Why Elon's “Super App” Hopes are Doomed to Fail
How America is Weird, Part Two
To be honest, I don’t much care what happens to Elon Musk, and I don’t think you do either — though we may as well take our billionaire schadenfreude where we can get it!
But Musk’s hopes to emulate the vast scale of so-called “super apps” through his acquisition of Twitter presents a good opportunity to discuss, following part one last week, more ways that the US technology scene is very different from that in much of the rest of the world. So let’s do that.
What’s a Super App?
Wedged between his purchase of Twitter and the fulfillment of his strange, childlike fantasy to name something, anything, “X”, Elon Musk announced plans to transform the app from its humble social media present into a brave ‘n’ bold super app of the future. (I’d like to think he announced this after snorting a nice long rail of cocaine.)
But what’s a “super app,” anyway? The term refers to a few companies — like WeChat, AliPay, and LINE — that are extremely popular in China, Korea, Japan and a few others, mostly centered around South and East Asia. They’re called “super apps” because even though they’re just a single app, they allow users to do just about anything they might possibly want to on a phone. Nearly all of the super apps began as one thing (WeChat for messaging, AliPay for sending money), and then grew, like unchecked molds, into nearly everything.
The variety of tasks they can do is onerous to list, but imagine a single app that combines the following, and you’ll get the sense:
Chats, voice and video calling (à la Text / Messenger / FaceTime)
Group video calls (Zoom / Google Meet)
Social media (Instagram / Facebook / Twitter)
Digital payments (Venmo, Apple / Google Pay)
Flight, hotel, and train search and booking (Kayak / Google Flights)
Ride booking (Uber / Lyft)
Online shopping (Amazon / Walmart / lots of others)
…and more
I’m likely missing functionality in some places and overstating it in others, but you get the idea. These “apps” do nearly as much as most smartphone systems themselves.
It’s easy to understand why Musk wants to turn Twitter into something like one; you can just imagine the monopoly-money dollar signs spinning across his eyes. And while I haven’t ever used one of these apps, I suppose they could be nice. Unless, god forbid, you get locked out of your account.
But all the big super apps today are in Asia. Could they take off in the US, too?
America Loves Credit
Even steering away from bold predictions, there are a number of factors making the US tech market very different from that in most of Asia — and for that matter, much of the rest of the world — that really stack the odds against super app success here.
One major offering of super apps like WeChat and AliPay is how they allow users to pay for stuff both on- and offline. In America, the use of digital payments for in-person purchases has grown lately — especially since Covid, which increased digital finance use almost everywhere, including in developing countries. But America has long been a place for credit.
More than just about anywhere else, in fact — including not only historically low-income countries with less access to financial markets (more on this below), but also wealthier places in Europe and East Asia. Indeed, America’s credit card debt is more than double that of Japan, and many times higher that of most European countries.
A good friend of mine who’s French moved to California around a decade ago. She’s well-off, earned a PhD, and now works at a large company conducting biotech research — but even she had to make a conscious effort to build her credit score when she moved to the US.
“In France, we don’t use credit cards. If you don’t have the money, you don’t buy it,” she told me. (Which, if we’re being honest, is probably a much healthier, smarter approach to credit than many of us take in the States.)
An even greater factor playing into the success of payments in Asian super apps is the sheer quantity who have traditionally been “unbanked” there — that is, those lacking access to established financial systems. As measured by the World Bank, the number of unbanked adults in the world still stands at around 1.4 billion, and tends to include people who are “more commonly women, poorer, less educated, and living in rural areas.” This number is shrinking rapidly, thanks in no small part to rapid increases in mobile data access — even in poor, rural areas in the furthest corners of the globe.
As it turns out, if you want to build and grow a super app offering digital finance, it can be a surprisingly large advantage if much of your target market doesn’t yet have access to a banking system — especially if you can find a way to offer it to them.
Leapfrogging Across Asia
Whereas digital payments apps in America must convince users to ditch their credit cards — or at least, integrate their cards into the digital platforms — many in China, India, Vietnam and other large “emerging” tech economies never had an option beyond cash to begin with. For these users, an app like AliPay or WeChat was likely their first, only opportunity to store money in some form other than banknotes.
