Europe's EXEC MBA, in collaboration with the Creativity Marketing Centre, hosted a talk on
'Entrepreneurship & How to Build a Billion Dollar
App' with speaker George Berkowski, Founder & CEO of
IceCream, Author of 'How to Build a Billion Dollar App', and
graduate of the Specialised Master in Innovation and
The event took place on 9th June, 2015 at ESCP
Europe's London Campus and brought together 150 participants from
Executive MBA and MSc in
Marketing and Creativity programmes, along with industry
George's broad experience comes from mainly working at Hailo - a
successful taxi app that operates in 18 cities across Europe and
Asia, and a few start-ups that he grew and sold. He raised a list
of companies that are top players in the mobile industry and built
amazing businesses, all worth a billion dollars or more. They
Crush Saga, Square, Clash of Clans, Angry
Birds, Waze, Instagram, Tinder, Tango, Viber, and Flipboard.
It took 11 years for the creators to make Candy Crush what it is
today. King has around 152 games in the app store and Candy Crush
is responsible for 85% of their revenue.
Since 2007, since the iPhone, the industry is almost 9 years old
and the life cycle of smart phones is focussed on re-invention. It
is less about designing brand new things and much more about
executing and translating offline.
Before Instagram, Kevin Systrom created Burbn (first attempt at
Instagram)- which did not work. While on holiday in Mexico, he was
tracking photos with his phone and he thought there was a need for
an app like Twitter for photos. His girlfriend said there is no way
that she would post her photos on Twitter as they were not of good
quality. That night, Systrom coded X- Pro II (what would be an
Instagram Filter) and asked his girlfriend if she would post this
photo publically with a filter to which she said "Oh yes totally!"
He used his network to get 25,000 people to sign up to Instagram
before it launched, and then it was just a simple case of why
don't you tweet a photo that actually looks good. He built up a big
movement before he launched.
He managed to double the value of his company by striking a deal
with Facebook. At the time Systrom said Instagram is worth 1% of
Facebook (worth USD$ 100 billion dollars then), Zuckerberg agreed,
and the contract was signed.
Jan Koum was a system administrator at Yahoo for many years. He
had USD$400,000 in savings, got his co- founder to raise
USD$250,000 and he created one of the world's most valuable apps.
Its initial focus was status updates, whether someone is busy or
not. He circulated this app and feedback from his friends back in
Ukraine told him that it would be great if the app would also be
able to send messages. There were no messages in the first 9 months
The messaging component was attractive because sending
international SMS at the time between the US and other countries
was very expensive. So Jan charged USD$1.00 to download WhatsApp -
in exchange users could send unlimited texts for free. It was built
for the iPhone first and allowed people to send texts from the
Ukraine to the US. It only had 3000 downloads and went nowhere.
Then the team built a version of the app for Blackberry phones, by
popular demand from Eastern Europe. He listened to his audience and
then the demand exploded, he got 100.000 downloads within a couple
Entrepreneurship & The Mobile
Apart from cases like Evan Spiegel or Mark Zuckerberg, for most
entrepreneurs nothing came easy and there are not many people who
have succeeded first time. In fact, the average age of founders of
billion dollar companies is 37. On average, they started 3
businesses beforehand and it takes 7 years to become that
successful. So, these are not really overnight successes.
In 2007 / 2009 we were all getting on the rollercoaster which
was only going up on smartphones and apps. Today an average person
has about 110 apps on their phones. Out of the 2 million apps on
the App Store, we only open 28 - 29 a month on average. Here is the
vital bit: we spend 75% of our attention on 4 apps.
If you are building a mobile business now, how do you get in
there? The benchmarking has changed and the bar is so much higher.
You are no longer just adding something to the mix, you have to
really perform and build and understand the audience.
If you really want to go down this path, there is an approach
and a strategy that pretty much everyone in technology companies
and product development follow.
In the technology industry the CEOs are actually the head of
products; they translate the need that they see in the market place
into in a sensible piece of software that people can understand.
They are able to build products that are simple, easy and
It's all about making your audience happy and ensuring
they stay with the app, business or solution.
How do you test a good idea?
The whole point of this part of the process is customer
development, knowing who your customer is. It is best to test your
idea with at least 500 people. Are you able speak to your audience
and explain your concept or solution in a way that people are
actually interested and do not fall sleep within the first 30
seconds? If after your explanation, your audience says that your
product is fantastic you have identified a real problem and came up
with a real novel way to solve it.
Once you get that solution into the market, ensure that people
are using it and that you can actually measure it. See if you can
start magnifying the number of users and get them to pay something,
somehow, somewhere, someday.
The golden rule is: If you want to generate a billion dollars
you need to touch a billion people
Currently there are 30 million active users on a monthly basis
which roughly translates into a billion dollar valuation and this
is a kind of metric that you should be after.
How does this actually work?
The dating industry is highly competitive and there are a lot of
big players. Tinder entered into the market with big players like
Match, eHarmony, Badoo and many others. Why would you launch a
mobile app in such an environment?
They launched in 2012 and got a billion dollar valuation within
a couple of years. What put the app on the map was functionalities
such as finding people that are close to you and being able to see
if they are interested in you.
The 2012 Olympics boosted Tinder's exposure: what better way to
meet one of the thousands of athletes in the Olympic Village? The
app got coverage all around the world, especially in the US. Last
summer Tinder got 2 billion matches and the 40-person team hit
USD$1 billion valuation in two years.
