# Why AI Probably Won’t Kill Your App (But Ignoring It Will) — Eric Crowley, GP Bullhound

Channel: Sub Club by RevenueCat
Video: https://www.youtube.com/watch?v=IGxuXkPXEco
Duration: 1 hr 3 min
Language: English
Words: 14447
Transcript page: https://viewrankai.com/tools/youtube-transcript/IGxuXkPXEco

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[0:00] Hello, I'm your host David Bernard and with me today, RevenueCat CEO Jacob Eiting. Our guest today is Eric Crowley, a tech investment banker with GP Bullhound, where he provides transaction advice and capital to top companies in the consumer subscription software space. On the podcast, we talk with Eric about the opportunities and challenges of AI for consumer apps, what you

[0:24] can learn from Straa acquiring Rena, and the flawed thinking around subscription fatigue. Hey Eric, thanks so much for joining us on the podcast. Thanks David. Thanks Jacob, thanks for having me again. Always a pleasure. And Jacob, nice to have you on as well. Good to be here. So this is our fifth time to have you on. this is your fifth or sixth uh consumer subscription software report. So I realized in the last few episodes having you on I've assumed certain knowledge of the audience but I didn't want to do that this time. So let's just kick it off with what is your uh famous uh and infamous consumer subscription software report that you do every

[1:01] year. Why do you do it and what is GP Bullhound? Yeah, let's let's we'll work backward from that real quick. So keep the commercial short. uh GPhound, we're an investment bank and venture capital fund. Uh been around for 25 years. Offices in New York, San Francisco, uh which is where I sit in SF and then uh nine offices all around Europe. And we we are the uh only investment bank with a focus on consumer subscription software companies. It's a big chunk of our business. We almost exclusively focus on selling uh companies mostly for entrepreneurs. We're helping them raise capital and we'll talk about a couple of the deals we've done in the past. So that's the firm. I

[1:38] started our CSS practice back in 2018 actually when we sold all trails uh to Spectrum Equity and that was kind of the eye openening moment for me about the power of selling software to consumers. I think a lot of people in 2018 were like B2B SAS B2B SAS B2B SAS. I said that's great but it's boring. And so I wanted to work with companies that I thought were fun that I really got to understand that I could download and play with. And so I wrote the first report actually David in 2019. And so we've been doing this now for for quite some time. It was pretty bad, but

[2:08] to be honest, it was the only bank report about the sector. And we we're a little different than other banks. We don't just do That's crazy. Sorry. That's just crazy. That that wasn't that long ago. I had way less gray hair. That's for sure. I think that wasn't the first time I I found GB Bhan. You guys were one of the first people to put out some sort of like report or any sort of coalesing of a quote unquote space here. Uh was was your uh your PDF. Yeah. you were really early to be so bullish on consumer subscription to to your credit and it it's cool that the origin of that was selling

[2:39] Altra to Spectrum Equity, but you know it's it's taken other folks a while to catch up. So your your reports are like a library of of the growth of this industry. It really is kind of fun. I mean I think Jacob, you guys were obviously ahead of me because you guys were building building the space before I was. So kudos to you guys. But no, I mean I think if you just think about the math, right? Consumers are 70% of the economy. They love experiences. They love doing fun things, right? So why wouldn't software just become bigger? To me, it just seemed like a mathematical certainty that this was going to happen. And so, you know, I was a younger banker trying to carve

[3:13] out my own niche. Didn't want to go play against like 300 other people that are all doing B2B SAS or or stuff like that. And they said, "Let's try something different." And I think I think that bet's been great. Like I think we're absolutely thrilled by that. And it's been it's just been a ton of fun for me. So, I got to say I really enjoy my job. Do you think there was anything like structural or sort of like consensus thinking at the time for like why this was overlooked? Was it just like people weren't used to it? And then like what has changed from then to now that it's

[3:41] like cool now? Is it just the market's bigger? Has like people realized like churn isn't the worst thing in the world? Like what's what what do you think is different now versus, you know, six years ago? Yeah, I mean it's it's a great question. I mean the honest answer is six years ago, right? It just wasn't on people's radar, but also the companies weren't as big, right? There weren't nearly as many success stories. They were starting to happen, right? If you think about both Netflix, Spotify were around. People were starting to subscribe to them. I mean, think about this. Like Netflix once again was an OG subscription, but mailing people the DVDs. So, people were starting

[4:14] to say, "Hey, I'll subscribe to something." And but the the success stories weren't there. So, investors were not I mean, Dolingo IPO was 21, right? Or something like this. Yeah. So hadn't even no that hadn't gone out right. So there I mean the the market comp was there right into it was there with Turboax there's other there's there's examples you just have to know where to look quicken right has been around for for 20 years right you had to know where to look but there just wasn't as many success stories IPOs the big the big booms that you're seeing in B2B SAS and so people were just not thinking about it but then at the same time right consumers think back

[4:46] to your first iPhone you probably were still doing inapp purchases right probably downloading an app for a buck.99 right the concept of subscribing to something for 20 bucks a year, 30 bucks a year. That just didn't appeal to most people, right? And but I think that changed a lot over the last couple years. One, the products got way better, right? I think that's 100% true. I think investors got super bullish during 2021, probably overly bullish on some of the CSS businesses that we saw. And that's okay, right? You're allowed to get overly excited about stuff because guess what? Some of those bets were great, right? Some of those investments that people made in 2021

[5:19] have absolutely been fund returners, right? Others weren't. But that's the same for every industry, right? B2B SAS went through the exact same thing. AI is going to go through the same thing. And so, yeah, I mean, I think where things are now is I still don't think most investors are caught up. I will say strategics have figured this out quick. I think anyone from media to consumer goods and even B2B SAS is saying like how do I add on some sort of a consumer angle, some sort of a proumer tool to one increase my ecosystem, two increase my share of mind share with my target customer. And I think that's been really exciting. Have they finally like written

[5:53] off trying to do it internally like uh like Allah CNN whatever and whatnot there I mean listen they're are still trying that's for sure you can hack these things and put something together real quick and determine if there's consumer love and if there is man boom all of a sudden HBO plus right or whatever HBO Knack max or whatever your name you want to call it right that's a massive step function change for that business model I shouldn't rag on internal like CSS cuz that's a clearly a victory despite their own you know follys they're definitely happy they have it verse not have it let's call it that way I was going to cover this uh later in the conversation, but since

[6:24] uh since we're talking about it now, you have a whole page entitled another subscription question mark exclamation point. Consumers say absolutely. Uh and I think that has been a big story which you're kind of already alluding to is that consumers are willing to spend and then it's kind of surprising how much they're willing to spend. Tell me a little bit more about you know what you shared on in the report about this willingness to pay and kind of the whole idea of subscription fatigue I think while you know partially true is is just so overplayed um so so yeah how do you think about that consumers are not dumb right and there's so many tools now to make sure hey you

[7:05] unsubscribe to this or or turn off that right so there you can't trick people right so so I think like this whole concept of like oh someone subscribed they forgot about it. Like that doesn't work anymore. There's too many good tools, right? And both legislative plus like just software tools. And then honestly like consumers will happily pay for something that brings them value, right? And so now do you need like 30 fitness apps? No. Absolutely not. But you might use two, right? You might use a yoga plus a running training app, right? Totally totally possible, right? And then I mean the beauty of what's coming up with some of the AI enablement of