There’s a term for this,“leapfrogging,” that’s popular in international development, and especially in its corners interested in internet and communications technology, where I’ve spent a lot of time. A country “leapfrogs” when it skips traditional development steps others followed: whereas many Americans moved from no internet to desktop computers to laptop computers to smartphones, many in places that gained internet access later have skipped right to the last step, smartphones.
Or if we look at finance: instead of moving from cash to credit cards to digital payments, hundreds of millions today are taking a shortcut right from cash to digital.
This all brings up a worthwhile philosophical question I’ll save for a later post. But it’s worth noting that terms like “leapfrogging” and even “development” imply that the paths of economic development taken by most countries a) are relatively linear, and b) necessarily work toward bettering citizens’ lives. While these things are very often true, it’s worth asking whether, say, staggering credit card debt is necessarily a marked improvement over storing cash under one’s mattress.
Anyway, leapfrogging is a useful term, and it’ll come up again in future posts.
America Already Has Plenty of Apps
One remarkable point about the list of super app features I wrote above is how most of us already use multiple apps that serve all their exact functions. Whether it’s online shopping, social media, text and video chat, flight, train, or rideshare booking, or in-person payments, we can already do almost all the things super apps can — just with our less-than-super, basic ones.
In the countries where super apps developed, they often provided the first and only opportunities to do any of these things online. According to the World Bank, when WeChat was founded in 2011 (and Alipay even earlier), only 38% of China’s citizens used the internet — a mere half the portion of the online Chinese population a decade later. This means that hundreds of millions of people began using the internet in China after WeChat came into existence — which, like digital finance, allowed the company to introduce first-time users to a single app with a great deal of functionality they’d never before had access to.
For most American users, of course, a new super app would have to convince a target market with ingrained habits, rewards statuses, and profile histories to quit Uber, and quit Kayak, and quit iMessage, and quit about a dozen other apps, to come over to some new app with dubious value that says it can do all these things, somehow better.
Plenty of the apps we still use in America today began embedding themselves into our digital lives long before WeChat even existed — Kayak for travel (2004), Uber (2009) and Lyft (2012) for rideshares, even PayPal (1998) and Venmo (2009) for digital payments, slow as America has been to adopt them.
Moreover, the architecture of super apps was likely appealing to many in low-income markets for an entirely different reason: because super apps allow for “app-like” functionality without requiring users to download and update many individual apps, they save space, download time, and data cost.
Phone and mobile data quality have dramatically improved in much of the world over the past decade, but for many internet users — including in the places where super apps have flourished — limited phone storage, slow data download speeds, and high data cost have all presented barriers to the regular use of dozens of apps, as we in the US have done since, well, pretty much the whole time.
Another useful term, “switching costs,” refers to the many factors — often subtle, sometimes nearly invisible — that keep users “locked in” to certain technologies and services over time. It’s the reason it’s so hard to switch from PC to Mac or iPhone to Android, why it’s so hard to leave Facebook no matter how many times you say you will, and why there’s been such a slow, messy move of users from Twitter to Threads, Mastodon, Blue Sky, and more.
Switching costs arise for a number of reasons: because users are accustomed to doing things a certain way, or because they’re loath to rebuild their profiles, social network and followings from scratch on a new platform. I even published my first academic paper about switching costs, years ago, based on research with visually-impaired internet users in India. Co-authors and I found that even something like the quality of a text-to-speech “voice” can lock users into a certain brand of software, even if they don’t care much about its other features.
So Will Elon’s Dreams Come True?
Again, I’m not going to rush any hot takes here. But anyone hoping to build a WeChat-like super app in the US (or at least, one that sees WeChat-like success) will have to overcome a number of hurdles that most of the extant super apps didn’t face.
America is a “mature” credit card market. Americans use credit cards more than almost anyone in almost any other country around the world. And while internet users in places with a large historically unbanked population may leapfrog directly from cash to digital payments, the shift has been, and will likely continue to be, slower in America and other credit card-heavy countries.
America is a mature internet market. Most Americans have been using the internet much longer than most in regions, like China, where super apps have thrived. In order for a super app to take off in the US, not only will an app developer have to overcome legal and societal norms around financial consolidation and monopolization, they’ll also need to overcome users’ individual switching costs, convincing us to throw out all our individual apps and move to a single app for everything — a single app, hopes ~one very special boy~, called X.
Song of the Week: -M- — Superchérie
This is one of the best summaries of the super-app marketplace and why it would be challenging to replicate in the U.S. market — thanks!