No, this has nothing to do with heading to the App Store and pressing the download button. You have got to be seriously lazy if you need a guide for that.
With the recent introduction of apps to the Flippa marketplace, we thought a guide might help some of you who are new to acquiring apps. You might be familiar with buying websites, but apps are a different ball game with a different set of metrics to measure success.
So read up young Padawan, and go forth and buy apps to your heart’s (or bank account’s) content.
Figure Out What You Want
This one goes without saying, but since this is a lazy user’s guide it must be said. Your interests matter here. An app is not something you can set and forget about. You must tend to it constantly if you want more downloads and sales. The more interest you have in the app, the more likely you are to keep working on it.
This is really the first step when you’re shopping for apps to add to your portfolio. Use your interests as a filter before you start looking at price and other factors. Don’t be lured into buying an app that you have absolutely no interest in because the seller says that it’s a hands-free passive money making machine.
Take It for a Test Drive
After you’ve found an app that you like, you should take it for a test drive. Download it, run it, play around with it. Try doing things that might break it. Maybe even get some friends to use it.
The idea here is to see whether you actually like that particular app. Is the design great or does it need a makeover? Does the app keep bringing you back or do you need to change it up?
Carefully go through the app and list out its advantages and disadvantages. Make a note of any key features you think it’s missing, or any unnecessary features that might need to be removed. Solicit advice from your friends and other users to get an objective viewpoint.
Are You a Developer or Can You Hire Developers?
As mentioned previously, you need to keep working on the app, upgrading it, adding new features to keep users interested, fixing bugs, and keeping stride with iOS or Android updates. Of course, you don’t have to be a developer to make an iOS app, but if you want to upgrade it, it’s a good idea to hire one.
This means you need to take into account all the extra costs and work involved in growing the app. In the previous step you made a list of the features it should and shouldn’t have. Now you need to estimate how long it would take and how much it would cost to implement those changes. You might need to hire a developer or a designer to redo some parts or the entire app.
This might be a good estimate of the additional costs and code work you’ll have right up front, but it’s not a one-time thing. There will always be more bugs to fix, more updates to send out and more features to add. You’re really looking at a recurring cost, so it’s a good idea to know about the ins and outs of the app business.
Look at the Numbers
At this point you’re really interested in a particular app and you might want to go ahead and buy it. There are some numbers to look out for to decide if it’s a good investment for the price it’s being sold at.
App Downloads
This is the most important metric. App downloads directly affect the popularity of an app. In every App Store you will find a column showing a top ten list of most downloaded apps. Think about how you sort through apps on the store yourself. You most likely sort them in descending order of number of downloads.
App downloads is the equivalent of traffic for websites. The more downloads an app has, the higher the seller will price it.
Daily Active Users
While the number of downloads reflect popularity, the number of Daily Active Users (DAU) reflects engagement. An app may have a million installs but if every person who installed it used it only once then it makes no difference.
A high number of Daily Active Users means that people are using the app on a regular basis and the app has something that keeps them coming back for more.
Daily Active Users is the app equivalent of return visitors for web sites. Look at this number in conjunction with the number of downloads to determine how fast the app can grow.
Revenue
Revenue directly impacts the value and ultimate sale price of the app. It’s quite hard to value an app that doesn’t earn anything solely on the strength of its downloads and DAUs.
Of course, there are apps that might have promise and potential to monetize at a later point. But unless you’re Mark Zuckerberg and you have a billion dollars to drop on a photo sharing app, you probably shouldn’t spend too much on an app that doesn’t earn any money.
The quickest way to determine if an app is worth the price tag is to look at how long it will take you to earn back your investment based on current earnings. So if an app makes $100 a month and is selling for $1000, you’ll make that money back in 10 months, which isn’t a bad deal.
Take into account all three metrics to decide if the app is worth buying:
- App Downloads
- Daily Active Users
- Revenue
High revenue, high downloads and low DAU means the app is not engaging and revenue will soon fall. High DAU, high downloads and low revenue means the app is popular and engaging but not monetizing well. High DAU, high revenue and low downloads means the app is useful to a small number of people and is growing very slowly.
Over to You
So there you go. You’ve got the basics down. Now head out there and start looking for apps to add to your portfolio. Let us know if you have any other criteria to look out for when you buy apps.
Flickr photo: Randy Robertson