[7:38] both legacy CSS plus let's just brand new consumer subscription tools like chat GBT right that is bringing new value to consumers every day right and they're they're going to be happy to pay for that and they're once again they're making a trade-off economic time versus money right and so the value they're receiving is is real right and so I think that's what I get really excited about is is yeah your subscription count probably went from zero or two in 2018 you easily have And but like let me take away two of those and tell me how much you scream. People be like, "Nope, that's part of my core. That's oh no, that's got videos of my kid playing baseball. No,

[8:13] actually this is how I'm learning something." Like people quickly say like, "No, I got value out of this." And so yeah, I think subscript subscription is overplayed. I don't think you're going to have 100, right? But I I wouldn't be shocked to see everyone having something between 15 to 20 in the next uh two to three years, especially as new categories came up, right? Like four years ago, no one had an AI buddy in their pocket. Nobody now, right? It's one of the fastest growing companies of all time, mostly consumer. And that's what I always keep coming back to is like c consumers will complain. I mean, it's it's human nature to not want to spend money on things. I mean,

[8:46] that's a rational market, David, working itself out is what that is. You know, you said you said Eric, you said consumers are not dumb. I would say one would even say they're rational. Consumers in large numbers generally are rational over time. Speaking of short-term irrationality, I've still been paying 30 bucks a month myself and 30 bucks a month for my wife on Ladder Fitness, even though I should just convert to the annual subscription just cuz 130 bucks in one pop. I mean, I have the money, but it just feels like such a big like drop $130, but it's going to save me a ton of money. I would I would argue though, David, is perfectly rational, right? Because it's sort

[9:22] of like you're you're you're sort of uh implicitly pricing optionality for yourself, right? Yeah. But overall, it is just fascinating to see and and you alluded to it as well that just the products have gotten so much better and and I mean I've talked about ladder a ton on this podcast, but it's just such a good product. The craft of making mobile apps continues to sort of improve and there's always been a design award level apps scattered around the app store, but I think it's becoming more the case that that's, you know, if you want to be a category winner, you kind of have to be

[9:52] on that level. And that takes like real skill, time, you know, from a design perspective, from a product perspective, knowing how to work the app store distribution as well. Like that's a whole, you know, dark art in itself. So if we knew the niches that it hadn't moved into yet and would, you know, we would we would just go build for them. I It's hard to predict, right? Yeah, I think I think that's right. There's more problems. I mean I mean, listen, think about it now. You're subscribing to something to help you unsubscribe to stuff, right? That's a fact. And then you also

[10:19] have on your phone. You've now downloaded an app to help you stay off your phone. Great business. And you're like, "Okay, that wasn't a problem that we had five years ago. Okay, I guess let's just keep doing that." I want to dig into that more later when we get into opportunities in the subscription space. But let's let's step back and talk about uh Runna. I mean, another great example of just a fantastic product that people were willing to pay for. So much so that they were growing insanely fast and were sold to Straa. Now I know you were a part of that transaction and helped advise RUA on the acquisition by Strava. So you can't you know speak too candidly about it

[10:56] uh but what can you tell us about that transaction why it happened and you know some of the thoughts behind it? Yeah so so obviously we were the salesside adviser to the to the run team and and big thanks to Dom and Ben and the rest of the team for for working with us. It was it was

[11:10] truly a fun fun deal to be a part of to be honest. Yeah. So we've sold two companies now at Estraa. One was Fat Map and then this one was Runna. And Runna was a phenomenal business. I mean, they were kind of the first ones to kind of take I mean, Running's been around for centuries, guys. Centuries, right? And they were like, "Hey, we can build an app that will keep even longer than that,

[11:29] millennia. Something some guy in Greece, the first person to step on the Serengeti and see a lion." I think we're going definitely running, you know. Definitely running. Well, but now and now that guy has a coach, right, which is beautiful. Yeah. Um, runner really caught a couple things and did it really well. I mean, so Ben is was a former coach for for triathletes and runners. So he really knew what the consumer wanted and was willing to pay for it to get value advice to get faster, to get better, right? And then Dom and the team built just a phenomenal product. Uh kind of one of

[11:57] those AI native businesses that that really made running personalized. And I think like if you have you have to use the app to truly experience it, but it'll tell you, hey, you ran a little slower on this block or hey, there's an opportunity for you to speed up by doing a few different things or today you had this, you know, this you ran a little slower. Let's think about that. And it turned into magical moments for consumers. And then they also nailed kind of the run club health fit health fitness trend among like kind of the next generation where they'd rather get up at 7 a.m. and go to a run club in San Francisco versus go out to the bars, right? And so one,

[12:29] the bars in San Francisco are terrible. So running is actually a really good choice. But anyway, I mean that that materialized across the world. And so I was lucky enough to meet those two um very early on in their journey. And so I was just a huge fan of the product. And so when they kind of gave us a call and said, "Hey, we're thinking about doing a deal." Um you know, we kind of jumped right in. And so, you know, when you think about like why Strava bought RUA, right? Strava has a bunch of features on there. Technically, even had some old training features on there. So almost almost a competitive product, if you will. But I mean, I'll give you my view,

[12:59] right? Obviously, I don't sit within the Strava board, but this was truly a 1 plus 1 equals 6 acquisition. And that, you know, people say 1 plus 1 equals 3. This is way better than that. And so, what what Strava is is Strava is an app for athletes, right? And so, if you're not an athlete, Strava is not for you, right? And as you a lot of people don't identify as athletes, right? And so, a lot of people actually haven't heard of Strava, right? I'm from Ohio and I can tell you most of my friends don't use Strava, right? San Francisco, everyone uses Strava. It's just a weird world that

[13:27] we live in out here in this 7 by7 square miles of San Francisco. But what RUA did is they enabled people to go from being on the couch to running a 5K to running a 10K and now they're an athlete. So for Strava, that's a massive TAM expansion number one, right? So now all of a sudden you can actually be for people that are not athletes but want to be an athlete and that is a huge TAM. Two, you know, Strava's done a great job with consumer subscription. It's one of the best apps out there. They've been around forever, great retention. Where they struggle though is pricing,

[13:53] right? They were un they have not built in a lot of different tiers to maximize price among consumers and runna actually adds this second tier that Strava can offer which is a bundle right and we all can talk about bundling unbundling but in in consumer subscription it's really popular with users you already have a paid user who uses Strava Runa integrated really well on Estraa from the beginning even before the acquisition right and so they were able to bring an addition ability to upsell a Strava runner or a Straa consumer with another package and so I think that's why it was it was a good deal or the run of founders didn't need to sell. You know, I don't think they had to

[14:26] do the deal, but Straa came calling and I think offered a pretty fair price for the business. Well, one of the things I was surprised at is that they didn't integrate immediately and that it is being run kind of as a as a separate business with this bundle which I was surprised at. So, any any more color on the kind of I'll give some color and I I mean I I don't know the Strava folks. I mean, we know the run. I know both teams but not super well. But I just think it would be kind of hard for what what Eric was saying. It's like, you know, run as a like come to a thing to like train

[14:59] for a thing, right? It's a very different flow versus like Strava is like Facebook for running, right? It's like you post all your stuff there. It's where you go to brag. It's your Instagram, right? And so it might take a while for them to fully integrate. That could be true as well. But I could also see a world where this is like a better approach like where you keep them separated and these are two very different properties and you know you have a you I don't know if we're going to talk about it but that you you talk quite a bit about conglomerates that are happening and you can

