The Rise of the Super-App

Social and cognitive researcher Robin Dunbar concluded it isn’t possible for high primates, including humans, to maintain stable relationships with more than 150 people. Of the 150, only 50 could ever be close connections. This became known as Dunbar’s number, explaining why people drop out of your life as new people enter it. It’s easy to see when you look back. There are only so many people to whom we can pay close attention.

However, it turns out that people we know are not the only ones in our relationship orbit – you can include pets and even celebrities you don’t know personally and will likely never meet. These are known as para-social relationships. Cognitively it is very difficult at a subconscious level for the human mind to delineate physical human relationships from one that is streamed directly into our consciousness via the screen. Hence, the Kardashians. We can even trust people we don’t know based on our pseudo-involvement in their lives. The TV industrial branding complex as we know it was built on the power of the spokesperson.

The concept of Dunbar’s number translates easily not only into our media habits, but also technology consumption. The only difference is that the number of media we can pay attention to is actually far lower. This reality is increasingly important for our investment strategy.

The Digital Dunbar

The front screen of an iPhone can carry 24 apps, not counting the four presiding over prime real estate at the bottom of every page. I have six pages filled with apps on my iPhone, most of which have become digital relics filled with bit-rot. When I investigated the number of apps that I used at least once a week in the past month, I found only 15 of the 141 made the cut. Of the 15, no more than five are indispensable to my daily routine. The number of digital relationships we can curate is small and getting smaller. I’m calling it the Digital Dunbar. Society is starting to realise that a large digital diet is just too difficult to maintain. This reality is in no small part why Facebook and other social apps do so well – they reduce social and cognitive complexity.

Trust and monopoly issues aside, consumer behaviour says we prefer our digital interactions and commercial transactions in one single location, and increasingly they are. Returning to the old days when Yahoo was literally the front page of the internet, we are heading towards the age of the Super-App. This heralds an era when we stay inside the ecosystem of a single app, rather than flitting from app to app within the bounds of our smart phone’s operating system. Currently, owners of an operating system make it hard for Super-Apps to thrive, but it seems like that is all about to change.

The Cookie Crumbles

Increasingly under risk is the common business model employed on mobile and desktop internet — harvesting and selling personal data to advertisers. Not only is targeted, algorithm-driven advertising in the crosshairs of greater scrutiny, both major mobile gatekeepers, Apple and Alphabet, are restricting the ‘cookies’ (read: tracking) on which all digital advertising relies. Apple is now significantly restricting how apps can track their users across their ecosystem. It is the default position that tracking is switched off. This is bad news for any third-party app that relies on advertising as its main revenue source. 

Likewise, Alphabet is reducing the data access it once provided via its Chrome browser and plans to entirely remove third party cookies by 2023. It would appear that the digital advertising ecosystem that facilitated a ‘free’ internet is coming to an end. It’s a good bet to assume that third party data streams of consumer behaviour will be shut down. While this is likely good for democracy, it will also bring challenges to the digital investment landscape.

The Dawn of the Super-App

In the recent case of Epic Games v. Apple, Apple was ordered to remove its anti-steering rules and policies that banned developers from informing users about alternatives to Apple’s in-app purchase system. It’s expected that further regulation will result in prohibiting Apple from blocking independent in-app purchases, from which Apple currently takes a 30 per cent ‘tax’.

The shifts will be in reducing both tracking across the web and the power of mobile operating systems providers, as a result of antitrust activity. Consequently, an entirely new mobile economic system is likely to emerge – ushering in the dawn of the Super-App.

Currently, consumers are often required to log into a number of apps to complete a single transaction. Let’s say you’re fully vaccinated and want to fly from Sydney to Melbourne to see the Australian Open Tennis. This process would require navigation through a number of apps. After buying tennis tickets on Ticketmaster, there’s booking flights on Qantas and accommodation on Airbnb, co-ordinating a catch up over WhatsApp, reserving a restaurant or two on OpenTable and hailing transport with Uber. These transactions necessitate some skill in project management to plan and execute independent interactions and usage of different payment gateways. If all of this could be done within a single Super-App’s ecosystem, sheer convenience would win the day.

Super-Apps already exist in other markets. Tencent’s WeChat in China is already what I’d regard as a Super-App. Beyond standard social media utility, users can also reserve a restaurant, buy tickets to events, pay for services and entertainment, organise travel, pay bills, book medical appointments and even obtain a personal loan. It’s the world’s best example of a Super-App. There are more than 3 million Mini-Apps flourishing inside the WeChat app itself.

Why limit your business to function only as a source of digital advertising when you can sell directly to your customers and take a clip of the ticket along the way?

It’s a sure way for any app to become indispensable. The smart play for any social media giant - Meta included - is converting from surveillance capitalism to ecosystem ecommerce. For all of Facebook’s historical failures, Meta does know what people have bought and are likely to buy next – so why not sell it to them? Over the past couple of years, Facebook Market Place’s growth has been nothing short of extraordinary. It currently has over 1 billion users, is five times the size of eBay and has now surpassed the evergreen stalwart that is Craigslist in the US. Ecommerce on Instagram has also been laudable, but there will now be greater competition from other Super-Apps, once access to the data stream for digital advertising becomes heavily restricted.

In an increasingly crowded social web landscape, the new game will be to trap users inside a single ecosystem, because social media firms will not be able to prove effectiveness of campaigns to their advertisers. To succeed in the emerging app economy, advertisers (read: social media giants) must transition to becoming ecommerce platforms, where their app is both a one stop-shop and a virtual digital department store participating in direct-to-consumer commerce. 

Who Can Win?

This shift doesn’t guarantee that the current tech giants will stay on top. With increased scrutiny on Big Tech and antitrust activity, this opens the door to second-tier digital brands. Two key elements required are frequency of usage (at least daily) and trust. To become a Super-App, the starting point would be an app that is part of the daily routine. There’s a good chance that finance could be the fulcrum. We inherently trust in brands that hold our money and with which we transact. But these brands need a social component to understand consumer behaviour and integrate deeply enough into people’s lives to anticipate and deliver what they want.

Jack Dorsey, CEO of Twitter and Square, could merge both firms to go down the Super-App path. Alternately, the recently spun-off PayPal (now with a market cap of $US227billion) could acquire a social media app. Whatever happens, finance will be the fulcrum. The game will be in direct transactions, not advertising. As investors, what we need to look for is social activity overlapping with finance in a single ecosystem. Single apps which will become social shopping centres – a virtual one stop shop. Those that manage to pull it off, well are likely to be the challengers to Big Tech as we currently know it, and may install new heroes in our portfolios.