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Hi friends 👋,
Happy Tuesday! Apologies for getting this one to you a day late. We had a wedding this weekend and an incredible Sixers overtime win on Sunday, and this is one that I didn’t want to rush.
I’ve been thinking a lot about what happens when it becomes trivially easy to build software applications — where value accrues, how and whether to build moats, and what to do about it — and today’s essay is one draft of my thinking.
Let’s get to it.
Brief dance in our hands,
Small Apps flicker, then depart,
Endless change expands.
– ChatGPT
It’s easier than ever before to build great apps. It’s harder than ever before to sustain them, to grow them into enduring companies.
Those two ideas are related, yin and yang.
Business models have not caught up to the potential of this new paradigm. Small Apps create more potential value than they can capture; partnering up with protocols
could fill the gap.
That easier to create equals harder to defend is not a revolutionary idea. It’s one I’ve been playing with for a while, since I wrote Shopify and the Hard Thing About Easy Things in August 2020: “Here’s the hard thing about easy things: if everyone can do something, there’s no advantage to doing it, but you still have to do it anyway just to keep up.”
That essay was about ecommerce specifically, but I wrote that the same pattern was playing out across industries and verticals.
It’s happening in newsletters, where Substack gives writers an easy way to try to become the next Ben Thompson. It’s happening in video games, where Epic Games is building the tools and literally giving them away for free to expand the Total Addressable Market. It’s happening in AI, where OpenAI is giving everyone GPT-3 to build on top of.
That last sentence has become more apparent in recent months as GPT-3 gave way to GPT-4. And it’s not just the GPT-wrappers, it’s the fact that AI makes it easier for anyone to build apps themselves, for evermore niche use cases.
People like me like to write about whether or not these products have moats, whether they can stand the test of time. We’re already at the backlash to the backlash on that subject:
Making something people want is good advice. Massive winners will be crowned simply by making products that people love without worrying about growth hacking or moat digging. OpenAI CEO Sam Altman recently tweeted something to this effect:
But at the same time, with everything moving so quickly, users are like kids in a candy store, sampling everything, even paying for the sweetest, and then moving on to the next. Check out Lensa, the first of this generation of AI apps to take the App Store by storm:
From a peak of over $2.5 million in net revenue per day in December, Lensa fell to $206k per day by early January. That data is a few months old, but I can’t imagine it’s rebounded. Either way, that’s an incredibly successful outcome. The app’s founders made something people loved, earned a shitload of money for it, and slowly faded away as the AI avatar hype cooled and competitors rushed onto the scene.
It’s not just Lensa. How many of these apps do you expect will be making more than $200k per month a year from now? How many will grow to become Big Companies?
I suspect we’ll see this pattern play out over and over again in the months and years ahead. It’s only going to get easier to build apps, and their functionality will only get more mindblowing. People will try the newest, pay for them, and move on.
So if you’re building a Small App, what are you to do?
One way to approach the situation is to try to dig moats. Maybe you add social features to create network effects. Maybe you capture valuable proprietary data that you use to personalize and improve your product so much people don’t want to leave. Some will undoubtedly be able to build moats, and we’ll probably see a number of billion dollar companies created by one person or a small handful of people.
For most, though, that will be a losing battle. It pushes against the physics of these things.
A second way to approach the situation would just be to build cheaply, avoid raising money, and try to generate as much cash as possible while the getting’s good. We’ve already seen, and will continue to see, developers generate hundreds of thousands of signups and millions of dollars in weeks, and again, building something that people are willing to pay for, if only briefly, is fucking awesome. Go make your millions and rinse, wash, repeat (or go kick it on a beach for a while).
But I think there might be another, third way. Small Apps that recognize their fleeting nature can team up with protocols that are built to last to build something bigger and more durable collectively.
We’re going to explore that third way today.
Last week, Slow Ventures’ Sam Lessin wrote a compelling screenshot essay on Social Apps as consumable fashion instead of enduring networks.
The same thing keeps happening over and over again – Yo, Yik Yak, Vine, Poparazzi, BeReal, Clubhouse. The list goes on. Social apps ride new mechanics to ever-greater heights, luring both users and investors, before fizzling out when the next new thing comes along. Facebook, Instagram, Twitter, and Snap remain dominant, seemingly impervious to the onslaught. If any of the challengers’ mechanisms are good enough, they can just copy.
Very occasionally, a new giant emerges. TikTok is the most recent example. But usually, they burn out and fade away. Nikita Bier is the only smart one here. He sells at the top.
Sam compares social apps to consumable fashion, and it’s a good analogy. Try it on, show it off for a bit, and throw it away. Like Shein, it all seems so wasteful. All of that time, money, and effort spent on acquiring new users and retaining existing ones, only to see them flitter off to the Next Big Thing.
Reading Sam’s essay re-sparked the Small Apps idea, and added a new dimension to my thinking: time.
It’s not that Small Apps can’t get big; they can. It’s that the vast, vast majority can’t stay big for a long time. What if they accepted that and used it to their advantage?
As things like Replit, AI, Vercel, APIs, Urbit, and web3 protocols make it easier to build apps, we’re seeing an explosion of Small Apps built for evermore specific use cases and user types.
Some Small Apps will be so small that they’ll be built by one person for one person, others will ride the zeitgeist to millions of users but fade quickly. These are temporally small even if they get big for a time.
This is the kind of Small App I’m talking about here. They’re like supernovae. They burn brightly, explode, and fade away.
Competition (both direct and more generally for attention) and kid-in-candy-store users will make it brutally tough for Small Apps to turn into Big App Companies, as is the case with Social Apps.
But a number of these Small Apps will be successful for a time. What if we could build Dyson Spheres around these Small App supernovae that capture and harness their energy?
In a 1960 paper, Search for Artificial Stellar Sources of Infrared Radiation, physicist Freeman Dyson proposed a system to capture all of the energy a star gives off to give civilization virtually unlimited power. This idea has been named the Dyson Sphere after its creator, and it’s gained popularity through its inclusion in countless works of science fiction over the past 63 years, even though its current feasibility is limited by the fact that its construction would require more matter than is available in our entire ecosystem.
We’re looking for something similar in the digital realm: a way to harness the energy that successful Small Apps spit off when they get really big and accumulate valuable data really quickly, before they explode.
Protocols that let users carry their identity, data, and relationships across Small Apps are a strong candidate. This is, of course, part of the premise behind decentralized social protocols like Farcaster and Lens, and data protocols like Ceramic Network. Ceramic (Not Boring Capital portfolio company) describes the opportunity in their excellent post from last year, Into the Dataverse:
Our vision of the Metaverse will run on the Dataverse: a composable, web-scale data ecosystem—owned by everyone and no one. Developers will build interchangeable interfaces and online experiences that directly interact with the Dataverse and the composable data that lives there. The Dataverse will play arguably the most important role within the Metaverse: a shared, high-performance, always-available graph of all data created and used by all applications.
But I think Small Apps and Protocols can focus more intentionally on their respective roles in the context of time. Small Apps will burn brightly and explode, and smart Protocols will do whatever it takes to ensure that they’re the Dyson Sphere capturing the energy in the process.
I think about it like an update of Fat Protocols, Thin Applications with a time dimension.
There is a popular framework, developed by Joel Monegro when he was at Union Square Ventures, known as “Fat Protocols, Thin Applications.”
In 2016, b