[15:24] almost see you know maybe that's a strategy for Strava to kind of play in is where they they become a pseudo you know a verticalized rollup company of a few of these things and then they take advantage of all the benefits of cross-selling and things like that. Yeah, I mean I think it's a good question. Like you know these are two very good apps, right? And they're kind of they're built differently, right? So and people just say, "Oh, just smash them together and call it a day." Well, like that doesn't work, right? Consumers demand an excellent experience, right? And both businesses are doing really well. So if you try to smash them together and it it's

[15:52] wrong, you just wasted a whole acquisition, right? And I think both businesses can learn from each other, right? Run is amazing at using AI inside the app. Straa is a system of record. They don't they don't have to do that yet. Now Mike and his team are doing some great stuff. So like keep your eyes peeled. And then also so I think Straa has been learning a lot from Runna on that front two. I mean Runna does some really good performance marketing. Jacob's right. It's a little more episodic. Hey, I'm training for a marathon. Hey, I'm trading for a big race, right? Versus Straa is more, hey, this is what I post my rides on every Tuesday,

[16:22] right? Those are two very different use cases for the consumers. And so I think that uh you know, I think that's right to keep them separate for now. And then I think they'll make a decision down the road when when you integrate, if you integrate. Any advice for folks playing in these spaces where they could potentially be that runa to a straa where they could be that TAM expansion, the kind of soft intro. I feel like we're probably going to see more and more of these kind of things happen over time where these giant apps that aren't necessarily great at aspects of the broader business that they're running. It could just be an opportunity for folks to build these kind of like

[17:03] adjunct apps and get bought. But like what does it take to be that standalone product instead of Strava just building it in? Like why didn't Straa just build it in? And how how do you become that kind of a product that doesn't just get ripped off by the big guys but get bought by the big guys? Yeah, I mean it's it's a great question and it's it's really hard, right? Because tech even even today now it's easier to build stuff than it ever was. It's hard to build something really great. So what I always tell founders is if you're trying to build for an acquisition, that's hard. If you think about an acquisition, an acquisition is one company buying one company,

[17:34] right? So think about all the matching that has to occur for that. And it's really hard to build something that is exactly for one company, right? So what I tell founders is build a really great business that consumers love. Just that's your northstar, right? Everything else will work out. And let's just say you're you're running it. Maybe it wasn't going really well and it didn't work out with Strava. There there'd be another suitor. You know why? Because people loved the app, right? And so my view is like just build something great, really get consumer love, and then the the strategic corporate rationale side will work out, right? Because people want to be around products

[18:05] that people love. And so I think Straa saw that and made the move. And I think every other deal I've done with a strategic acquire has that lens on it, which is the strategic wants access to consumers that love a product, period. Right. And so that's that's gen. Yeah. And to your earlier point, you know, Rena wasn't in a position where they had to sell. You know, they had a fantastic business. And that that's the most attractive acquisition and the best place to be in if you're negotiating one of these acquisitions. It's like, we have a great business. It's growing. You know, people love it. Way better position to be in than than needing a sale to happen to make the business

[18:40] work. Yeah. Yeah. Exactly. Yeah. You don't want to be in that spot ever. Early in the report, you had a page titled the CSS State of the Union. And in that, you talk about a lot about AI. It almost felt like the whole page was dedicated to AI and and it's kind of the, you know, 900 pound meta gorilla in the industry right now of like what's going on with AI, how much of it's a headwind, how much of it's a tailwind. And you started with the headwinds, and I'd like to start there. you know what what do you see as as the headwinds consumer subscription

[19:12] founders should be thinking about in this age of AI? Yeah, I mean so this is the first year we've ever done this like state of the union letter and we did it kind of cuz I I was just feeling like man I'm getting so many questions that are incredibly nuanced. putting together a slide with a couple bullets just isn't going to do it, right? And so I was like, "All right, how do I write like long form write what I think are impacting my clients and hope, you know, future clients today and and then just think it through, right?" And like the answer we're getting from investors every day is is AI a headwind or a tailwind here? And the answer is that

[19:43] it's a shitty answer, but it depends. And and it depends on a bunch of factors. And so, you know, we we kind of went through and just said like here's where we think the headwinds are today, right? and I expect that to change materially over the next couple years. And then here's where we think the tailwind ones are today. And we expect that to change materially over the next couple years. And just try to list it out. And so, yeah, we we went to the negatives first, right? Because I think you got to start you want to start with the bad news first. And so, the the big

[20:08] thing we've discovered, and I'm sure you guys are experiencing this firsthand, is is Google wants the number one source of traffic to the internet is is now no longer the sole default. Right? So if you're a builder or a marketer, right, and your job is to get your product in front of someone. SEO your your website, your content, that was it. That was what you did. You the whole thing you did was optimize to make sure the Google crawler found your site and then surface that up, right? And if it wasn't doing it organically through SEO, you man, you're putting money into Google for SEM for

[20:38] search engine marketing and making sure you showed up as one of the 10 blue links if you weren't organically there. All right? And that applied to business that around for 30 years. It applies for business that been around for 30 days. He ran that exact same playbook and that fractured a lot over the last two years and I think it's going to fracture further where people are starting their discovery or their recommendation to a problem they have with with one of their AI tools. Pick pick whichever one you want, right? And that is the first time in probably since Google was created and maybe 5 years after Google, you know, came and be the powerhouse where access to the

[21:10] internet fractured. And so like it does require a new skill set for entrepreneurs and marketers to make sure their products get in front of people where they can't rely on Google, right? And so I've had clients, I've had, you know, buddies that are running businesses where their SEO is dropping 30 40% year-over-year, right? You're seeing a bunch of articles come out with a lot of the major I'll call legacy publishers that just published articles on the internet, Wikipedia for sure, where they're seeing traffic drops, material traffic drops that will change their business model. So that's absolutely a headwind, right? So I think that's a big a big deal. And we kind of

[21:41] compared it to the shift from desktop to mobile where uh you have to really redo everything, right? And at the same time, you can't afford to let SEO break. So you can't just optimize for chatbt and put a bunch of bullets on your website because Google still is going to represent the majority of your traffic. The question is, does it represent the majority of your high intent traffic? And that is what the jury is still out is if AI is delivering high intent traffic with clickthroughs. Right? And a lot of people also, oddly enough, they'll search on chatbt and then go search Google for the answer that chatbt gave them, right? So you're actually seeing two

[22:16] different attribution is like one of the hardest problems. You're seeing two different attribution uh issues with that specifically. So I think people are probably actually underounting how much chatbt or perplexity or whatever tool people are using is contributing to traffic these days. One of the headwinds you didn't list was that AI is going to subsume all apps. And I didn't watch the whole thing, but I saw a clip of Elon Musk saying that within 5 years there would not be apps. Everything would just be AI and the AI would just magically deliver everything you ever wanted. I don't think that's going to happen. Any any thoughts on I I'm sure this is a

[22:52] question that you posed to yourself and have had people pose to you. You what do you see as those real headwinds over the next 3 to 5 years of AI kind of subsuming more and more use cases? Yeah, I mean I think the answer is it's definitely going to do more. Definitely going to do more. There's no no doubt in my mind that whatever you're using with chat GBT or you know your AI tool today, it will be more in two to three years for sure guaranteed. And so then the question is right like what we we've heard this the same kind of fear I'll call it fearongering or FUD like fear

[23:23] uncertainty doubt about the consumer ecosystem for years. I think the last time we heard it was in 2010 2011. Apple, Google, Facebook, they're just going to build everything right? No point in making anything else. Guess what guys? Game's over. get out. And I think we're seeing the same thing. Yeah, that was that was the number one like VC objection for like half a decade, which was like, what if Google does it? Google's going to do it, right? I mean, hell, hell,

