The following is a rough cut of our Q&A with Jonathan, edited for brevity. Jokes are often not included. There is more depth and discussion in the ear candy.
Intro & Icebreaker
Q: Who are you and how'd you get to Apptopia?
Jonathan Kay: I'm the CEO and one of the two founders of Apptopia. I've been here for 11 years and I'm generally leading daily operations of the company, the company’s strategic vision, and the product.
Q: We're at a time where the economy feels unpredictable. Industries and market shares have had serious shake ups because consumer behavior changes, and in response, company behavior changes. What is important in uncertain times like these?
Jonathan Kay: In times of uncertainty, you either have less capital or you're willing to risk less capital. All businesses are making bets. The bottom line is, that in times of uncertainty, you should be making less bets than you are in a normal year where money and access to capital is easier. If you're going to make less bets, you better be sure the ones you place are good ones.
Q: How much of a focus, if at all, should be put on first party data?
Jonathan Kay: Oftentimes, the most common thing is that you need to use data to increase your confidence. The more data you have, the higher the likelihood that you make the right decision. Data doesn't guarantee you make the right decision, but it at least can help you make sure that you're not fishing in a pond with no fish.
Analyzing first party data is table stakes. You have to be analyzing and looking into your data. However, your data will lack meaning without context. That’s where competitive intelligence starts to come in.
Q: As a brand, how can I get started in understanding that context or bringing in that context?
Jonathan Kay: I typically suggest just starting with a basic benchmark. There's two categories of those:
The first category would be your direct competitors. I would come up with a list of five to seven direct competitors and see where you rank versus those competitors. Typically, we're looking at a relative basis and asking questions like “What's your market share?”or “How does that look this year versus last year?”
My second suggestion is that in addition to looking at your direct competitors, I would build a larger set of ten to twenty competitors that looks a little bit wider into that industry. Find micro movements on your hyper-focused competitors, but then look at the larger macro ecosystem and see how much of that has lifted up.
Q: A lot of times it's better to be a fast follower of some of the biggest companies like Apple. I saw a tweet from Gas app developer, Nikita Bier. He said: “On a long enough timeline, the entire tech industry is just satellite research labs for Apple. We're all just building temporary products that will eventually be shut down or integrated as features if they're of any value.” He's essentially saying that the biggest and best companies in the world watch the industry to see what's going and then make decisions. It seems like taking more strategic swings is a good move to be doing right now. What do you think about that?
He's essentially saying that the biggest and best companies in the world watch the industry to see what's going and then make decisions. It seems like taking more strategic swings is a good move to be doing right now.
What do you think about that?
Jonathan Kay: I would hate a world where all good ideas are eaten up and destroyed. But, I do deeply agree with the sentiment, which is that the cost benefit analysis for being innovative and first sometimes just isn't there. It's often the people that do something second or third that do it best.
Q: We talked about analyzing competitors, learning from their mistakes, and learning from their successes. How can that information help a brand inform what they should be doing with their business? How can companies leverage that data?
Jonathan Kay: I think you just need to expand outside of your core competitor set. For example, health and fitness apps that are trying to sell you on fitness subscriptions can learn from streaming companies, who can also learn from dating companies that all have the same model. At the end of the day, they are different apps with different value props and different content areas. But the game theory, the mechanics, the way consumers behave, is very similar.
More data is always better. The larger sample size, the more examples you have and the more confident you can be in decision making.Look at competitors that might not do exactly what you do, but might have components that are similar to what you. There's a lot you can learn from them.
Q: If you understand your demographics and then you realize another non-competitive brand has similar demographics, there could be some crossover partnership there to widen your customer base. Do you agree with this?
Jonathan Kay: One of the spaces that we have been tracking since the pandemic is this idea of buy now, pay later (BNPL) which are almost like microcredit loans. Some of the well known BNPL apps are Affirm, Afterpay, and Klarna.
Apptopia looks at advertising intelligence. We look at ads that these apps are showing and the content in their ad creatives. One interesting trend that we saw is that Affirm was hyper focused on using the concept of buy now, pay later for travel. Klarna and Afterpay were running similar amounts of ads to Affirm, but their ad creators were hyper focused on physical goods. We saw that these ads were actually performing much better than those that were focused on travel.
The audience that these companies were targeting happened to resonate with one message over the other. Businesses can learn from that and adjust their advertising to focus on the thing that these companies have already spent or wasted their money on to learn.
Q: You’ve talked about how there is so much information and insights that are available and about data that we can glean from competitive intelligence from first party data. With that being said, how do we combat information overload?
Jonathan Kay: There's a lot of data. It's rightfully overwhelming. The answer is you have to start with a thesis, or a question. For example, “Why is my competitor getting more downloads than me?” Almost certainly, the question is going to come out of your first party data. In order to not be overwhelmed, just stay focused on that one question. You may pull a lot of data to get a complete full view, meaning you might come at the question from a bunch of different perspectives, but you just follow that trail.
Q: Can you think of an example of a company following a competitor’s trail?
Jonathan Kay: For the last three years in a row, Ulta Beauty, from a mobile, digital perspective, had been getting more meaningful downloads every month than Sephora. It seemed like Ulta Beauty was taking a different strategy in running their user acquisition campaigns than Sephora.
So, Sephora stuck with the question, “Why is my competitor getting more downloads than me?” They used competitive intelligence and saw Ulta Beauty had been having a lot of success advertising with DoubleClick, one of Google's primary ad networks. DoubleClick was showing ads for Ulta Beauty inside language learning apps like Duolingo and Rosetta Stone, so in October, Sephora followed this strategy and started to advertise on DoubleClick.
DoubleClick realized the correlation between successful ads shown to people interested in language learning and people interested in makeup and started to show Sephora's app inside those same apps. Sephora's downloads skyrocketed, just since they started to fast follow what Ulta Beauty had been doing for three years. Now we’re seeing Sephoras downloads, beating Ulta Beauty between 25 and 40% month over month, from a new user acquisition perspective.
That sounds like a success story, but the reality is, what the heck had Sephora been doing for the last three years? What was the actual opportunity cost in missed users acquired or missed revenue as a result of not fast-following sooner?
Q: What do you think are some industries that have the highest chance of market share changes given the either current or impending economic uncertainty?
Jonathan Kay: My obvious answer is travel. I think that you typically see large changes in market share come out of markets with low user satisfaction. If people are happy, they don't change their behavior.
Right now, there's so much unrest and dissatisfaction in travel. People always complain, but it’s at completely heightened levels and usually that follows with some change. Even something as simple as JetBlue has gone from one of the highest regarded airlines to middle of the pack. I think someone will come out with a new strategy or a new approach and people will be looking for something new. When there is dissatisfaction, there is change.
I would start to look at what industries are having the lowest user sentiment and the most complaints; something that's above and beyond what you normally see. That’s where you can start to expect change.
Game Time: Two Apps and a Lie