"People Invested $1 Million In An App That Just Says ‘Yo’"
It only took 8 hours to build the app, and the only thing it does is allow you to send the word ‘Yo’ to your friends. To many, it seems like a joke. But its inventor, Or Arbel, is totally serious.
Arbel, who built the app three months ago, has quit his job and moved halfway around the world — from his native Israel to San Francisco — to work on Yo full time. He’s opening an office, hiring staff and seeking “strategic partners.” And oh yeah: He’s already raised $1 million from investors.
So is Arbel right? Is Yo, which he calls “context-based communications,” the future of messaging? Or is investor interest in Yo an unmistakable sign that we are in the midst of another internet bubble?
Yo is a very simple app. It allows you to send a push notification to anyone else with the app. All of those notifications say the same thing: “Yo.” Arbel says that “you usually understand what the Yo means based on who you get it from and when you get it.” According to Arbel, once you start using Yo “the way it affects your life is profound.” He noted that many of the reviews of Yo in the app store say things like “Yo changed my life.”
Some of these reviews, however, do seem a bit sarcastic: “Not just a means of simple but effective communication, Yo is a way of life,” one review says. “Since downloading Yo, all my relationships have improved and I’ve regrown most of my hair.”
Yo was launched in the App Store on April Fool’s Day of this year. (It was initially rejected by Apple because they thought the App wasn’t finished yet.) It took off when tech evangelist Robert Scoble called it “the stupidest but most addicting app ever.” Thus far, it has attracted over 50,000 users who have sent about 4 million Yos. It’s particularly popular among other start-ups like Kickstarter and Four Square. Once it gets into an office, Arbel says, “it goes viral.”
Why not just send the word “Yo” using an existing messaging app? Arbel says the primary benefit is efficiency. With WhatsApp, an extremely popular messaging app that allows you to send words of your choosing, it takes 11 taps to send a Yo. With the Yo app, it only takes two taps.
The comparison to WhatsApp also may point to Arbel’s larger strategy. In February, Facebook acquired WhatsApp for $19 billion, even though the company’s revenue is negligible. Arbel says that anyone who uses WhatsApp will also want Yo. If Arbel can grow Yo into something a larger company believes is even 1 percent as valuable as WhatsApp, that’s still $190 million.
Some analysts believe the WhatsApp sale and the flood of venture capital seeking out the next big thing represents a new tech bubble. Hedge fund manager David Einhorn, speaking to the Los Angeles Times recently, said “[t]here is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it.”
During the last tech bubble, in 2000, the Nasdaq Index — which features many technology stocks — lost nearly 80 percent of its value and “Silicon Valley saw 200,000 jobs evaporate overnight.” In the first quarter of 2014 “venture capitalists invested $9.5 billion in 951 U.S. companies,” a level not seen since the last bust.
Many people within the tech industry, however, remain bullish. The internet is much more mature than at the turn of the century, the smartphone plays a central role in modern life, and people much more willing to spend money to enhance their online experience.
So how do you convince investors that there is money to be made in the Yo-delivery business? Arbel is working on developing an API that will allow him to “partner with brands.” In our Yo-enhanced future you would get Yos from “things that interest you.” When the Gap has a sale, for example, it would send you a Yo. When your friend’s plane lands, Delta will send you a Yo. Arbel is particularly excited about the prospect of getting a Yo into Starbucks. When your order is ready, Starbucks could send you a Yo.
“Shouting your name is old fashioned,” he says.
The first $1 million has come from group of investors associated with Moshe Hogeg, the CEO a social network similar to Instagram, Mobli, where Arbel worked for two years. (He initially created the app at the request of Hogeg, who wanted an easy want to tell his personal assistant he needed to talk to her.) Arbel said he’d like to raise some more money from “strategic partners.”
One thing that Arbel won’t be doing is adding more features. He believes that simplicity is the key to its success. (There are some hidden features, or “Easter eggs,” in the app. You can double tap someone’s name to send a “YoYo.” And adding a plus sign between usernames sends Yos to a group.) The simplicity also provides some benefits to users. Unlike most other messaging apps, Yo doesn’t collect any personal information from users. In comparison to photo messaging apps like SnapChat, it’s hard for kids to get into trouble using Yo. You cannot sext on it.
“We do have some users who don’t get it and think it’s a joke,” Arbel admits. He thinks that even if users initially download the app because they think its funny, they’ll keep using it because it will “change their everyday life.” He describes the perception of Yo as a joke as a “problem we need to solve.”
The larger problem is whether an economy built on seven-figure investments in Apps like Yo is sustainable. If Arbel can convince sophisticated investors that Yo already merits a $1 million investment, maybe he is onto something. Or maybe the potential of Yo is not in the product itself, but on the ability in a frenzied marketplace to quickly flip Yo to another company for a profit and move onto the next app. It was too many of those kinds of transactions — divorced from revenue or value of the consumer — that caused the entire system to crash at the turn of the century.
Where does Yo fit into this equation? We’ll need to wait and see. Until then, Arbel has been waiting for a Yo when this piece gets published.