[23:44] they told that to Facebook. So funny. You don't hear that. Google's just going to build Facebook. Don't worry about building Facebook. Google's just going to do it. Yeah. Right. They probably will build something that's useful, but I mean, that's the beauty of consumer, right? it. You know, there's definitely the large winners, but you can easily build a great business that does 10 million in revenue and pays you 3 million in cash a year and be a comp and your Facebook could be a competitor for you for sure, right? And so, you know, you can get weather for free on your iPhone, but it's terrible. Or you can pay someone and get a lot better information. So, I think this is kind

[24:14] of like if I'm a founder, and we talk about this in our report later, like you definitely have to have a game plan to compete against AI, right? I don't think you can say great, we're just going to do the same thing we've been doing for the last 5 years and hope to win, right? Because AI will come after you and they'll come after you either by licensing data from you or your competitor. They will start to build more and more functionality in there that people will just start there and maybe never end up with you. And I think that's yeah, that's kind of the competitive threat. We So,

[24:39] we talked about it a little bit, David, but I think the page right after our our opening line was like, hey, we don't think AI is going to take out the consumer ecosystem at all. I think it'll take out some for sure. I definitely think they'll be losers. This might be a silly question because we're still early on the exponential curve, but like has has can you all think of

[24:57] a single app AI has replaced for you? Like maybe I could say Google, but I still Google stuff, right? It kind of just depends. Google's AI results are so good, too, right? Yeah. You know, you get you get a little bit of both. You get some blue links and you get a little bit of word slop. It's like the best of both worlds. I often go to Google specifically because their AI results are so much better than Chat GPT. Yeah, they're decent, right? Oh, I I like that they they'll dive into the pages for you and kind of extract, but Chad GBT is I was thinking yesterday the the best LM is the

[25:25] one I can get to the fastest. I use Chad GBT 10 times a day or some LM 10 times a day, but I can't think of a single app that's a daily app or a weekly app for me that that AI has replaced. Now, that does not mean we're not heading towards the Musk world of full software slop, but like Eric,

[25:42] I think a version of the argument you're making is is somewhat conspicuous consumption, right? which is like people people want to choose an app. They want to be a part of an app and it's not just having the need met. You know, there's a little bit of like defining yourself by the software you use and like what you choose. Um, which I think is an argument why there are so many weather apps, right? A phone has a perfectly capable weather app built into it, yet there's still a huge industry of of people, you know, who are interested in in slight variations on that theme. Will the

[26:10] LLMs be able to productize the use cases faster and better than you? And the answer is probably not at least for a long time because like why does Rena exist when you can go to ChhatPT and have a running coach? I saw somebody pose that. Like why even pay for Runna when ChachiPT is a perfectly competent running coach? Well, it's not a productized running coach. A perfectly competent running coach probably remembers what you did the last time. I mean, those are in theory with like better memory and more compute and all these things like in theory solvable problems, but will it still feel like that cohesive product? And will people still be willing to pay for that

[26:45] cohesive product even when the LLM can like quote unquote do it? It's not a great experience. No, it's probably going to produce whatever crappy version of, you know, the worst version of a flight tracking app or not the worst, but like it's not going to put any care in craft. Now, if it can, then we've truly reached AGI and money doesn't matter anymore and like all that stuff, right? So, like, you know, Eric's out of job, I'm out of job, every fine. Yeah. Don't worry about it. We're done. Call it a day. Yeah. I was like waking up in cold sweats like 18 months ago about

[27:14] this. One, I think this is sufficient variance in it. I think any prediction is like less than it's not useful to try to make. And then secondly, I just think like we've already seen, you know, and the fact that you split it up in headwinds and tailwinds, it's like AI is disrupting. It's certainly like accelerating some things. It's it's moving things around, but it's not like free money, you know, sort of like um solution for everything. At least not in the current, you know, in the current iteration. It's it's obviously like a next step function um in technology. And it's a and it's a big driver, I think, of growth, but like I'm not as chicken little about it as

[27:48] I was a year ago, I think. No, I think people are getting there, right? I think we've heard this over and over again, right? Like when we did the flow health deal, everyone was concerned that Apple was going to come out and just crush flow. Not even close. The flow's almost like double the size when we did that deal, right? So, like I think I think it's one of those things where it's very easy to sit there and scream and be afraid. It's harder to be the entrepreneur on the ground building and like I think you got to be smart. I think when the last time Apple did like a Sherlock

[28:13] truly Sherlocked something and like it actually disappeared like I don't they've definitely taken the some of the gas out of some apps I know. Yeah, maybe that's true. Yeah. So, they might not kill you but they'll they'll hurt you, right? And they'll slow your growth, right? And that can just cause a whole bunch of issues with an exit, right? But very quickly after the headwinds, you moved on to tailwinds. And I think these are the more interesting things to talk about now that we've gotten over the the chicken little phase. It's like how do we then leverage AI to move faster, to build better businesses, to build better modes? Uh so what are your thoughts on that? The first

[28:44] one we see is just in the marketing like and how you market to consumers, right? The the ability to do product testing, message testing, right? content creation is just off the charts faster than it was two years ago, right? And you guys have you guys are working with tools, right, that are leveraging AI to do different marketing copy. It tests that really quickly. And so, you know, best of breed businesses are quickly finding like they don't have to hire 20 marketers to go out and create content. They can basically spin up a 100 different versions, test it really quickly to see which one works with their consumer, right? And delivers the best LTV, which so not just the

[29:15] acquisition, but the retention of the user. That's been really powerful. two, you know, you can spin up new features, new content even faster with some of the coding tools, right? So, effectively, you know, if you think about how long it took all trails to spin up their content with tons and tons of hikes, right? Ladder, just to use those guys again, right? Are producing content even faster, producing new features, right? Enabling their coaches to produce more content. So, to me, like you're going to create a much better much better version of the business real quickly, and you can spit up new features that consumers love. If you see like a little bit of a tick where

[29:45] people are starting to use different things, I think I think that's pretty cool. And then, you know, the the moes are hard, right? It's really hard, right? And the moes are going to be ever changing. So, what we recommend is you build the biggest moat you can. And one of the things we talked about this year is like adding hardware or some sort of product functionality to your to your

[30:02] subscription, right? Which is effectively going to move you out of the competition set for Chat GBT. All right? If you have some sort of a hardware piece with proprietary data that's spitting off it, that's a really powerful thing. And so Aura, Whoop, you know, all businesses that have, you know, raised or are raising that are going to do, you know, I think ideally kind of build on their existing business with AI native features. So I think that's that's pretty cool. And then the other one is community, right? I think the one thing that people don't understand about a lot of the apps that we know and love is they are places other people are putting

[30:31] their content into that make the apps better and then we are happily contributing our content, our energy into those apps to make it better for us and for other users. And that is something I don't think AI apps have done yet. And so when I think about community, you know, I think that's also includes like the concept of brand and trust, right? And so inputting very personal information about yourself. And we all know people put really personal information into chatbt or prefer to get a lot of personalized information out of chatbt with some of the erotic functions. People are going to continue to work within their own app and what they know and love. And so I think people are

[31:03] building community, really strong brand, really strong design, right? Because like using something on your phone can be really painful if it sucks, right? But something that's beautifully designed, intuitive, right? That's what gets people to come back and use those products over and over again. So I I think like the combination of AI plus human insight to build a beautiful product is going to be, you know, the way to win long term. Yeah, I really love the way you summed up this

