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Can You Profit by Backing Mobile Apps?

Mobile apps are big market and are expected to grow in the next years. Why not even decades? Just think about it: while everyone in the Western world has a computer, not everyone yet has a smartphone. On the other hand, while not everyone in Africa or Asia has a computer, almost everyone has a mobile phone. So saturation is far away in the future: a lot more people will have smart phones soon. Billions of people. Mobile market is going to be big. Think mobile games, utility applications, mobile apps completing websites, mobile versions of existing apps and games, and so on.

Now, the question is how you can profit from all this.

Unless you are a programmer you can't just sit and start building an app. But that's not a problem. Actually I hope you are not a programmer. Because most of them do it wrong. Most programmers who decide to try themselves on the mobile market fail because they are too focused on programming while they must be focused on business. But enough about programmers - they are not your competitors.

So back to the question: how can you profit from the mobile software revolution? Here are a couple of ideas:

  • Back a mobile app through a crowdfunding platform
  • Buy existing mobile app business
  • Be the producer and create a mobile app "yourself"

So, let's have a look at the three opportunities in more details:

Invest Through Crowdfunding

App Store

Crowdfunding platforms are popping up like crazy. At the time I write this someone is is building the next one. You can learn a bit more about them here. A bunch of these platforms are focused entirely on funding mobile apps. There are two I already tried: AppBackr and AppsFunder. They are a real deal, no HYIP or anything like that. Which of course doesn't mean they are risk free.

So here is how does investing in mobile app through a crowdfunding platform works. Basically you are funding apps at an early stage of development, sometimes even at a concept stage. You are giving money to the developers to complete their work or to market their app. In exchange you are getting high return when the copies of the app you have backed are sold on the marketplace. It's like buying wholesale except that it's not your job to sell the app. You just invest and wait for the profits.

What is the ROI? The returns on AppBackr are fixed - 27% for an app that's aleready selling and 54% for an app that's still in concept stage. Typically it's going to take between 1 month and 1 year to get your return back. No one can tell you how long exactly as bad apps may never sell at all. So being able to pick apps that will sell good is part of the game and the risk you take as an early stage investor. The minimum amounts you can invest are fairly low - for some apps the minimum is just about $10, for some - $50 - $100.

The ROI on AppsFunder is even more crazy. Depending on the amount you invest you can get 3 or 5 times your money back. Which means 200% - 400% pure profit. Again you are facing exactly the same risks as on AppBackr - you don't know when and if at all the apps will be sold.

Why do developers agree to give backer so much of their profit? Simply because they need money now, and prefer sure cash rather than potential profits in the future.

I see one major issue with this kind of investing in mobile apps: Because developers receive lots of money upfront and will have to give out their profits for long time, they have less stimulus to work on marketing once their app is released.

I backed some apps on both sites. Got nice return from one, still waiting for the others. So it's early to publish stats on how well this works for me.

Buy Existing Mobile App Business

Some mobile developers or small companies build one app, usually with a site around it, and then decide to sell it and move on. There can be all kinds of reasons to do this. From personal, to needing money for other projects, losing interest in the project, not being good in marketing, got a job, or anything like that. You can buy such developed app business and grow it further or just collect the profits as long as they come. As you can imagine, there are several marketplaces where people buy and sell mobile apps with source code and rights:

  • SellMyApplication.com is one of the most popular. You can find apps selling from $99 to $20,000 and more. Apps are sold in auctions or just as classifieds. Some publish revenue figures, others only downloads.
  • SourceBuying doesn't have as detailed listings but has a similar concept and is rather popular.
  • AppTopia looks great too and gives stats for weekly downloads, best month etc. Pay attention to what is being sold - some apps come with a site/domain name, while others just have App store listing and source code.

Sometimes better deals can be found at global marketplaces like Flippa.com and Sedo.com. You will have to search more but you'll avoid a lot of competition as many buyers on these sites aren't yet interested enough in mobile.

When buying an app or source code always plan to have a developer on hand: you may want to make tweaks or release new versions. Releasing new versions often is one of the ways to get free promotion. In general you need to understand the market a little bit before investing large sum in already developed app. If you have no idea, try the crowdfunding platforms first.

Invest in Development Of Your Own App

This is where you can win or lose most. First, let me get it clear: you don't have to be a programmer to develop your own application. You will hire one (or more than one). You need to have a good idea however and have plans how to raise some buzz around your app, and how to market it. This is a huge topic so it deserves a post on its own. But I want to give several random tips that will be very useful if you choose this route:

  • It's good to hire great programmers, designers, and maybe musicians (if it's a game). But this requires high budget. On the other hand you can find low cost freelancers at Scriptlance or vWorker.com. Usually this approach also gets the work done - slower but much much cheaper.
  • If you don't have big budget you can try crowdfunding from the other end - instead of investor be the developer and get others invest in your app. You are reducing profits but also the risk. You can practically nuke the risk and use other people's money to try your idea. This is not unfair because investors know they are taking risk - they also want to get profits from your idea and your work.
  • Have an exit strategy. It can be to sell your app at SellMyApplication or on Flippa for example.
  • Have at least Android and Iphone versions. Same idea, same graphics, similar code, two big markets. Consider the other app stores too. Windows Mobile is also going to be big.
  • If your app fails to sell well consider making it free and earning from ads or affiliates.

Maybe you are already considering the mobile market, or maybe you still have no idea about it. In the latter case I highly recommend you to get interested into it. Investing in mobile apps is going to beat conventional investing in the same way investing in websites did it. The future is here, get involved now.


Published at Jul, 06 '12 , Read 7908 times.



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User comments:

Dieter Ziegler at Nov, 07 '16 03:34
I loved this blog. This is guidance in the right direction. Something similar I found, might click with your idea, check it out: http://bit.ly/2eIU1fB
Reply to this comment
DevRabbit IT Solutions at Dec, 06 '16 05:49
Hello, The Article about invest in mobile Apps is nice.It give detail information about the procedure and ways How to invest in Mobile App Business.Thanks for Sharing the information
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Kara Adams at Feb, 28 '17 01:00
Great read thanks for sharing! Crowdfunding is another effective way to easily raise funds and more startups are benefiting from it everyday. Check out crowdfunding platforms like http://www.plumfund.com/ to learn more about its benefits.
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