How did this app explode so fast in such a crowded
The app is really simple; the interface brings up profiles of
people near you and the user swipes right if interested or swipes
left if not interested. It is hyper localised so you can set the
radius to a few km or few hundred meters. This is what mobiles are
designed to do - be local, be mobile, and move with you. If both
users get a match, the app alerts them. This is an amazing
distillation of what e-Harmony, Match and other companies have been
trying to do for years.
Anyone who has worked in the dating industry can tell you that
men require one factor alone to determine whether they are
interested in somebody or not and that is a photo.
How did they rock it up so fast without actually raising
hundreds of millions of dollars?
Tinder's team owns about 5% of the company; the rest is owned by
also owns Match and 600 other dating websites. This was a massively
innovative product; its growth came from the mothership behind it.
This is an interesting example on how mobile and businesses are
growing these days. Entrepreneurs come up with the products but in
order to get scale and to grow fast, huge partners are needed in
It is important to focus on the business model: how robust it
is, how profitable it is per user, how easily people can be
acquired. If you can acquire users and downloads relatively easily
then your business model does not have to be massively robust in
terms of what you are earning per user. If it is difficult or
costly for you to acquire users then the business model becomes a
more important consideration.
Hailo and Uber
Last year Uber pulled over a 8 billion USD dollars in revenue.
The company accounts 2200 employees, operates in 300 cities and in
55 countries. This is real business; they went from absolutely
nothing to figuring out a business model that really scales.
Hailo is about 9 months younger than Uber. Travis Kalanick,
founder of Uber, created an on-demand service similar to Adison Lee
which is great - 3000 - 4000 cars without carrying the costs of the
assets. They run the network, build the brand and get drivers to
bring their own cars.
Both companies faced the same problem: when you go into a market
place that relies on supply and demand, how do you break that? How
do you get passengers when there are no drivers? How do you get
drivers when there are no passengers? Jay Bregman, CEO of Hailo
told me, "we really have a novel solution for this; we are going to
build an app for drivers to solve their problems and sprinkle
passengers on top of that." The passengers are not integral to
solving their problems. The company built these features into an
app-since smart phones can track you wherever you are, they can
figure out whether you have a passenger on board or not, they can
tell you at the end of the day via automatic analytics that you
spent 50% of your day empty or 90% of your day empty. It can create
a network amongst drivers, so when drivers see there is more
demand, i.e. if there is a concert, they can broadcast this message
to the network of drivers. They were able to use credit cards and
actually process payments on the spot especially since around 85%
of cabs journeys in London are based on credit cards. When Hailo
started this figure was about 3%. So this took off well, they got a
few thousand drivers on the road using this day in day out for 8 -
9 hours a day.
After this, it was a piece of cake designing the passenger app .
The big challenge for them was not about providing the supply for
drivers; the challenge was getting people to hit the 'pick me up'
button, getting their credit cards and actually going through with
Uber did something different; they started off in San Francisco
where taking a taxi 5 years ago was horrible - terrible service and
impolite drivers. They started by recruiting the small players.
Uber paid 20% above the fare if drivers accepted 100% of their jobs
and provided the drivers with iPhones so they could use the Uber
app. It took them a year to get around 2000 drivers and 4 years
after that they had 300 000 drivers which is great growth.
Uber and Hailo are examples of products which fit the market.
They built a model, figured out how to get drivers on board, found
out how to get passengers on board, figured out how to make an
advantageous product or service and fundamentally profitable
business. Per transaction, Hailo charged 10% margin on the cab
fare. Uber charged 30% but this was only after they demonstrated a
huge success in London.
Uber was a great success in San Francisco and scaled this model
to other cities, securing huge investment. For Hailo it worked
great in cities such as Madrid, Barcelona, and Dublin and in a few
Uber's model is more flexible; they understand that this is a
transportation business- getting passengers from A to B. Most
people didn't care as long as the taxi is nice, clean, on-time and
well-priced. Uber introduced Uber Black, Uber Lux, Uber Pop and
Uber X. They added car owners to their portfolio who were willing
to make money in their free time; this part of the business is
called the steer around the world.
Uber undercut taxis fares considerably and currently makes a 5%
gross margin on Uber X trips, take credit cards out of it and it
takes 3% but that is what consumers want. Uber's business model is
very savvy; when the demand is high and there is not enough supply,
there is "surge pricing".
These apps are real businesses and have used strong viral
marketing, the simplicity of distribution through the app store,
beautiful design and huge production value.
We look at our phones 150 - 200 times a day, the huge value of
mobile start-ups is where we spend time, messaging, voice calls,
music play, gaming and social media, and this is where the
opportunities are. You have to do something ordinary and make it
better; you really have to do it differently. The average age of
founders of billion dollar start-ups on the retail or consumer side
is 34 years on the B2B side and the enterprise side is 37 years.
The average time to make a billion dollars is 7 years.
George identified "storage" as one of the biggest problems with
smart phones and created "IceCream" a new app that allows you to free up
space on your iPhone quickly. More than 22% of all smartphone users fill up their
phones every month, and 12% clog up their phones every single week,
that's over 250 million people.
To relive the live tweet of the event, click here.
If you would like to uncover more case studies and key insights
shared by George Berkowski his full presentation and its highlights
will be available online soon.
Find out more about Executive Master in Marketing and
Find out more about the MSc in Marketing and Creativity.
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