[31:26] state of the union. So I'm going to I'm going to read the quote because I thought it was so good. The future will be built by those who combine AI's power with enduring human insights and design. Creating products that people not only use but refuse to live without and choose to evangelize to their friends. Like that's your goal as a consumer app builder today in 2025 is to leverage AI to build those great things. And and the moat, like you said, is so many different ways to build modes, but that great user experience being that incredible intuitive experience on this tiny little pocket supercomput, it is just so powerful. Completely agree. The next thing I wanted to talk

[32:06] about was uh you had a whole slide about the walled gardens opening up and then fascinatingly since you published the report, Google had to comply with the injunction in the Epic v. Google lawsuit and they opened up way more than Apple even opened up. So, it has been a big story this year of the app stores really loosening up. What What are your thoughts and what are you seeing on the ground as far as how this is actually playing out and actually helping consumer subscription businesses? The app stores absolutely add value to the to consumer subscription businesses for sure. Right. Absolutely value. I think what the world has woken up to is that there's probably a

[32:44] limit on that value. And so I think the lawsuits that have been coming for the years, right, are finally starting to take impact. But also people are moving now. So like three or four years ago, most people were not worried about getting outside the app store. Just wasn't a function. They said, "Great. I'm, you know, I'm going to pay 30% and call it a day." That was for two reasons. One, it was kind of hard to build a third payment rail and go through building all that tech and working on web funnels. Like that was hard, right? So if you weren't big enough or hey, the business is working great, why do something hard, right? Just don't fix what isn't broken. But

[33:14] then I'd say like the last two years, every one of my clients, and I do mean everyone, is building web funnels. And I think one, they're just not as worried about Apple coming after them or being being mean, right? And we've all heard stories about product updates getting jammed up and going through multiple rounds of reviews because you had a link out to a different payment tool. And Apple got their hands slapped and they got their hands slapped hard for doing that,

[33:36] right? And I think that was kind of proven that they were kind of jamming people up a little bit. And so I think one that they've kind of said, "All right, great. We're going to back away from that." Right? So, you know, people that are building apps of scale, right? Getting 15 to 20% of your profit margin back is a big deal, right? It's a big deal. And so, when you're especially when you're 100, $200 million in revenue, we're talking about multiple million dollars in profit. And so, like, it's crazy not to build for that. And so, I would tell you, every one of my clients is now,

[34:02] if they haven't built a webunnel, they're actively looking at it. You know, I think we've seen a lot of payment providers come up there like Paddle, Solid Gate, you know, Stripe even that are helping people kind of manage subscription payments, manage the tax withholding, all that type of stuff. Uh, that automates once again what was a hard problem to do, right? I think even you guys were thinking about doing something on that front. And so I I think that's really exciting. And then, you know, I think people just said like the fear of Apple's going down a little bit. They're still super valuable partner. You know, most people will never, you know, throw up their hands and leave,

[34:32] but I think the word is out. Hey guys, like it's okay to build for this stuff and it's easier to do it than ever. So why not go pick up that money? So that's that's what I'm seeing on the ground. the operative question and the way you you presented it in your um slide deck is you know I don't what the split was certain amount of billions that goes to developers net versus you know what goes to Apple and that's actually where we'll see I mean if we have good data on total revenues uh versus like Apple reported app store revenues um if there's is a substantial shift in this I

[35:02] think one of the one of the challenging things I've seen with folks adopting this stuff is you know just the time it takes to port things over. You know, it's not something you can do overnight, especially if you have like an established subscriber base and and things like this. But yeah, basically anybody anybody past a million dollars a month, maybe even less than that, is is probably should be or is doing some amount of this. But yeah, I think my my biggest and and maybe now that Google has, you know, complied as well and and maybe this is like a new market equilibrium. It's still early on if this is going to stick, but maybe it will. Now,

[35:40] now that I feel like Google's there, too, like it might like I don't I don't know. I mean, I think it would be hard even from a competitive perspective for Apple to to regress, but you know, the the court order and we've said this on the pod in the US before is like extremely against Apple in the sense that they don't they basically they're required to provide distribution for for basically zero uh requirements on the developer. I don't expect that to last, but it doesn't mean they're going to get substantially worse. I I was uh trying to use NordVPN recently and saw how they do it. And they're not required to have a link to the App Store plans like on their payw wall,

[36:15] but they do. And I think that's probably either by by fiat or by sort of market forces where we'll end up is that, you know, the big apps will kind of subtly push you to this like off app store payment, but the uh the app store payment may still be available. But I don't know if the case gets fully like played out and this injunction gets resolved and and whatever, we end up with some sort of like more stabilized case law on this. I almost think Apple's just going to, you know, we've talked about it's just going to have to drop the price, right? They're just going

[36:43] to have to drop to 20 or 15 or whatever number is going to get them to their like new market optimal, which I would call that a win, right? Like if Apple just has to like set the price to a point where developers will opt into it, I think we'll be in a better position than we were with a higher fee. Apple won't, but also it's like the app for business is at scale. They at some point they have to understand that there will be some margin erosion, right? So maybe I'm maybe I'm coming around maybe I'm coming around on this. Yeah, we we've talked about it a lot on previous

[37:12] podcasts and Twitter and other places as well. So I won't rehash all my thoughts on it, but just just to to get a few jabs in here. I think you stated it really well is getting 15 to 20% of your margin back because too many people are talking about it as if you instantly day one get 30% of your margin back by getting rid of the 30% fee and we know that's not true and then plus you know a lot of these more mature consumer subscription businesses are already at 15% because Apple drops it to 15% at year two and then Google has been 15% on consumer subscriptions across the board even

[37:47] first year on consumer subscriptions for several years Now, uh, so the margin opportunity isn't as big as it first seems. And then there's also businesses that I think work better in this way. Like certain businesses function better with a web funnel. Certain businesses just need that in-app experience to convince people. And then consumers like it's going to be interesting to watch of how, you know, people have gotten very comfortable with converting in the app store because they have that power. They know exactly where to go. they know how easy it is to control the subscription and is that comfort level valuable enough and how much margin hit do you take just on those conversions

[38:27] and then retention like there's so many factors and so even though it seems like such a slam dunk it's not always the slam dunk and not necessarily lowhanging fruit for all businesses but the great thing is like now it's an option so now it's like for the right business I mean it's definitely working for a lot of people though at this point like you know we're beyond experimentation phase and like a lot companies have made it a part of their their thing. I still, you know, go back to my normal cautions not to do this too early and think you're going to like magically, but like it seems there's definitely uh spread there for some scale or from some class of large scale

[39:03] businesses. Well, and speaking of uh regulation, the click to cancel law got stalled out. That was a interesting concept of legislation. It's one that the market doesn't need. And I say this because like every one of my clients knows that like if you make it hard to offboard, you're going to get sued, right? Think about like all the gyms that are getting sued. Amazon Prime's gotten

[39:23] sued for making it hard to offboard. And like it creates a bad blast experience for a consumer. It does because now they're pissed at you. You wasted them 30 minutes, right? So like make it easy to offboard. Make it super easy to onboard. Don't forget about marketing to those consumers, right? Like we call it remarketing. Um right? So you have a huge base of churned users. every company does. Like that's that's someone who loved you at one point to pay you money. There's a good chance you can get them back, right? You just got to offer them something different or remind them of the value of the great times you had together. But if you make it bad at the last couple minutes,

