How to start a mobile apps business

Thinking of starting up a business in mobile applications? Funnily enough, like anything else you care to name, there’s an app for that.

Search the App Store, Android Market et al, and you’ll find plenty of examples: there are applications that offer app development code tutorials; apps that enable you to test your idea through market research; and even more applications that allow you to submit your mobile app idea to developers. Then, there are applications that help you keep track of sales once you’ve launched your mobile app…

With more than 225,000 apps to choose from on Apple’s App Store, tens of thousands on Android Market, and other platforms such as Blackberry, Nokia and Windows Mobile doing their darnedest to catch up, mobile apps is a growing area if ever there was one. It’s a crowded and competitive marketplace too, however, and not an easy one to break. While it’s true anyone can develop an app, and many get brought to market, very few mobile app businesses actually make any money.

What is it and am I suited?

Since the launch of the iPhone in 2007 and the resultant boom in smart phones, mobile apps have become the hot spot for new businesses. As Tristan Celder of Zolmo (the developers behind Jamie Oliver’s iPhone app which won top prize at the Apple Design Awards winner) puts it, the mobile app industry is “a lot like the music business. It’s all about the Top 40.” It’s dog eat dog, and things move very quickly.

To top the charts, you need a good idea, for sure. But you don’t need to be an expert developer yourself. It’s a business like any other: you have to work hard to create a decent app and you need to know your market.

In the UK, the most popular apps change all the time. Everything from throwaway gaming to retail, social networking and education gets a look in. Stand out successes range from gimmicks such as iPint from Carling and World Cup favourite Vuvuzela, to giants such as GoogleMaps and Facebook. There’s a world between them all: so what do the chart toppers have in common?

Our case studies, Jamie’s 20 Minute Meals, Tweetdeck, Touchnote and The App Factory, have seen varying degrees of success in the mobile app market. They are very different businesses, each with their own approach to development; to monetising their product; and to growing their venture. But what marks each out as a special case is the solid business thinking behind them:

Jamie’s 20 Minute Meals: a made-to-measure paid for app with celebrity credentials
Tweetdeck: a free social networking app with big business funding
Touchnote: a free-to-download app linked with a mobile provider
TheAppFactory.co.uk: a self funded early stage app development agency and publisher

Investing in your app

Before you launch into the app world, be prepared: developing a mobile app is not cheap, whether you put the hours in yourself, or commission a pro to develop your product. Figures will vary according to the complexity of your app, but regardless, development costs can be fairly high, especially if you plan on developing quite a few.

If a developer is creating your app for you, their charge may vary according to platform. For a really simple app on Android, for instance, £500 is probably the minimum. For a simple app on iPhone, it can go from around about £800 plus. At the higher end, for a more complex app, you could be going for £4,000. Things can get a great deal more expensive than that however. Anecdotally, we have heard of an American development company flying over to a UK client via private jet. Apparently, they wanted to charge £25,000 for the project in question, and a percentage of the revenue too. (We suppose they needed to pay for the jet somehow.)

There are development companies out there who will go for really high prices, and there are companies who will pay it. Raam Thakrar of Touchnote warns: “I know people that have built apps for not much more than a thousand dollars. But I also know of many companies that have spent in excess of £100,000 on an app. Just be really careful of what you put in, because a start-up going into mobile… most of them don’t make money on it.”

If you need a good bit of start-up money to develop your app and to get it off the ground, how you go about securing this investment is another question. You can save, self fund, and start small, like David Carter of The App Factory; or you can try to secure the backing of investors, like Iain Dodsworth of Tweetdeck. His company has the backing of ProFounders Capital, the fund set up by Bebo founder Michael Birch and Lastminute.com founder Brent Hoberman.

“A year ago,” Iain explains, “Tweetdeck was a one man operation. Now there’s 15 people. In order to grow that quickly in terms of resources, in order to build quickly, you need to have an amount of money, but you also need to talk to the right people.” With an investment base you get a lot more than money; through them you are better connected, and are likely to find developing relationships with platforms and providers comes a great deal more easily. “We could have done it as a one man band,” says Iain, “but it would have taken a lot longer to get to the stage we’re at.”

You could also decide to tie your app to a particular mobile service provider, as Raam Thakrar of Touchnote has done with Sony Ericsson; or share revenue with your developers, as Zolmo and Jamie Oliver have done. There are many ways to skin a cat, and as many paths to funding your app.

Even if you don’t have financial backing, you shouldn’t let high development costs put you off, according to Tristan Celder of Zolmo: “If you haven’t got the capital to risk and your idea is strong enough, there are ways and means of getting your application produced.” Apparently Zolmo is always looking for strong content partners, and so in this case, the cost of producing an app would be zero as Zolmo would act as publisher.

