VCs On The Wrong Side In The Smartphone Wars

Think of how much better your life is now you have an iPhone or one of its many virtuous progeny…iPad, Android, apps, mobile-optimized games, content and services. Do you want to go back to before smartphones, before tablets? Unlikely. Yet many VCs do. Hence their self-interested handwringing over the alleged slow death of the mobile web.

Do not be fooled. The web is thriving.

The real issue? VCs fear the easy money days of amassing their fortunes atop publicly financed, freely available platforms is long gone. Now they are faced with the daunting prospect of either building their investments inside the thriving iOS or Android ecosystems, both of which demand their fair share of any booty, or figuring out ways to route around these two clever giants.  

This is very unlikely to happen. 

iPhone, Android, native apps and today’s infinitely scalable private platforms continue to deliver benefit after benefit to users around the world.

A Tax On Venture Capitalists

Chris Dixon of Andreessen Horowitz (A16Z) bemoaned the declining state of the “web” last week, squarely blaming iPhone, App Store and all it has wrought.

What wins mobile, wins the Internet. Right now, apps are winning and the web is losing. Moreover, there are signs that it will only get worse.

Worse for whom? Not me. Likely, not you. Worse, perhaps for a venture capitalist. Just like the original incarnation of the web was worse for music companies and newspapers.

Dixon continues:

Resources are going to app development over web development. As the mobile web UX further deteriorates, the momentum toward apps will only increase.

Resources following users is not a problem. Moreover, Dixon appears to hold a rather limited view of the web. As John Gruber noted last week:

We shouldn’t think of “the web” as only what renders in web browsers. We should think of the web as anything transmitted using HTTP and HTTPS. Apps and websites are peers, not competitors. They’re all just clients to the same services.

The fact is, the “mobile web UX” has not deteriorated. Instead, the web has evolved, as it always has, and new platforms have constructed a thriving business that, for now, better support the needs of the billions of mobile web users. This should be lauded! Indeed, omit the nebulous term ‘app’ and the fact is web services, software and computing functions have never been more robust, more capable, more discrete, more accessible, more affordable. These are all good. I’m surprised any venture capitalist would bemoan this state of affairs.

Let’s not reduce the web to only those parts that VCs can exploit for maximum gain.

More money is presently flowing to Apple’s iOS ecosystem and Google’s Android ecosystem because that’s where the users are. That these two great private companies have their own platforms, their own gateways — and demand payment for access — has actually helped extend the power of the web.

My suspicion, of course, is VCs do not fear a deteriorating web UX, but are instead upset today’s brave new web limits their potential gains. Don’t believe me? More from Dixon’s post:

Google and Apple control what apps are allowed to exist, how apps are built, what apps get promoted, and charge a 30% tax on revenues.

Ponder that. A venture capitalist is decrying a sustainable business as little more than a “tax” on revenues. Again, whose revenues? Apple and Google have each created a marketplace that only a few years ago did not exist. These now serve billions of people. This is a net good, even if it’s not ideal for today’s web VCs.

Shortly after Dixon’s column, venture capitalist Fred Wilson similarly lamented the “mobile downturn”:

It has gotten harder, not easier, to innovate on the Internet with the smartphone emerging as the platform of choice vs the desktop browser.

Wrong! Innovation has never been easier, never been faster, cheaper, more accessible. Time for VCs to accept this new world.

Before the iPhone, before the App Store, the ‘open web’ offered a massive resource VCs happily plundered: the public switched telephone network. The costs of this public infrastructure was borne by carriers, the government and each of us. VCs piggybacked their investments upon this infrastructure, which carried them to unfathomable wealth.

Those days are gone. They will not return, no matter how hard VCs press for a change.

A Boon For Users

If the VCs really want to alter today’s mobile reality, they are welcome to risk their sizable funds toward technologies and services that improve the non-app web or completely disrupt the current state of affairs. After all, despite their assertions, the web has not been shut down or corralled. It’s still there, availing itself to all.

Build something better. That’s my challenge to them.

Do they have it in them? Consider this final lament from Fred Wilson’s post:

So (VC) Brian (Watson) pulled out his iPhone and I pulled out my Android and we took at trip through the top 200 apps on our respective app stores. And there were mighty few venture backed businesses that were started in the past three years on those lists.

This matters not one whit for users.

It just may be, thanks to the iPhone, Android and the new mobile web, the future big money in tech will have to be earned the old fashioned way: brick by brick; through building an actual sustainable profit-generating business, from scratch. Now that would be disruptive.