[39:55] like guys, this it's just a bad move, right? It's shortsighted, right? And I think almost every client that I have that's building a best of breed client or best breed product has figured that out. Yeah. So I think that's one of those things like great by the time that law if it does get passed, it's going to be old news. The only thing that I still wish it had gotten past was to kind of, you know, you're talking to and interacting with Best of Breed, but there are certainly tons of businesses that are still trying to make it harder to cancel and they care about the revenue. They

[40:30] don't care about that bad experience because they're optimizing for a different kind of business. And then the unfortunate part there is that then it does kind of sour consumers generally to subscriptions. And that that's the one thing that I I did was looking forward to if that law passed was that it would kind of clean up some of the bad practices on the low end of the market. But it's fascinating to hear you, you know, say at the top end of the market, it's already kind of solving itself. On the low end, you know, I can't really speak to that. I think that's a whole another concept of But I mean, like credit cards are figuring that stuff out,

[41:02] right? Like no, you have to be diligent about it. You can't just, you know, some people just have a credit card bills of $10,000 and they don't worry about a $29.99 charge and probably right, they probably shouldn't be spending their time thinking about that. I think there's a there's a whole world of like this stuff's just too easy to catch on your phone. It's really easy to discover. You know, if you just if you subscribe to a web funnel, now a little bit different ballgame, but it's still attached into a credit card, right? And so at some point, I feel like that's that's

[41:27] just easy to track and get rid of. So, yeah, I think you're just playing a very short-term game. Well, one of the things you include every year now is opportunities. And I love hashing through this with you a bit on the podcast because I feel like it's it's a great opportunity for people to think not just of building in the specific spaces that you talk about, but kind of your thinking behind why these spaces are opportunities. So, the the two newly identified opportunities to

[41:54] build category killers that you list in the report are Strava for pets and screen time management. And we kind of already did talk a little bit about screen time management, but I'd like to dive into these these two categories and kind of why you see them as category killers and then maybe hints to,

[42:09] you know, what be maybe future category killer potential places to play for consumer builders. I mean, Strava for pets is something we we've thought about for a while and listen once again we didn't think of it right for founders have been building phenomenal businesses in this space before we thought of it. But if you think about like once again I think about like long-term TAMs, big waves that are impacting the world and health and wellness is a big one and then treating our pets like our kids is another one. Those things are not changing, right? And they're only going to accelerate. And so, you know, I had a German Shepherd uh for a while and had a had a tractive

[42:43] collar on them. Just phenomenal product, right? It was one of those things where like I would get the notice, hey, you know, you haven't taken your dog for a walk for a day. Time to get up and go, right? And that's that was awesome, right? And I could see how active they were. When they move into health, which is something you thinking about like movement is really tied to health for pets, right? So, you're going to be able to get pet insurance, like based on how many times you walk your dog, how active they are, if they're sleeping well at night, right? That is just going to be

[43:08] something that people are like, "Great. I spend, you know, $1,000 a month on my dog for food, for, you know, I don't know, day classes, whatever you're sending your dog to, right? Just whatever you spend your kid." Like, spending a hundred bucks a year for that is a no-brainer, right? So, I think that'll be a big one. And then the screen time digital focus. I don't know. I keep waiting

[43:25] for this to become more popular, but but humans are really bad at blocking out distractions. Really bad, right? And when you're starting to compete against AI, right? Like you actually got to get better. And so, I think like to create be creative, actually do high quality work, right? You can't have constant pings from the 30,000 apps on your phone. So, I think there's going to be stuff that's going to happen there. And then, you know, I think we're seeing like consumers wake up to the fact that like certain aspects of screen time are bad, right? Like most of my clients are not focused on screen time and selling ads. They're focused on doing a job for you and getting

[43:57] you to close the app as fast as possible. You know, my wife works for Facebook, so I can't say that's the same case for all ads or for all apps. But I think that's something like consumers know like like some of the screen time is not mentally healthy. It doesn't promote good behavior. And so finding ways to limit it, especially in kids or young teens, is going to be huge. So, I'm a big believer in this in this trend. Yeah. I think that one of the unifying factors with both of those is is looking at kind of broader societal trends and looking for places where people either already spend a lot of money or have the opportunity to recoup a lot of money and both

[44:32] I think those two kind of both play to that that health and fitness has been this growing trend and people are spending tons of money and we see tons of apps building in that space. pets. Another area tons of people spend a ton of money in. And then I do think it's fascinating how, you know, Opel charges, I think what, $120, $130 a year. And their whole pitch is like if you're a busy professional and you're wasting an hour a day on Instagram, that hour a day is worth so much more if you can recoup that and be more productive. And even if you're not more productive, if you're

[45:06] more productive in just like living a better life so you're not as burned out so that you're more productive when you are actually working. It it's like such a strong pitch. And I think there there's going to be more categories like this. And and this is where people should be looking is like where you know whether you're already building in certain spaces or whether you're looking for

[45:23] a space to build in. These are the kind of spaces where billiondollar companies will be built. Yeah. I mean I I fully agree. I think especially like the one thing I've been using a lot is is one of these apps. I won't I won't give them a Well, I guess Opal for shutting down like email on the weekends. I mean, I'm not a doctor or an emergency care guy. Like, there's very rarely a chance that I'm gonna help the world at Saturday at 9:00 p.m. It's just rare. It's not going to happen. But, man, I look at my email at Saturday 9:00 p.m. I don't need to, right? And so, like, just

[45:51] shutting that down and then just, hey, spend time with your wife, some spend time with your kids, right? That's just way more way better for me to do as a human. And so, like, I'm actively trying to focus on that. And I think like a lot of other people are going to realize that same thing too. The last topic I wanted to hit on was the rise of conglomerates. Uh the Birkshshire pathway of apps I think is a a fascinating concept. We kind of already talked about it with Strava buying runa and the TAM expansion opportunities the power of bundles and things like that but what what's your

[46:21] thinking on conglomerates in the app space? And then of course, you know, the the elephant in the room would be bending spoons, which just raised an 11 billion dollar valuation kind of running this playbook. This is something we've been thinking about for a couple years, and I think we looked, we kind of coined the term Bergkshire Hathway, the app store, and I think Luca actually from Betting Spoon said they're a combination of Birkshire Hathway and Google. I think this is a super interesting trend. investors have a really hard time wrapping their head around these businesses and trying to decide like one what they're worth, two are they good businesses or not, right? So

[46:54] those are we we get that question a lot. We try to frame this in like a unique idea cuz like a lot of these businesses are coming up and they have like high churn products, right? They're testing like 20 different things and some of them will fail but two or three will stick, right? And they'll be really good businesses and start producing cash and then all of a sudden they start building these really big businesses and so they spend a lot of money on marketing, right? because they're

[47:16] effectively getting brand new products in front of consumers for the first time. That's hard, right? That's really hard. So, you have to spend you have to spend marketing dollars. So, so investors have been like kind of confused by this concept. So, we try to make it something simple. So, I like to use analogies and try to break down like how do I think about these new age consumer conglomerates and and I really like the business models. I've met with a bunch of them. They're building really cool stuff. We use two frameworks. One is the greenhouse where these businesses, you know, effectively start with high-end tech talent, really high-end, right? They're the best of

