Why Everything is Nothing for Apps

For Elon Musk, it is very much the one that got away. He may be best known for Cars and Spaceships, but the South African-born entrepreneur started his career in the technology sector during the heady days of the dot-com boom. He once owned an online payments app called X.com that famously merged with PayPal before he was ousted as the CEO of the combined company. The full story has been widely recounted in recent weeks, and the parallels between his ambitions at the new X.com and the old X.com are striking.

When he took over Twitter, Musk said he wanted to create an everything app. His vision was for an app that can be used to buy or book anything whilst also acting as a social network. It is clear he wants to finish the app he started developing twenty years ago.

Global Ambitions

To be fair to Musk, he is not the only tech entrepreneur who has spoken about building an everything app, equivalent to China's WeChat. Facebook, Uber and Amazon have previously made moves in this direction. Neither have come close to succeeding. In part because of significant structural barriers that exist in Western markets but not in Eastern ones.

WeChat started out as a social network. It became the go to destination for money transfers, primarily because of its vast user base. It was the only app in China that everyone used, partly because the Chinese government blocked rival social networks in order to simplify censorship.

Grab, the south east Asian ride-hailing app, have been able to make a similar transition more recently for a similar reason. It was able to offer financial services to drivers often underserved by traditional banks, and expanded its user base from there. Its payment services are seeing widespread adoption in the region as a result. They have plenty of competition too, from apps such as Gojek and Sea.

Western Disincentives

Meanwhile, Facebook have tried to make the pivot to financial services more than once, but their payment services have never been widely adopted outside of their own social networks. Fierce competition and powerful incumbents are the reason. The failure of everything apps in the West is nothing to do with technology-averse consumers, but is instead due to the relative power of the mobile platform owners. There are Western tech companies that have succeeded with mobile payments, but these companies have no incentive to extend this success to other areas.

Apple and Google could easily develop a multi-purpose app which combines messaging, social media and mobile payment in the same way as WeChat. They already have apps for most of these things in their respective app stores. It's just they'd rather release each function as a separate app.

Neither have any real reason to create an everything app. They don't need to, because they already own the hardware and have their own app stores. To Apple and Google, apps are secondary to the main goal of increasing usage of the underlying OS by users and developers.

Developer engagement is critical here. WeChat has launched its own built-in app store used to distribute mini apps created by third party developers. These mini apps are a major reason why WeChat has evolved into the behemoth it is today. Such an approach is totally impossible to replicate in the West because both Apple and Google ban apps that act like app stores from their respective marketplaces. Epic Games tried to get this policy changed through the courts but lost.

Payment-first

The success of everything apps in Asia is based around their digital wallet features. Both WeChat and Grab have succeeded in becoming everything apps because they've become the most widely used digital wallets in markets where large populations don't have access to credit cards or bank accounts. In these countries, everything apps are the easiest way to pay for goods and services. They attract developers and businesses to list on their apps because that is where the money is.

In the West, the market for digital payments isn't controlled by app developers. Instead, it's controlled by banks and big tech. The leading digital wallet providers are Apple and Google, whose payment services are increasingly popular. Yet, both are still dwarfed by the amount spent on credit cards. Musk's ambition to control half of all digital payments puts him directly up against the big banks, who have already seen off the challenge of fintech companies such as Monzo and Revolut.

Apple and Google were able to negotiate with banks and payment processors in order to get their services widely accepted by retailers. PayPal has struggled to achieve the same reach precisely because it's never really had the same backing from the financial sector. PayPal are the oldest and best known of the US digital payment firms. They also spent a decade under the ownership of eBay.

The marriage between eBay and PayPal was probably the nearest the West has ever come to an everything app. Ultimately, that combination failed due to competition from Amazon, who became the go-to-destination for e-commerce. PayPal was eventually spin-off because increased competition in online payments meant the links to eBay became a competitive liability. Retailers refused to support a service owned by a competitor, while the ubiquity of credit cards meant that consumers could use alternative payment providers.

What Revolution?

Just offering existing technologies in one app isn't sufficient to ensure mass adoption. Super apps have managed this in Asia because they expanded mobile payments to millions of consumers who previously relied solely on cash. Mobile payments are significantly less important in the West, where technologies such as Apple Pay and contactless credit cards are ubiquitous. Indeed, large parts of Northern Europe are already cashless societies.

If X are to succeed in their ambitions as an everything app, they will need to find a way to revolutionise financial services in the West. It is certainly possible that Elon Musk could have managed this with PayPal in 2001, given more time. Two decades of fintech innovation make this a lot harder now.