Here’s the thing, running a business is hard. I know it isn’t a surprise to most of the entrepreneurs reading this right now but it seems that for a great number of people out there in the app world the thought is that it should be easy.
Of the 400+ entrepreneurs I’ve interviewed on UNTETHER.tv there isn’t one of them that has said to me “Rob, this was the easiest thing I’ve ever done – much easier than starting a terrestrial business” – not one. They’ve told me how they have sacrificed their nights working the “new 9-5” (9pm to 5am), how they struggle to market their product on a budget and how they are overwhelmed by the amount of support work that is required to make a good product into a great experience. This is the reality of a mobile entrepreneur and most of them won’t make it passed their first year in business or will continue to do it as a hobby without grand expectations. And this is ok because before mobile this would not have been possible for them.
Given this, that making a living making a business is hard, we shouldn’t be surprised that most of the developers populating the various app stores aren’t making enough money to support themselves. If you take a look at the realities of starting and running a business, app companies are not exempt. For every Microsoft, Apple, IBM and Amazon there are countless companies you’ve never heard of. For every Angry Birds, Instagram and Shazam, there are thousands of apps you’ve never heard of.
Even the “successful” companies have been challenged finding revenue in a mobile only world. Rovio, makers of Angry Birds, generates 30% of their income from merchandise (roughly $30 million of their $100 million + revenue). In fact, I’ve spent more money in plush toys and real-world Angry Birds games than I could possibly spend even if I bought all the versions of Angry Birds on every single mobile platform. Instagram hasn’t earned a penny in revenue as it cruises towards 100 million users and Shazam, the next generation advertising network, has generated pennies per user across the 250 million of them that use it.
So what does it take to turn mobile into sustained revenue? There is no accounting for the diversity of the taste of the mobile population – which is pretty much the entire planet earth these days. Before mobile there would be thought and focus and audience considerations and marketing budgets and sales staff to support the product or service. This shouldn’t be any different.
So here are 4 pieces of simple and effective advice, condensed from over 400 UNTETHER.tv episodes but remember, it’s not about rocket science, it’s about execution.
#1 Do not try to disrupt everything at once
This almost seems counterintuitive doesn’t it? Mobile is about innovation, disruption, destruction and rebirth. True. It is all of those things and much more but if you want to make money in this industry the last thing that you want to do is to educate your audience about how to use your product. You don’t have to look further than Foursquare for a perfect example of this. While they taught the world to check in their competition was reaping the rewards of location based marketing. While they took 4 years to hone in on their business model, companies like Yelp and Google used their considerable clout to turn users into revenue right away. Unless you are Google, the last thing you want to do is invent a market – especially if you want to make money any time soon.
#2 Go with the tide – to start
There is pain in the market right now. Pain that has existed for years that has gone underserved because there was really no way to solve that pain in a cost-effective way. Perhaps until mobile. The most immediate source of revenue is solving an existing and persistent problem. Think of Square and their original focus on enabling credit card transactions for the millions of small businesses that couldn’t (or wouldn’t) afford to accept credit cards before. An addressable market with a clear pain point where mobile was clearly an easy solution.
#3 Go after the money already being spent
Ahh, the low hanging fruit approach – it still works though. Sometimes we over complicate things as humans and the obvious is right in front of our eyes. Mobile is no different. Companies are spending on something out there that has a budget, has a need and can be improved with mobile. Find those budgets, identify those needs and replace the broken process with a mobile product or service that (a) saves time or, preferably (b) saves money for the organization.
Going after the money that is already allocated is an easier conversation – and faster to cash in hand – than trying to eek out some new budget down the road. Remember, this is about finding revenue right now, not next fiscal year.
#4 99 cents doesn’t scale for most, neither does advertising
Sure, there are the corner cases everyone continuously brings up that buck this trend but, for the giant majority, selling apps for $1 or selling ads does not work. The strategy that most employ is the “multiple app” strategy which means the more apps you have the greater the opportunity there is to make a few bucks from each thus creating an income. Good if you’ve got a continuous flow of apps, bad if you are a small team producing a couple apps per year.
You’d be better served to define a clear business model with a clear customer in mind and then build something that satisfies both. Build a business that generates the revenue as a result of the app, not from buying the app. We’ve seen a number of these companies over the past year including car-sharing service GetAround, rent-a-room company AirBnB and temporary work matching service companies like Gigwalk. The thing they have in common is the app is a conduit to revenue and their business models are scalable without a reliance on selling ads or the apps themselves. It also doesn’t hurt that the company and the users make money as a result. That’s good business.
There is not doubt that mobile has democratized entrepreneurship – more so than the heady web days – and the lessons we learn and teach today will be the reason for the success of the next generation of businesses. But there is opportunity and there is revenue to be had, you just have to take off your visionary glasses for a moment and look right in front of your nose. Find the things that haven’t been solved or find the things that have a budget or find the things that require simplification. If you do, the revenue will flow.
***The photo, for those wondering, is Vern looking for the money he buried under his porch in the movie Stand By Me – lots of parallels here***