[47:45] breed guys. They're really good at distribution, right? And they learn incredibly quickly. So they they effectively are really good at marketing, right? I'll rephrase that word to say marketing. And then they understand like consumer demand and they will look for trends and what consumers are looking for and they will build something for that. They'll build it quick. It'll be dirty, but they'll quickly get it out in front of consumers and then they'll iterate, iterate, iterate really quickly. So to me, that looks like two things. One, it looks like a greenhouse, right? We have all the the base infrastructure of what you need to launch an app or grow a plant, right? You're

[48:16] going to have a couple things that work really well. All right. Right. If you're successful, you have a couple things that work really well, and there's your cash cows. You have a bunch of other stuff you'll constantly be testing, launching out in the world, and seeing if they work. And then if they do, they become new cash cows, and if they don't, you shut them down. And then ultimately, like with AI, right, the cycle is happening faster and faster and faster. So launching five products 5 years ago, that now looks like 50, right? And so you can test and test more and more things. And so

[48:41] we kind of use this greenhouse concept. So if you want to invest in a greenhouse, you have no idea which product is going to be the best one, what's the top seller this year, like which rose color is going to be the most popular. But at the end of the day, it doesn't matter, right? So then I tried to look at a business that like that exists today that everyone knows and loves that has the same model. And what I came up to was Coca-Cola, right? And so Coca-Cola is a consumer business that's run around for centuries. They have a great brand. They have excellent distribution and a crapload

[49:08] of marketing, right? And so what they do is is they don't care if you walk into 7-Eleven in the morning and buy a Coke or an orange juice and then the evening you just did a workout, you do a Power Aid and then the afternoon you buy an iced tea. They don't care which one you buy, right? Effectively you're churning from Coke every time you buy something else. But to Coca-Cola it doesn't matter because they know they have a portfolio of brands. Some are great, some are cash cows like Coke, Sprite, Diet Coke that you will buy once a week for sure, guaranteed. Others like, hey, you only need it when you need it, right? a Power Aid, a Dani if you're stuck in the airport,

[49:39] right? Otherwise, no need to buy bottled water ever. And then, you know, then they'll test a bunch of other stuff and see if it works, right? Like Costa, they tried coffee. You know, I think it was okay. Maybe not going to work. But, yeah, so those are the two ways we've been thinking about these businesses. And so, I've met a lot of them. Really impressed by the founders of a lot of them. More and more are coming up. And so, I I think this is going to be something investors are going to figure out real quick. And yeah, as we noted in the report, like if Bending Spoons

[50:02] files an S1 and everyone kind of all of a sudden peers in behind these PR releases and it's like, hold on a second, how profitable is this business? I think people are going to get really intrigued to kind of find the next two, three, four of these. Is that the same that's going on inside Bending Spoons for example? Like are they sharing like what are what why are they able to drive much more profitability than say each of these brands on their own? Yeah, I mean I think they're just excellent operators, right? They are like their model has been initially to build apps but it quickly pivoted and pivoted years ago years years ago to buy and then they buy and optimize right

[50:36] the definition of optimize has probably changed over time but they are experts at pricing they're experts at marketing they definitely have some really good tech talent right if you look at what some of the statements Lucas put out there right it's a you know where they're one of the most exclusive hirers of tech talent in Europe like with the lowest acceptance rates from job applications like that means they're getting best of the best right and so when you look at what they've done, right? They're well known for this, right? And it's well talked about that they will buy an an app or a business, right? A subscription business, and they will fire 97% of those

[51:05] employees within the first month. And just think about that concept, right? Effectively, they're not shutting down the business. They're not just taking its cash flow. They are just lifting the business off whatever infrastructure and team was done and they're putting it onto their existing team, right? They're not adding new people to do this. They're taking the same 600 people and just adding business on top of that and running it. That is operational efficiency that I don't think I've ever really seen in the tech world, right? There's no big US company that's bought a business and then shut down 97% of their or fired 97% of the employees without that being some sort

[51:36] of a massive failure. I think that they've got a secret sauce and a playbook that they're running on the operations side that that most people have not been able to figure out. Evernote still has 4.4 stars on the app store, so they must not be going all wrong. I I think they employed two people from Evernote if I remember correctly. Might even be less than that now. That was a business that had hundreds of people before the acquisition. And this is just total musing, but I wonder how much of their what they, you know, people who build an app and start it. I think

[52:00] there's a tendency to hold on maybe too long when you've reached terminal. You know what I mean? Like terminal growth. Not that it grows bad. It's maybe beats the market slightly, but like the team you built up to invest to get to that point is not the team you probably should have, you know, if the app has kind of reached its like end state. And and Bending Spoons is just the the undertakers that'll help you realize that mission and help you get over that hump. Yeah. I think they dispute the term undertaker, but I think they are not they're not I say that in a undertakers are valued members

[52:30] of society, Eric. Okay. Like it's an important job, but they are also not afraid to ask ask those hard questions, right? They're not afraid to say the person that got you to a thousand users isn't the person to get you to 100,000, right? And I think they they know what it takes to go from 100,000 to 200,000. And they're like great, we don't need that person anyway, right? So we're we're moving past it, right? So I think some people argue against their model. You know, I think luckily they they've done well enough they don't care about our opinions. So Right. Well, obviously they've earned the, you know, high profitability and whatever. They don't they don't

[52:58] really it doesn't really matter what other people think. Um I'll be interested to see. I mean, they just they just closed AOL like recently, which is kind of it got to be the biggest, weirdest, boldest uh buy. I don't even know what that business is, and that's fine. Um I presume there's some sort of subscriptions for something in there. I mean, it's still the number eighth email client in the world, something like that. It's crazy if you actually look at the stats behind it. I mean, it's a big big business, but maybe maybe still kind of follows that thesis though of like, okay, like AOL is this legacy brand that maybe the the current owners don't really know what to do with

[53:31] or really know how to like optimize around for like a number of reasons, political, emotional, like all the above. Luke and his team are just they're kind of ruthless uh and they and they make it happen, which is cool. And it' be interesting to see this old company, Constellation Software. I'm sure you know of that, Eric, but you know, there's sort of the like web 0.0 version of this. Like basically like '9s back house software version. You know, I I'm I'm sure there's for every bending spoon for bending spoon, there's got to be like 10 others that are that are behind them like trying to replicate this model in in slightly different ways. So,

[54:02] it' be interesting to see if that continues or if everybody just gets you live long enough to die or get bought by Bending Spoons. Those are your two options. So, I think that's a interesting take. I feel like Bending Spoons is a company that's most forced me to update my priors over the last like four years because initially I did think it was crazy and Eric and I are in this group text thread with a few folks where where we've talked actually quite a bit about bending spoons specifically and and I'm one of those and he he was probably slightly alluding to it of uh people's opinions

[54:34] because my opinion was not very favorable early on but I think I see more and more the playbook as they've done this is that you know to your point, Eric, about being able to fire 97% of the people. It's like they their playbook is operational efficiency. But then I think secondarily, too, is that we've talked about a lot on the podcast about pricing sensitivity and how when you build a best of breed product, when you have consumers like Evernote where you have 15 years of data locked up in there, that pricing threshold starts to look a lot different than these, you know, brand new fresh apps. And then even the AOL acquisition like which initially I was like

[55:14] what AOL and then you start looking deeper into it and see all that email and guess who guess who that those you know millions and millions of emails are boomers and guess what's a great market to be building toward and market all those other apps to boomers. I don't know if AOL joining or bending spoons acquiring AOL is quite the runner like oneplus 1 is six, but maybe it's a very like oneplus 1 is three or four or two and a half. The joke I made on the internal slack is uh and