The development stage

You do not need to be an expert developer in order to take a mobile app to market, although it could certainly keep costs down. But whether you build and test the app yourself or work with a developer, you need to invest a great deal of time in the development stage. You could mock something workable up in a week or two, but if you are serious about things, two months is really the minimum. Many apps take six months and more to work up to a finished product.

If you are developing the app yourself, you need technology appropriate to the platform on which you’ll be launching too. If you want to launch on iPhone, for instance, this means an Intel-based Apple computer, and devices for beta testing: an iPhone, an iPod Touch, and perhaps an iPad. You’ll need to register as a member of the iPhone Developer Program, which costs; and get your hands on the iPhone Software Development Kit (SDK), which is free, and assists in the development of native applications for iOS, using Cocoa, Xcode etc.

You may need to buy a platform specific developer license for certain other platforms too. For Android Market, the system for app development is less proprietary: Android is a Linux-based platform from the Open Handset Alliance whose members include Google, HTC, Motorola, Qualcomm, and T-Mobile. Unlike iPhone, Android apps can be developed and obtained by users from anywhere, even a third party developer’s own website, and sales are not limited to Android Market. All this opens things up for developers. Of course, as the platforms are generally mutually incompatible, the techie detailing and coding changes with each.

If you’re not a technology expert, the thought of coding and intensive testing can sound too much. But you can leave that side to the developers, as David Carter of The App Factory explains: “If you’ve never built an app, you’re better getting a company or an independent developer. The coding itself is very easy for someone who’s in the know. But if you’re new to it, you could take hours trying to work it out!” We can safely say, ‘hours’ is probably an underestimate.

In any case, don’t let coding and such hold you back. Making an app requires the coming together of many disciplines: in the broad sense, developing an app takes so much more than technical knowledge. “Of course you need software engineers,” Tristan of Zolmo explains, “but you also need great product designers, graphic designers, sound designers, content producers, and in the case of 20 Minute Meals, a photographer and entire video production team.” In addition, you need great marketing and PR people. You could say one of the most important skills required for building an app is the ability to build a great team.

What platforms to use for your app business

Symbian, Android, Windows Mobile, Blackberry, iPhone… There are many platforms vying for developers’ attention. The App Store for Apple is the primary market right now, and Android Market, and its various carrier partners, is fast becoming a fierce contender. Blackberry, Windows and others should not be discounted out of hand though: many carriers are looking around for interesting propositions, and working hard to grow their market share. As Iain Dodsworth of Tweetdeck says: “All the app stores are searching for really good applications to put out for their user base – so they can market their store as the place to go to get cool apps.”

Developers should consider their options carefully. Choosing to go Apple or Android is a big commitment: “The App Store is certainly the place to be at the moment but Android is showing signs of promise,” Tristan Celder of Zolmo advises. “At the moment, you have to build different apps for different platforms and this takes resources, so choose your platform or platforms wisely.”

Many companies choose to launch their app across multiple platforms. Like anything, there are pros and cons to this. “There are platforms such as Flash,” Tristan explains, “which promise to operate on multiple platforms. But as Apple has rightly pointed out these come at the cost of features and performance.” Often companies publish on a number of platforms because this approach offers more earning power, however. So it could balance out. Touchnote, for instance, is now live on four different platforms. “We’ll be on six or seven in the coming few months,” says Raam Thakrar, CEO. “For us, it’s been a significant development and a big cost.”

Each system is so different that each platform requires a native build. “The thing is,” Raam explains, “a lot of the stuff used for one platform won’t be useful for other platforms.” So for instance, what you develop for the iPhone: technically, it’s no help to what you might do for Android. It may be useful in terms of features, but not in terms of the real developers spending time working on it.

In terms of revenue, and pricing, the platform generally takes a percentage: Apple and Android take thirty percent of sales revenue and publishers take the rest. “In many cases the publisher and developer of an app are one and the same, such is the case with 20 Minute Meals and Zolmo,” Tristan tells us. “The reward can be good for publishers, but it comes with its risks – so make sure you do your market research.”

Whichever platform you go for, you want to make sure that the first app you do is spot on. “Don’t submit it with any errors in it,” says David Carter of The App Factory, “That’s the sort of thing the platforms pick up on. They go into amazing detail and will find it if there’s anything wrong with the app.”

Pricing strategy for your app

Deciding on how much you charge for your app can be tough: as Raam Thakrar says, there’s a lot of interesting thinking around that! Many companies struggle to make the numbers tally even if they charge; many others choose not to charge for their app in order to get higher numbers of downloads. Touchnote, for example, offers a service whereby they give the application away for free, and then charge each time it is used.

