting features if implementations fall short.
- In the Chinese market, Baidu is anticipated to counteract the unbundling dynamic by fostering strong, consolidated portal models where a single application manages diverse services like dining and entertainment, reducing the need for separate icons.
- Traffic acquisition is expected to remain a primary challenge, with the strategy pendulum swinging between standalone apps linked via Facebook and websites similarly linked, while users determine sources based on Google search versus app store discovery.
- Success metrics are predicted to shift toward engagement with services rather than download counts, as developers risk becoming "victims of download shrapnel" by over-indexing on acquisition, and new businesses may succeed with a user base of half a million rather than billions.
- Content creators and established firms are expected to consolidate new R&D into existing apps to maintain distribution channels, avoiding the "artificial" launches that occur when features are split without justification from screen real estate or technical capability.
- User behavior is forecasted to remain concentrated, with 80% of smartphone time spent within apps and the remaining 20% covering a long tail of nearly one million websites and apps, despite an average lifetime usage of 25 apps with only seven to eight in active rotation.
- A trade-off is expected to endure between the Facebook approach, which aids discovery but hinders installation, and the Baidu approach, which facilitates installation but complicates feature discovery, potentially confusing users if unbundling is driven merely by imitation.
- While the cost of creating digital products is expected to have collapsed by two orders of magnitude, the cost of acquiring billions of consumers remains high, reinforcing the viability of business models focused on deep engagement within a smaller user pool.
- The industry is expected to view bundling and unbundling as distinct, valid strategic approaches rather than a linear progression, with the specific choice depending on whether the priority is application discovery or feature discovery within complex ecosystems.