In 2009, Apple promoted its newly launched App Store with the apt slogan of "There's an app for that", promising that it has an app for just about anything that someone wanted to do.
Twelve years on, smartphones and mobile apps have become part and parcel of our everyday lives. There are apps for almost everything — from playing games and making cat filters for camera apps, to managing your finances and making video calls.
As the pandemic continues, companies have started to pay more attention to apps and cloud solutions, sinking more money into various digital initiatives to navigate this “new normal”. But can they see a return on their investments? Or do they at least have visibility on how to make their digital investments better?
San Francisco-based start-up Amplitude aims to offer a solution in the form of the Amplitude Digital Optimisation System, which was launched on April 27. According to Julio Bermudez, Amplitude’s vice president for Asia Pacific and Latin America, this system helps companies optimise their digital offerings by understanding “how their products work”. This, at first glance, seems like a no-brainer. Why would a company not know how their product works? After all, they were the ones who designed it.
Evidently, this might be a bigger problem, translating into a bigger potential market opportunity than most casual observers might imagine. Last May, Singapore’s Government Investment Corporation (GIC) led Amplitude’s Series E funding round of US$50 million ($67 million), bringing the start-up’s valuation to over US$1 billion. Other investors include US private equity firm Sorenson Capital and Sequoia Capital. In total, Amplitude has raised some US$186 million so far.
The product experience
From Amplitude’s perspective, the main problem with companies when they develop digital platforms like apps is that they pay too much attention to app downloads, and not enough to app usage. “Amplitude helps you understand what happens post-acquisition [of the customer.] Having visibility of what occurs when users are in the app can lead to certain outcomes like what features to build,” explains Bermudez in an interview with The Edge Singapore.
This is important because the numerous options available today means that customers are unlikely to return once they are turned off by a bad experience. “How many times have you reinstalled an app that you have uninstalled?” Bermudez points out.
With more than three billion smartphones in use today, there is a massive market for app developers. Mobile apps are expected to generate over US$935 billion in revenue by 2023, estimates app development platform Buildfire. However, this is a combined revenue split among some 4.83 million apps on the App Store and Google Play Store, with many of them offering similar functions.
“If you think about all the companies that have grown the fastest in the digital product
space, they’re largely competing not on better marketing [but] on actual product experience,” Bermudez says, adding that the Digital Optimisation System, ultimately, “helps [companies] build better products that offer a better experience [so that it can be used] as a competitive advantage”.
The amount spent on just building digital products will amount to about US$6.8 trillion by 2023, says Bermudez. So, if a company or developer doesn’t know what is going on, it is akin to pouring all that money into “a massive black hole”. “What Amplitude allows you to do is to understand what people are doing inside your app in order to build a better version of it,” he says.
He adds that many business owners he spoke to are not only worried about user adoption for their platforms or apps, but also how to monetise their users’ behaviour on their digital offerings. In Asia, the user base is wide enough that an app will get downloads but revenue per user and brand loyalty are usually low. “Everyone is constantly switching; they’re looking for the best deal,” says Bermudez.
In contrast, digital offerings in the US have begun to concentrate on building loyalty through customer experience. “If I want to keep people loyal, it is not just about giving them more coupons, but actually building a better experience,” he adds.
To understand how to do that and gain “the competitive edge”, developers can ask for feedback about the app via feedback forms or conduct customer surveys. However, Bermudez says these solutions are not scalable and are also subject to biases.
He is not advocating ditching these surveys, but making the point that Amplitude’s system can allow for a company to observe all user activity and gather feedback through all these data points. “[With Amplitude], you can look across your entire user base and see millions of people’s behaviour from these hundreds of thousands of surveys,” he says.
“The difference between a customer survey and using behavioural analytics is simply scaling and statistical significance. You will need a lot of data points to understand if those data points are actually correlated to the outcome,” he adds.
One of the main objectives that Bermudez observes among companies that develop apps is that they want to know about user retention — if people are using their apps repeatedly. The common reason to download an app is either the users absolutely need it, or because they were incentivised to do so by a discount or promotion.
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The latter costs the company money. “You’re already in the negative if they use your app one time,” says Bermudez. “You literally paid for that person to use your app and then leave.” As such, an app needs to retain customers via a good experience.
He adds that Amplitude helps companies and developers understand not only their retention rates, but also which parts of the digital product lead to retention. This is important because if a product or platform can retain customers, it can increase the lifetime value of the customer, which covers the initial marketing cost.
So what are the experiences Amplitude aims to achieve? Ideally, it is a personalised experience for each customer, depending on what they are doing in the app, in contrast to blanket promotions or changes to the app. For example, if a user takes a ride hailing app from a place labelled “home” to a place labelled “work” four out of five days a week, the app will recognise that and perhaps offer the user a free ride for the fifth day.
This prevents customers from switching to competitors and, by extension, builds loyalty. “Those are the types of things that people can do with the Digital Optimization System, because we’re giving you the analytics to understand that,” Bermudez says.
The closest parallel that one can use as an analogy for the Digital Optimisation System is Facebook and various other social networks, which use Big Data and algorithms to understand how users are navigating the network and leverage those insights to enhance a user’s news feed to keep them coming back.
Pandemic boost
Cashback reward programme ShopBack is one of the early adopters of Amplitude’s solutions. As such, ShopBack was already in a prime position to understand changes in users’ behaviour when the pandemic hit early last year. “If you think about it, all the data you had in the past was suddenly useless [to address the changes brought about by the pandemic]. So, looking at what worked before didn’t matter. You [need] to have a highly intelligent system to tell you what is going on right now,” he says.
Many businesses adopting Amplitude’s solutions think like Shopback. This is why the company grew five times over the past two years in Asia. “Obviously, the pandemic played a big part in accelerating that, but it was inevitable as companies had to really have a digital presence in order to survive,” he says.
Before the pandemic, when he tried pitching to prospective customers, they would often say, “We really care about that, but, maybe next year. We don’t have resources right now. Come back in a quarter or two,” he recalls.
“Then all of a sudden [they changed their minds and say] we have to do this now,” says Bermudez.