“We very much wanted to encourage multiple and repeat usage,” Raam explains. “So that was a very easy decision. You can think of many other apps that do charge on the first download. But for an app developer, the central question is, ‘What is my return on investment, in terms of the amount of money I will likely make versus the amount of hours I will put in?'”

Often you can adjust the price and monitor the reaction, and make the decision through trial and error, and learning what sells and what doesn’t. “We’ve tried a number of pricing strategies,” says David. “So if some apps were doing well, we put them up a bit. But then they wouldn’t sell, and so then we would cut them and see if we would get more downloads…”

Some of the apps The App Factory develops and publishes are free downloads, and money is made back on adverts. If you go down this route, when you put your app through to the store, the platform decides on the advert that will display on your banner.

The Tweetdeck app is entirely free, without advertising; founder Iain Dodsworth suggests developers decide whether they want to make money directly from the product they’re building or if they want a lot of users. “We’re not selling these apps,” Iain says, “They’re all free. We are developing a broad user base.”

In terms of monetising the venture, if you make your app free, it is not plain sailing. If you want to trial this approach, it is best to have funding behind you. Again, there are not many people who make money out of it. As Raam says: “There are too many people putting hours and weeks and months into it, who are getting £2,000. When it comes to a return on two months of work, that is not even enough to live on, let alone increase the business on!”

All the platforms need developers to continue developing applications as they are doing now. So perhaps things will ultimately change so that developers/publishers get a better return on investment. Until then, choose your pricing strategy with care.

Growing your app venture

Depending on whether you decide to develop one app and stick with that, like Zolmo, Tweetdeck and Touchnote; or turn your app talents into an agency, like The App Factory, you’ll want to grow your business into a bigger venture. So how do you go about establishing your app as a market leader, and get yourself known in the app world?

The best start is building/publishing a great app. “There is an old cliché that says the best marketing is word of mouth marketing,” says Tristan. “This is true for so many reasons, but the key to getting this kind of marketing is by building a great product – followed up with great PR.”

And think long term from the development stage. If you think your application has a shelf life, then you should develop accordingly. So if you’ve got a game that you think is going to be popular for only three or six months, for instance, then you should plan to evolve it. On the other hand, if you have something you think will be around for the next three or four years, then you need to keep on improving it and iterating so that you can keep your customers engaged.

Some, such as David Carter of The App Factory don’t believe marketing is strictly necessary. “If we do an app on iPhone or for Google or Blackberry,” he says, “they take care of promotion themselves. Once it’s in the store, that’s it.” But if you are planning to promote your app, earlier is best, if you take Tweetdeck’s advice. “If you develop a kind of fanfair, some kind of PR, then you’ll be able to give it a better shot. From what I’ve seen,” says Iain, “it really is all about that initial spike of interest and downloads and obviously revenue from selling your app. So if you can maximise that spike, you should.”

There are many paid-for apps which work on this basis. They exploit the initial spike of interest by adding on new levels to games. The developers produce version two of the app, version three… and it keeps interest going. In this way, they keep downloads high. The trick is to drum up numbers when you first launch the app – and then keep interest by iteration and new developments.

Keep in mind, for your app to be profitable, and to get enough return on your investment, you need to be getting 50,000 downloads, or even 100,000 or 200,000. There are far too many apps that haven’t made that, according to Touchnote’s Raam Thakrar. “You need to think about it,” he says, “You need to build and develop a marketing campaign, or somehow you need to have built a sufficiently addictive or viral enough proposition that people start telling each other.”

Tips and advice for a mobile app business

Get close to service providers and platforms

Tip from Tweetdeck: “If you want to put something up on iPhone, you’ve just got to get in there with Apple. If they really like what you’re doing, you find yourself walking past an Apple store and you see your logo in the window. It’s obviously worth spending a lot of time speaking to the people who run the platforms.

“When you’re thinking about Android, obviously it’s going out to different carriers and their own app stores. And all the app stores are searching for really good applications to put out for their user base. So they can market their carrier store as the place to go to get cool apps.

“Spend a lot of time trying somehow to get in with those people, the platform itself and then the carriers.”

Find a mentor Tip from Touchnote: “Go and find yourself a mentor. Someone who can help you along the way, who’s possibly a few years more experienced than you are and who’s been through similar issues. They will not necessarily solve technical issues, but they will be around making sure your proposition is strong, making sure your thinking is correct, challenging some of your assumptions and so on.

“Go and find one of those people. They are worth their weight in gold, they really are.”

Listen to your users Tip from The App Factory: “You can get user comments on comment boards in app stores, which can help with development and iteration. Some users will send emails through to your company as well, which are really helpful actually. You get great ideas from what people say.

“Often if you get an idea this way, you’ll think, wow that’s great. Most of these people like the app you’ve put out, and just want to see an update of it. And as you’ve got the IP, you can build it easily.”