In this technological era, the phrase “bubble” has become a fancy term put to use by investors, entrepreneurs and business owners alike, still the meaning of this term is murky. “A bubble means that the value of a particular startup, group of startups or market is not correctly justified by the supply and demand conditions existing in market.” Till the time this bubble persist, the value or prices will be different from rest of market.
“A bubble means that the value of a particular startup, group of startups or market is not correctly justified by the supply and demand conditions existing in market.” Till the time this bubble persist, the value or prices will be different from rest of market.
Burst of Bubble
Hyman Minsky Highlighted five points in life cycle of a financial bubble:
# Displacement - When Investors are ready to investing in the new product in market
# Boom - When their share price starts increasing with large number of investors
# Euphoria - This is the valuation stage where the share price of product reaches its peak
# Profit Taking - This is point when investors sell share and make profit thus burning the bubble slowly
# Panic- The point when share price fall at an instant speed the way they rose leading to burst of this bubble.
So are we in App bubble?
Startups are looking forward to develop apps as a big strategic tool to penetrate maximum market. So, this lead to the development of an app bubble which started when big investors & crowdfunding companies started investing in apps based startups.
Some investors such as angel investors and crowd funders have been continuously contributing to this bubble and the problem with them is that there is no liquidity to their investments. Startups have been rising day by day and ecosystem of apps rose around them.
There are almost 750,000 apps in App Store alone. I am not even counting counting the Play Store. TechNet estimates that this app economy has paved the ground for employment opportunities and has created 476,000 jobs.
However, amongst those apps, you cannot guarantee which one have genuinely made significant market income. And the massive lay offs we have have seen in startups is not clandestine.
As the number of apps developed will increase, the wall of that bubble will get thinner and thinner and will eventually burst. Maybe similar to Dotcom Burst in 2000. Companies with no real business model die with effect to killing some genuine one.
But does this give a message that companies should stop making apps?
Fortunately No. Until this bubble is bursting, apps will continue to work as long term strategy and a good business medium to reach audience. And with no doubt we can say that the future of digital is ubiquitous, what is really required is the genuine use of these small square symbols on mobile phones. Apps really need to connect to some real business model which can foresee great ROI.
As with this bubble, the apps of poor development quality or with bad tech stack will litter virtual ground. Only apps which are smooth, fast, updated and feature-filled will take off. So the apps need to be uniquely displaying their business model to blow within the bubble.
You need to take flash of the DotCom burst in 2000, while this bubble was bursting, many entrepreneurs were planning for great business model on same. In fact there are many examples like Amazon.com or eBay which survived that bubble and have successfully gripped the market. They just took a curve in their business model, reorganized themselves and survived.
You need to know that a great tech product will no longer speaks for itself without an effective strategy, and a venture cannot sustain until it has a great business plan.
Technology is always evolving and change is necessity, we at Daffodil hold on tightly to this thought we suggest our clients to use app technologies wisely so that the bubble burst does not affect their business. On the contrary, along with the right technology support, an app burst can cause a business to benefit surprisingly.
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