YOU know there’s a stock market bubble when the shoeshine boy starts giving you stock tips. In the same way, I can’t help but think there’s plenty of froth in digital right now, because everyone I know is building an app.
As Facebook heads for its IPO on 18 May, which could value the company as high as $85-95bn (£53-59bn), it’s a seductive thought that so much value could be created from a simple idea. More and more people want to believe that the digital economy has created a space where business has become a form of conceptual art, where idea is everything and execution is almost irrelevant.
They’re wrong though. In fact, Facebook shows this more clearly than most. For one thing the ugly legal dispute between Facebook founder Mark Zuckerberg and the Winklevoss twins revolves around this very question. The twins had an idea for a Harvard-only social network and thought all they had to do was commission Zuckerberg to program it for them. It turned out he was working on his own project “the face book” at the time. They now claim that he stole their idea and that, as the scale of Facebook’s success increases, it only reveals more and more money that he has cheated from them.
The courts have granted the Winklevosses a settlement including shares that, at IPO, could be worth $200m+. But the idea that Zuckerberg and the teams he later hired were not the chief reason for Facebook’s spectacular growth is preposterous. He had demonstrated his ability to build an addictive, popular site already, with the controversial Facemash generating 22,000 photo views in its first four hours. And Facebook succeeded by making the right choices again and again, even as other social networks like Friendster and Myspace fell by the wayside. Facebook has earned its valuation the hard way.
And where Facebook hasn’t lived up to that standard – notably in mobile – its bottom line suffers. My Facebook app for BlackBerry makes me want to throw my phone across the room every time I use it. And Facebook evidently sees this problem too, which is why it just paid out $1bn for Instagram, a mobile photo-sharing app that is an absolute joy to use. Equally, Facebook must defend its valuation by showing it can turn its user base into an audience for effective advertisements.
Execution is still everything. Apps can make serious money, but most won’t. And Edison’s rule about the proportions of perspiration and inspiration holds true, as the hours pulled by serious app entrepreneurs in workspaces like TechHub prove.
The author Dorothy L. Sayers wrote in The Mind of the Maker that creation requires not just an idea, but implementation and the user’s engagement. Without all three, a global app market is no guarantee of free money for anyone with a good idea. But until the froth gets blown off, it’s still a tempting dream. How about an app that helps you come up with app ideas? Anyone know a good programmer?