Essential Products – Never essential.

Me too products sink the ship.

• Andy Rubin’s Essential Products Inc has gone from a $1.2bn start-up to ignominious closure simply because it catastrophically failed to live up to its name.
• This has been coming for a long time as the company has hardly made any noise for months and has now announced its closure (see here) where most of its software will be posted to GitHub for anyone to play with or use.
• Essential Products began life as a very high-profile start-up led by Andy Rubin after he left Google, which led investors to throw money at him without ever really worrying about how he was going to succeed.
• The irony is that if they had paid attention to what made him successful at Google, the fact that Essential Products was never going to go anywhere would have become immediately obvious.
• It is this analysis that led me to be sceptical on this venture from the start (see here).
• Android was successful largely because it was the vehicle that allowed the very popular Google services to come to mobile devices as an alternative to iOS.
• The fact that it was “free” and open source helped, but its appeal has been largely derived from the Google services themselves.
• By 2011, when China really started to adopt smartphones, Android had already been around long enough to be an obvious choice upon which the Chinese Digital Life services could be built.
• Despite its massive success, the Android software itself does not make any money and never has done.
• Google makes a vast amount of money from Android by monetising its ecosystem which sits on top of the open-source Android OS.
• Consequently, if Essential Products was going to go anywhere, it had to replicate the piece on top, not just make Android smartphones.
• As I have always said, it had to make products that were essential to own rather than me too and in order to do that, it needed to develop an ecosystem.
• RFM’s ecosystem analysis has long suggested that the minimum viable size of an ecosystem is around 100m users.
• At its peak, I suspect that Essential Products may have reached 1-2% of this in the best instance because there was no compelling reason to get involved.
• Its hardware was average, its mods unexciting and the AI that it had to make the devices come to life was virtually non-existent in my opinion.
• Consequently, no one bought the products even when they were heavily discounted meaning that heavy losses were incurred.
• The company pivoted towards the home (see here) in 2017 which came exactly at the right time and was designed to solve the smart home’s biggest problem: fragmentation.
• Hence, I thought that it might have a shot with its smart speaker that was running its new Ambient OS.
• Unfortunately, no one else bought into this idea and the smart home remained as fragmented as ever and has since fallen into Amazon’s clutches.
• The net result is that Essential Products had nowhere to go and following a brief and absurd venture into a thin smart device (see here), it failed to raise money or sell itself.
• The failure of Essential Products highlights is a cautionary tale for others that have similar ideas and assume that the engagement of users is easy to win.
• This is a very difficult nut to crack and the more mature the digital markets become the more difficult it becomes.