Market view and Insights
Small programs that run on mobile devices have made a big impact on digital life and resulted in big exits for their creators.
Without them, smartphones wouldn't really be smart. Apps, the small programs that offer a seemingly infinite variety of games, entertainment, information and productivity tools, are at the heart of today's connected life. After reading about Worm, Shazam and ICQ in the first part of Insatiable app-etite, here are the origin stories of other legendary apps that paved the way to today's digital world.
Long before the advent of AI-driven chatbots, generating concise summaries of longer texts was a difficult feat. Nick D'Aloisio, an Australian-born British programmer, was able to pull it off and engineer a successful exit before turning 18.
Launched under the name Trimit in 2011, his iPhone app used artificial intelligence to trim long texts down to a few hundred words so they were more easily digestible on a smartphone. All it took was a shake of the phone. Investors, among them celebrities such as Yoko Ono and actor Ashton Kutcher, beat a path to his door. The app's success prompted Yahoo to acquire the renamed Summly in 2013 for the reported sum of $30 million, making its inventor a millionaire at age 17.
Yahoo eventually folded Summly's capabilities into its news platform. D'Aloisio joined Yahoo for two years before launching his next company called Sphere. The group chat app was acquired by Twitter in late 2021 and D'Aloisio, now in his late 20s, was as of January 2023 still working at Twitter's London office.
While its name changed, the little red flame logo has remained. When two programmers hatched the mobile dating app Tinder at a hackathon back in 2012, they initially wanted to call it MatchBox, but that proved too close to another dating site called match.com, owned by tech conglomerate IAC.
The app presented a new, gamified way of finding a potential date based on real-time proximity and personal attributes. Users could swipe right to get more details on a love interest or left to move on. Tinder initially took off on college campuses, and by 2014, the average subscriber spent 90 minutes per day on the app, prompting match.com's parent company IAC to court its rival at a $3 billion valuation. Its three initial founders (all men) reaped a $1 billion windfall from the merger.
It turned out to be a complicated date. The combined matchmakers underwent a publicly fought and at times dirty battle over sexual harassment accusations after Tinder cofounder and former marketing VP Whitney Wolfe Herd left and sued her former partners in 2014 (the lawsuit was quickly settled). That same year, Herd started a new dating app called Bumble that lets women make the first move. "I always wanted to have a scenario where the guy didn't have my number but I had his," she told her husband and business partner who founded the dating app Badoo. "What if women make the first move, send the first message? And if they don't, the match disappears after 24 hours."
Herd took Bumble public in early 2021, becoming a rare female tech billionaire overnight.
After introducing this twist to the overcrowded dating app market, Bumble was able to quickly grow its user base. Herd took the Austin-based company public in early 2021, becoming a rare female tech billionaire overnight, although the valuation of her 20% stake in the company has since come down significantly. In the third quarter of 2022, the female-centric dating app had 3.3 million paying subscribers and reported $233 million in revenue.
Having a successful exit with a pioneering app or service sometimes happens in a roundabout, global way. In 2002, four Austrian and German tinkerers started the internet radio station and music community last.fm, with the Micronesian domain name paying homage to the wave band on which most radio stations broadcast. Based in London, last.fm grew into a full-fledged service with the addition of Audioscrobbler, which collected the tracks a user listened to online or on a portable device and spat out artist recommendations.
Every founder of a start-up has to bring a certain entrepreneurial spirit to be successful. The Princely House of Liechtenstein, the owner of LGT, has been successfully pursuing entrepreneurial activities for centuries. Entrepreneurial thinking and actions are deeply rooted in LGT's DNA.
An instant hit with users, the big media companies took notice and American network CBS (now Paramount Global) acquired last.fm in 2007 for a reported $449 million. The ensuing years saw major redesigns and tweaks to the streaming business model, including introducing a monthly subscriber fee in many countries, until the streaming option was finally discontinued in 2014. Instead, last.fm has focused on integrating with music services like Spotify and Apple Music and the online gamer platform Discord to power data-driven music discovery.
Its founders, among them Austrian serial entrepreneur Michael Breidenbrücker, have moved on, starting or investing in various tech startups, some of which keep the initial passion for music alive.
Swedish entrepreneur Niklas Zennström and his Danish business partner Janus Friis had been dabbling in the hot niche of peer-to-peer file sharing with a platform called Kazaa when they saw the next opportunity: peer-to-peer phone calls. Skype, released in 2003, took a bite out of phone companies' income by letting everyone make free voice and later video calls using the Voice over Internet Protocol (VoIP).
Little wonder that Skype's user numbers kept growing, hitting 100 million in 2005, with the product name even becoming a verb. That year, online marketplace eBay bought Skype for $2.6 billion, thinking it could augment its platform by simplifying communications between buyers and sellers. That idea didn't catch on with users, though, and eBay unloaded two-thirds of Skype to a group of private investors four years later.
By 2011, Skype's user base had swelled to 760 million people. That's when Microsoft came calling and acquired Skype for $8.5 billion. Today, the service has close to two billion registered users around the world, both individuals and businesses, although it has been eclipsed as a must-have communications tool by later entrants such as Microsoft Teams and Zoom.
Zennström and Friis, who reportedly earned a combined $1 billion from the deal with Microsoft, have launched several other startups. Friis' latest is Starship Technologies, which develops last-mile delivery robots. Zennström also runs an investment company called Atomico and has established a philanthropic foundation with his wife to support human rights and the environment.
Stay tuned to MAG/NET to read the second part of our story "Insatiable app-etite" about Skype, Summly, Bumble and Last.fm next week.