#10B – A review of the past decade in tech, the 2010s, and its impact on the world we live in

We split this episode into two parts: in this, the second and final part (10B), we discuss the significant shifts in business models and the funding landscape that happened in the 2010s. We deep-dive into these business models, e.g. freemium, advertising/free at the point of consumption, subscription, and we give you the no-BS view on the fundraising landscape, what REALLY changed and what (mostly) stayed the same. Please also listen to the first part of this episode (10A), in which we discussed the macro-trends of the 2010 decade and the underlying technological tectonic shifts, including analyses of the OS, platform and product & application spaces Navigation: Introduction (01:24) Section 1 - A brave new world ... of business models (01:56) Section 2 - The switch in funding landscape (27:59) Section 3 - The end ... of the world, as we know it?! (37:38) Our co-hosts: Bertrand Schmitt, Tech Entrepreneur, co-founder and Chairman at App Annie, @bschmitt Nuno Goncalves Pedro, Investor, co-Founder and Managing Partner of Strive Capital, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news. Subscribe To Our Podcast Full transcription: may contain unintentionally confusing, inaccurate and/or amusing transcription errors Intro (01:24) Bertrand: Welcome back in this , the second part of Episode 10, Episode 10B, we're still focus on the 2010s, that incredible decade that we spent some time discussing in Episode 10A and now, we are going to be focus on the dramatic changes in business model that happened, as well as the switch in funding landscape. For further reference, listen to the first part of this Episode, Episode 10A. Let's start today with dramatic changes in business models.   Section 1 - A brave new world ... of business models Nuno: So software is eating the world, Marc Andreessen famously wrote, I believe in 2011 and the world was going to be basically not only fully digitized as software was going to entrench itself and disrupt every single industry. Part of that promise, I believe, was realized in the last decade where we have the advent of a lot of things that we discussed in episode 10A, but also I believe that the whole thesis around software is eating the world is not the full story. In some ways, the world got totally digitized, but the physical world didn't catch up. And one of the stupid examples I always give is in a world where, for example, we are going to have self driving cars, well, the cabin of a car needs to change because you don't need to drive anymore. So what is it going to become? Is it going to become an office, a living room, a bedroom? Is it going to be a flexible space or not. So Mark's comment I think is well taken. The comment that digitalization is going to overrule many industries. There is not any other moment, but the current moment in which we're in the midst of COVID, that would make that point. But I do think it missed part of the story. Part of the story is that the physical world will have to change as well. And it's very interesting that Marc just published a manifesto of sorts on how the world needs to change going forward. And he talks a lot about core infrastructure in that manifesto, which is, by the way, an exceptionally well written piece of text. But as I said, I think software wasn't the only part of the story. There is also a hardware and physical part of the story. Bertrand: Yes, totally. It's as you say, pretty interesting that he started the decade with this very famous article and is starting a new decade with a new article. I think he was definitely right on the first one. Software is indeed eating the world, but as you say, the physical world was not following up. The good news is that these days the physical world is digitalizing as fast as they can, learns to use some tools that us been using for a while. It's definitely a tale of two worlds, but these are going to merge.  So, in term of change of business model, let's go to first the B2C side and we'll talk later on about B2B.  I think the first biggest phenomenon has been the rise of apps. Long time ago, there was a lot of discussion about why do we even need apps, there was a lot of discussion of native apps, web apps, et cetera. Now it's very clear that it was huge. Interestingly enough, initially Steve Jobs didn't want native apps. He was fine with web apps, changed his mind dramatically after a few months, launched what was the biggest revolution, thanks to the app store, which was not just a new technology, but truly a new business model. A new way to discover, distribute and monetize content at a scale, never seen before. And that has been since copied by every other platform. From, Android to Windows to of course, MacOS and other platforms. And, interestingly enough, they started first with music. The concept was started with iTunes, then it was followed by Amazon with their Kindle platform. But finally it started to go really big with the app store. Just to give you some numbers, of course, we know that we have millions of apps, more than a dozen million apps across different app stores. But in term of downloads, we got more than 200 billion downloads in 2019 alone, 200 billion downloads. We have seen in term of consumer spend directly through the app stores, so excluding e-commerce, excluding advertising, more than 120 billion U.S. dollar of consumer spend in 2019 alone. Per day, the average user of a smartphone is spending 3.7 hours, more than three hours and 45 minutes every day on their smartphone. So, it's really been a huge revolution coming from zero to the biggest new way  to distribute applications. And, that's probably been the biggest change in the history of B2C in term of rise of a new business model.  Nuno: I think in hindsight it's always obvious that, basically this was going to be a success anyway, but this is a time for you and I Bertrand to gloat because we were people that bet on this. You with App Annie, I with Strive Capital, we bet that mobile apps was going to be its own thing. And it was going to be its own economy. It was going to be a content form that was just different from anything else. And so this is a time where we say we were right guys. You all told us that we were wrong. We were right. It wasn't HTML 5, it wasn't some other thing. This is its own thing. And back to your point on the economy side. We've had a lot of innovations that really in some ways I believe were facilitated and certainly gained momentum through mobile apps and starting with the first one, freemium. Obviously the most monetized area of apps are games and games. In some ways, innovated in how you propose to your end user and potentially customer to get paid for.  They innovated by saying, we'll give you something free that gives you utility that you can play with. But if you want to extend the range of things you do, if you want to extend utility of what you do with it, you need to pay. And that innovation is dramatic. And as we'll discuss later, also pretty apparent in what happened in the B2B space. Bertrand: Yes and it's an  actually started in Asia, specially in Korea  in gaming, copied pretty quickly in China, initially in PC gaming and ultimately came to the West with mobile. So, invented in Asia, in a PC gaming situation, transposed in the West, in mobile situation. Freemium was a huge, huge enabler for gaming for sure, but also for a lot of other type of products that benefited from such a business model. And we'll talk more also on the B2B side, where it had a real big impact.  Nuno: And then my favorite pet peeve around business models. Since probably 2004 2005 I've been saying free isn't really free. Free at the points of consumption comes with some costs. And in many cases that cost was supported by advertising based business models. A lot of the services we had were paid for by the ability for the provider of that product or service or application to serve me ads. For a long time we were very happy with that because free is great. Free, I don't pay. As we will later on discuss, the issue was that the free was done at some cost to me because my information was being manipulated, used for things that maybe I didn't know it was being used for. And then I was served back with advertising. Now, I'm not saying advertising based business models are all wrong. I don't think that advertising based business models have been negative. Actually, quite the contrary. They have supported a lot of services that we use that are significant to us. Who could imagine not using Google search if we didn't have advertising based business models? But clearly that was a trade off that was all but misunderstood by most users. People never understood the trade off. People were like, free is great. I'm not willing to pay anyway. But they didn't understand that there was something being done with their information and that manipulation. The advent of advertising based business models is a very interesting counterpunch to now the advent of subscriptions, which were really looked down on for significant part, even of the early decade of 2010s.  Subscriptions is like the old business model. Nobody wants to pay for that. That's the old model of feature phones where you have so called value added services. And you pay for things that you don't know you're paying for, or you have subscriptions that your telco charges you that you don't know why you have them. But somehow subscriptions did make their way back in the late 2010s, and today they are wildly adopted business model and one that we've seen across every single area, like entertainment, gaming, et cetera. So subscriptions have taken over in some way for the fact that we do like free,...