The (Intelligent) App Store of the Future
What do previous platform innovations tell us about where AI is headed?
Happy New Year! Hope everyone had a safe and enjoyable holiday break, and didn’t spend the entire time playing with generative apps. Special shout out to @umpherj for creating an amazing Home Alone + White Lotus mashup using Runway for our holiday enjoyment…
Let’s kick off the new year by diving in on one of the predictions we made for 2023: that this will be the year Generative Apps go Mainstream. By this, we mean we expect generative apps and foundation models would transition from being used primarily by early adopters and technologists, to being in the hands of the general public. As we continue to think about (and invest behind) this theme, one helpful lens to look at is a historical one: what were the previous technological innovations that led to a Cambrian explosion in new applications, and what can we learn from those periods?
Coincidentally as we were writing this post, Paul Graham asked which product would experience the same growth in usage as the Internet in the next 25+ years. We agree with Aaron Levie in the answer is AI.
Cambrian App Explosion #1: The Advent of the Modern Browser
Most histories of the Internet harken back several decades to the 1950s and 1960s, when the US Government was primarily concerned with ensuring American military technology stayed ahead of its enemies at the height of the Cold War. The first packet-switching network (ARPANET) was developed in 1969; file sharing in the 1970s; and TCP/IP in the early 80s. Tim Berners-Lee then famously launched the World Wide Web in 1989, which was originally conceived for automated information sharing between scientists in universities and institutes around the world.
However, it wasn’t until the launch of Mosaic and Netscape in the early 1990s that the Internet became truly accessible to the general public. Until the early 1990s, the Internet was still primarily the denizen of a relatively small group of scientists and early adopting technologists who could successfully navigate the complexities of arcane browsers to achieve hyper-specific tasks. That changed in 1993 when Marc Andreessen and Eric Bina, then two developers working inside the National Center for Supercomputing Applications (NSCA) at the University of Illinois, launched Mosaic. Mosaic became the first truly user-friendly web browser thanks to its smooth graphical interface, ease of navigation, and clickable hyperlinks. Subsequently, in 1994, Andreessen famously teamed up with Jim Clark to launch Netscape, whose Navigator browser quickly overtook Mosaic to become the #1 web browser by 1995. (Of course the story doesn’t end there; if you’re interested in learning more about Netscape’s subsequent battle with Microsoft, check out Browser Wars).
The Internet would never be the same again. Suddenly, the web opened up to millions of new users who didn’t need a Ph.D. or any programming knowledge to surf the web. As long as you had an internet connection and a bit of curiosity, anyone could view, build, and interact with websites. The influx of new users led to a corresponding growth in the number of websites, web applications, and web companies serving those users. And like any good virtuous cycle, the new supply brought in another wave of new users.
Few products in the history of science and technology have grown at such a rapid clip:
The number of Internet users grew from ~2M in 1994 to 300M in 2000 (150x growth). Today, close to 70% of the world’s population (5.5B) are on the Internet
In 1994, there were ~3,000 websites on the Internet. Today there are ~2B.
The three largest Internet companies by market cap today were founded just after Netscape launched: Amazon in 1994, and both Google and Tencent in 1998.
The total revenue generated from the Internet in 1994 was likely <$100M. Today, Amazon alone generates ~$500B of revenue and the total market cap of the largest Internet companies exceeds $5T.
The point of this ridiculously truncated and simplified history of the early Internet is simply: while the core technology had been building up for decades, it wasn’t until the modern browsers came along that the Internet went from a hobbyist tool to everyday usage.
Cambrian App Explosion #2: The App Store Opens
Now fast forward to the 2000s, when the next Cambrian App Explosion occurred, this time driven by the iPhone. While smartphones started to gain popularity in the late 1990s when IBM released IBM’s Simon, the launch of the first iPhone would radically change how we communicate, consume, and distribute content. It is obvious today that the modern smartphone is one of the most revolutionary innovations in the last two decades, but what isn’t as obvious is the invention of the Apple App Store.
When Steve Jobs announced the first iPhone on January 9, 2007, there was no talk of an App Store. Jobs was against the idea of any third-party apps on the iPhone, and believed any apps used on the iPhone should be web-based. This was commonplace among other phone platforms of the time (Blackberry, Nokia, Microsoft). Less than a year later, on October 17, 2007, Apple announced they would release an SDK that would be available for developers to easily build apps. Jobs stated “we want native third-party applications on the iPhone, and we plan to have an SDK in developers’ hands by February [2008]. We are excited about creating a vibrant third-party developer community around the iPhone and enabling hundreds of new applications for our users. With our revolutionary multi-touch interface, powerful hardware and advanced software architecture, we believe we have created the best mobile platform ever for developers.”
