App stores are frustrating, cluttered places. Even with Apple’s prescreening process of every app that passes through its iOS gates, the App Store, it is often hard to find what you may want or need. This is a problem for consumers - but an even bigger problem for developers that often rely on these apps to make a living. For every successful app that makes millions for its publisher, there are thousands of apps that will not rise above the mess.
So, you are an app developer and you have figured out your next big idea. Dollar signs and millions of downloads float through your head, like so many sugar plum fairies. If you build it, users will come... or so the thought goes. But there is really a lot more to it than that.
“People still believe that if you build an app, they will come. They see the app stores as being the answer, and feel all they need to do is publish and watch the money roll in,” said Tom Emrich, principal at Toronto-based App Promo. “There is a lot of disillusion from the big winners that get the most press; this belief often causes them to focus on the idea, UI and code, so they forget that they need a plan and a strategy to be successful.”
There are plenty of apps that have succeeded by building a great service and spreading it through grassroots and word-of-mouth methods. For example, RunKeeper has never had much of a marketing presence, yet it is one of the most successful apps over the last four years. Granted, it also had a first-mover advantage in the App Store, but the company has been able to build a lasting business and platform well after its initial rush of popularity.
The middle-class developer does not have the advantages of being a first mover that establishes a market segment, or the financial wherewithal to wait for grassroots acceptance and word-of-mouth to take effect. Developers need to make money so that they can keep developing and earn a living. Monetization of apps is more than just deciding whether it should be free or paid, or have advertising or in-app purchases. Those are avenues of payment. But if nobody is actually using your app, those avenues do not matter.
From the beginning of production, developers need to think about strategy. Who is your target audience? How can you reach that target audience? Once you have people in the door, how do you get them to spend money? Unless you are a hobbyist, apps are a business and should be treated as such.
“Most of the individuals that are creating apps either come from code or just have an idea and so aren't used to creating business plans, revenue projections, etc.,” Emrich said. “So even if they know what they need to do, they don't usually know where to start.”
These are questions that small businesses have asked themselves for generations; they are fundamental tenets of business. What are most app publishers if not small businesses? They may not be your traditional Main Street small business, but the basic concepts of economics still apply. The difference for app developers is that the ceiling for success is much higher than a traditional small business. A successful app can create millions in revenue.
“At the end of the day, there has been a lack of emphasis in the app community's conversation on the fact that what we are creating are products and business,” said Emrich. “You wouldn't take $100,000 and open a coffee shop tomorrow in your neighborhood without a plan and marketing, would you?”
In talking with several venture capitalists, we have seen a trend emerge with how many consumer app developers (as opposed to business-to-business developers) approach their ideas and projects. One VC says that “consumer developers often are just scratching an itch.” They have an idea and want to build it. Building things is fun, especially if you have the talent to pull it off. But building without a plan is not a recipe for success.
Every decision a developer makes from the very beginning should be focused on how to get an app into the hands of consumers that will ultimately provide revenue. Monetization is a consequence of good decisions, not skill or luck. Appcelerator and IDC took a deep look at this in a Q4 2011 survey of mobile developers in the fourth quarter of 2011. The path to revenue is reach that turns into engagement that turns into loyalty.
Reach includes discovery across multiple platforms. Engagement is creating a unique and intuitive user interface that can be coordinated with marketing (analytics) and social plans. Loyalty is created through relevance and understanding your users (analytics again). When all of that is in place, then you find that the app monetizes itself if you have the proper avenues already in place or ready to launch.
As we can see, there is a path. That path needs to be figured out early in the development cycle, because it is not something that can be thrown together ad hoc.
“I see people throwing into paymium games which do not have an effective in-app purchase strategy. In-app purchases cannot be retrofitted. Freemium game play has to be built in from the beginning," Adam Telfer, VP of game development at Toronto-based XMG Studio told ReadWriteMobile recently.
Developers: Are you coming at your ideas with a business plan in hand? Or are you trusting to providence that the great idea you have will generate the millions of dollars you dream about? Let us know in the comments.