[55:43] I I say this with a lot of respect for betting is they're building a museum of the internet. They're leveraging the museum to bootstrap the future too because like the museum people are going in there and then now you're bundling the Coke and the other apps and uh and leveraging all of that into a much bigger thing than any one of those individual businesses could be on their own. And then there's so much power in being able to flip the switch on IBIDA too of being able to acquire these companies and and I I would imagine there's even some financial engineering around this over time where No, I mean we we're recording this I think they announced last week,

[56:18] right? They just did a crazy equity and debt raise like in the in the billions. So like they're they're making it work. But some of the businesses they've acquired, maybe they lay off 50 this year, 50% this year or 20% this year, 20% next year, 20% the year after that. And you've just got to dial to dial IBIDA up and down at will because you have these retentive really good businesses with really strong underlying fundamentals and you can turn the dials. Yeah, we said on our slack, Jacob is how much would I pay you have to pay you to drop your Gmail? Delete it tomorrow. Just

[56:52] delete it. Yeah. I mean, there's some amount of money, but it's like somewhere around also pulling out my fingernails level amount of money, right? Like it's very high. Like you probably won't get rid of your first kid, maybe your second. I've had that email Gmail for 20 years. So like good luck attached to everything, right? Everything. I mean, you just think about that and you say that sounds out loud. You're like, well, thank thank you for the new uh new thing to wake up with cold sweats about. I appreciate it. Bending Spoons acquires Gmail. It will happen. It's like uh it's the great attractor. Like everything will eventually end up in Bending Spoons. Um any any other conglomerates

[57:26] you're watching or upstarts or opportunities you see in this space that that bending spoons isn't yet subsuming? Well, on the conglomerate side, I actually had the fortune to go over to Istanbul, Turkey early this year. And first off, man, if you haven't been to that city, you got to go. It makes like New York and San Francisco just seem like sleepy back back roads. It is just so high energy. It's phenomenal. And I had a great dinner uh with like HubX, Codeway, AppNation. And these are some of the business. They're coming out of the Turkish gaming culture which is which has been well known as building like quick high quality gaming apps and they're now building consumer subscription

[58:01] apps and they're great. They're the founders I've met there, the business profiles I've heard like won't give any numbers here, but like they're fantastic. So we've seen that come up in a really big way. And then you you got to ask the question like what do you build to not you know get bought by Betting Spoons? And and the answer is just depends. You can always say no, right? They're not a hostile acquirer. Everybody who's ever sold the Bending Spoons has done so willingly. That's right. Yeah. There's there's there's not too many. They don't buy bankruptcies, guys. And so, like, I think that's the way I describe it is like just build a a product you love and then you have

[58:29] a choice to do with it whenever you want, right? And your community will have a voice in it, right? Like your employees will have a voice in it. So, yeah. I mean, I think that's that's the way I always describe it to people is like that that is a by- choice decision. And what do you think the opportunities are to build the next bending spoon? Should should people be thinking about how they can emulate that model in some ways? Yeah, I mean a lot of people are. Yeah, it's hard,

[58:50] right? It's really hard though. Like I'm sure we we've all spent some time with app conglomerates. You can't just buy apps and stitch them together, right? And like what? Like so you can't just financial engineer it. Like I don't think that's the solution at all where you're like, hey, I bought it for six times, you know, and which means you're never going to buy anything from me. But if you, you know, bought it from six times and then like great, now I'm going to sell it for 10 times. Like that game doesn't fly, right? you actually have to really have a talented team underneath the hood. Like, yeah, if you're buying it for six times eBay, it's probably not growing,

[59:15] right? And then if you got to like you got to pump some marketing dollars out there and ask me how hard it is to market in 2025 to consumers and I'll tell you extremely hard and getting harder, right? So, you have to have a best of breed team to do that and then you got to do it across six, seven, eight, 50 apps, right? That's hard, guys. That's really hard. So, you know, I've gotten a lot of people approach me about doing it. I think it requires like a lot of skill. A lot of skill. Yeah. And the more money that has poured into that, I mean, there's so many

[59:43] companies now buying apps and that means that the competition for buying those apps goes up, which means higher ebidas, which means you got to have an even bigger win to make the money worth it. So, it's like it's already hard and then getting harder by the day as more and more money flows into trying to build these kind of conglomerates. You know who the real winner is? Developers. I didn't hear what I didn't hear what David said. But I just heard what Jacob said. I think Jacob's

[1:00:09] right. Let's just leave it there. Uh I'm I'm what David's David's the true right answer. Uh but I do think like the fact that like apps past a certain scale has become a fairly liquid market. Um depending on your you know your price sensitivity and things like that is is pretty great. Trading and flipping apps has always been a thing. But um you know I think we're seeing that secondary market for apps like mature pretty well locked step with the uh you know and there's good buyers for these now we're really talking your book Eric you see more and more people I do at least on Twitter talking about you know getting ready to sell flip an app

[1:00:45] whatever. Um but yeah I I think I'm with Eric that the um the idea of like oh I own 10 apps and now they're worth 12 times what I paid is you know probably a little bit fantasy. Um, you know, we talked about bank spoons and stuff, but like somebody like Elon can go in and cut 80% of staff, but like you're not Elon. Uh, is like I think a good piece of advice for most people. So, really think about what you're doing. Yeah. I mean, it always looks easier. I remember this is such like hubris of builders is like, you know, you get you start raising venture and stuff, you're like,

[1:01:16] I could do venture. How hard is that? And then you spend some years around it and you're like, okay, it's actually really hard. Most people fail. And I think that's probably true of the case of like conglomerates and roll-ups, too. It's probably most people fail. Anything worth doing is hard, guys. This doesn't change. That was so much fun, Eric. Thanks to you again for joining us. Anything you wanted to share as we're wrapping up? No, I mean, always, always a pleasure to be here. I will give you guys a shout out for your Revenue Cat conference in New York. I got to tell developers that's a must attend if you get the chance. I learned so much. Met so many great people,

[1:01:42] had a fantastic time, and you guys are just going from strength to strength on that conference. So, I mean, please keep doing it. I I told Rick, whatever the budget was, like I'll tell Jacob, maybe add 20%. What was the budget, by the way, because you because nobody will tell me. Good. Good. I think I think it was like $100 if I remember correctly. I keep asking. People go like, "Uh, we'll get it to you." It's coming. They're formatting it. I logged into the JP Morgan the other day, we're good. Good. All right. Cool. As long as there's money in there,

[1:02:07] we'll keep I'm glad you still have access to that app. That's a good one. Hold on to that one. Yeah. I think that's that's you know, on our side, I think you have questions, you want to chat about what I do is these guys know I'm pretty open book. So, even if you're not in the market for selling, like, great, no problem. If we forgot to feature in our report, which is the number one complaint

[1:02:22] we get, feel free to send an email to me at eric.crowley@gbbullhound.com and file a complaint. I'll send it I'll send it to our complaints department. We'll get you added and then yeah, if you have questions about the report or want to see it, it's free online uh gbullhound.com or just email me and we send it to everybody. So, we love to put our thoughts on the internet and get told what we do wrong. So, but no, always a pleasure to be here, guys. So, is this why you're a great guest for sub club? Perfect. I love it. Awesome. Thank you so much, Eric. Have a good

[1:02:48] one. Everybody, thanks so much for listening. If you have a minute, please leave a review in your favorite podcast player. You can also stop by chat.subclub.com to join our private community.

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