By July 10, 2008, the Apple App Store officially launched with 500 apps. Fast forward to today, and there are over 1.8 million apps on the App Store available for download. Not long after Apple’s App Store launched, the Android Market was announced on August 28, 2008, which Google later rebranded to the Google Play Store on March 6, 2012. Today, Google Play offers over 2 million apps available for download (some more interesting statistics on mobile app data can be found in here).
We share this brief history lesson of the launch of the Apple App Store because we believe it was revolutionary in a few key ways:
A new channel of distribution. It’s hard to remember how poor the software distribution was before the modern-day app store. Most third-party apps at the time involved downloading a program on a PC or Mac and then syncing to the smartphone. By contrast, the app store today has an extremely simple and clean user interface, making it easy to find, download, and install apps that are compatible with your end device. It is estimated that there are close to 7B smartphones users worldwide today, which further demonstrates the reach of a single app.
Transformed how developers could create applications. The App Store SDK unlocked new developer tools and technologies, making it much easier for developers to build and update apps. The SDK offered a structured process for app verification, distribution, and quality & assurance. Now virtually any developer could build and monetize apps in the Apple ecosystem.
Unlocked new markets and disrupted traditional industries. There are a whole host of applications that have been enabled by the reach and distribution of smartphones and the modern-day app store, such as Spotify, DoorDash, Yelp, Uber, TikTok, Instagram, and Strava – the list goes on. It isn’t a far stretch to say that if it wasn’t for the App Store, many of these products likely wouldn’t exist today.
Today’s Cambrian App Explosion: Generative Apps Built on Foundation Models
Similar to the launch of Mosaic and Netscape in the early ‘90s and the App Store in 2008, we believe ChatGPT (and other Foundation Models) is heralding a tipping point for the world of generative apps. In other words…
Modern Browsers (Mosaic & Netscape) led to millions of new websites
The App Store (Apple & Android/Google) led to millions of new smartphone apps
ChatGPT (and many other Foundation Models) will lead to many (millions?) of new Generative Apps
Why is this? In both previous eras where the number of end-user applications exploded, there was a fundamental technological innovation at the platform / enabling layer that opened the floodgates to the general adoption of existing technology. These innovations (the modern browser, app store, and foundation models) had similar characteristics:
Simplicity: Making complex technology available only to a handful of power users (scientists, early adopters, engineers) available to the general public through ease of use, convenience, and a “magical experience”.
Developer Friendly: Making it easier for developers to build on top of the existing technology as opposed to having to build everything from the ground up themselves, leading to entirely new ecosystems not even thought possible with the original platform.
Widening Distribution: Opening up new markets, new populations, and new forms of monetization that are exponentially larger than the original users.
Of course, there will be a number of new questions that emerge in this next era of app usage that we’ll need to think through:
Will there be a single “tax collector” akin to Apple with its 30% App Store fee?
Will value be distributed across the entire spectrum of apps, or accrue to a small minority (similar to Ben Thompson’s “Aggregation Theory” for Internet businesses)?
What are the key barriers and factors developers need to consider in building new generative apps (which foundation models to use, finetuning, evolving regulatory structures, etc.)
Who will be the builder persona? Software engineers, app developers, or a new persona entirely (AI specialists?)
Circling back to Paul Graham’s tweet above, it will be fun to reflect back in 2043 and determine whether AI really did have its “modern browser” / “app store” moment in 2023!
Funding News
Below we highlight select private funding announcements across the Intelligent Applications sector. These deals include private Intelligent Application companies who have raised in the last three weeks, are HQ’d in the U.S. or Canada, and have raised a Seed - Series E round.
New Deal Announcements - 12/16/2022 - 01/05/2023:
We hope you enjoyed this edition of Aspiring for Intelligence, and we will see you again in two weeks! This is a quickly evolving category, and we welcome any and all feedback around the viewpoints and theses expressed in this newsletter (as well as what you would like us to cover in future writeups). And it goes without saying but if you are building the next great intelligent application and want to chat, drop us a line!
Thanks Sabrina and Vivek for the thoughts and perspective.