Apps have fundamentally revolutionized the way we create & use technology…but that doesn’t mean creating one is a good business decision. In fact, it’s probably not.
Like approximately 6 million other people in the United States, I’m an avid fan of the show Shark Tank. And recently, I’ve noticed a peculiar trend among the American entrepreneur: the idea that, for some reason, developing an app is often the next logical step in growing a business.
Let’s back up for a second, though. For anyone not familiar with Shark Tank, it’s basically American Idol for entrepreneurs. Contestants pitch their ideas, innovations and businesses to five “sharks” (a rotating dais that usually consists of Mark Cuban, Kevin O’Leary, Barbara Corcoran, Daymond John, Robert Herjavec, and Lori Greiner). If one or more sharks likes what they hear, they’ll invest their own money for an equity stake in the company.
Most of the businesses that appear on Shark Tank fit into this category: they have existed for one or more years, they’ve accumulated some revenue and are starting to become profitable. Their problem is that they need money, usually to “take their product to the next level” (whatever that may imply, given the product in question).
This inevitably leads to the matter of scaling their business so the shark can make a return on their investment, and it’s here that the mania concerning apps is so unsettling. For, there’s nothing that says “I have no f**king idea” more than when someone answers the question of “what’s next?” with “building an app” — here’s one particularly ridiculous example:
“Mensch on a Bench”: A Somewhat Cautionary Tale
Neal Hoffman actually had a great idea with the Mensch on a Bench, and I totally respect his attempt to bring Hanukkah into the wonderful world of banal Yuletide commercialism.
The video here doesn’t show the app part of the pitch, but here are the bullet points: faced with the issue of expanding his brand and scaling his product, Hoffman took a hard left turn into app-land, claiming he wanted to do something similar to the Elf Yourself app that Office Depot had previously developed.
Mark Cuban — who made his nut in software and is arguably the shark with the strongest foothold in the IT world — found this proposition ludicrous and promptly recused himself. But Hoffman did succeed in getting two sharks on board: Robert Herjavec and Lori Greiner.
What’s even more impressive is that Hoffman has recently partnered up with none other than Office Depot to integrate Mensch on a Bench into the latter’s Elf Yourself app. So, it looks like Moshe the Mensch had the last laugh…or did he?
Anyone who knows anything about app development would have to concede Marc Cuban’s concern: developing a Mensch on a Bench app could cost millions of dollars. That’s not in dispute. The question at hand is whether developing such an app would be worthwhile in the first place.
It’s important to note that Hoffman didn’t develop his own app. He’s integrating his brand into an app that already exists. So, the architecture has already been built. The heavy lifting is done, and it was another company that bore the costs incurred therein.
So then, to what end did Hoffman put the original $150k that he received from Herjavec and Greiner in exchange for 15% of his company? The sharks convinced him to make a few design changes, and in return Greiner got him into Bed, Bath & Beyond. Looking toward the future, Hoffman has stated that their next step is going to be introducing another line: Hannah the Hanukkah Hero.
In other words, the trajectory toward success has been improving and expanding on what you’re already doing. Stick to the medium to which you owe your current success. There’s absolutely no need to venture into the brutal jungle that is Silicon Valley — especially when the costs are so large, the risks are so huge, and the rewards are so uncertain.
Should You Develop An App?
The fact that, come December of 2016, your kids will be able put their faces on Moshe the Mensch as he sings and dances to “Hanukkah, Oh Hanukkah” doesn’t necessarily prove anything. It certainly doesn’t imply that developing an app would have been a good move on Hoffman’s part.
In reality, evidence to the contrary is very strong. Most people — and please forgive me if I sound the least bit patronizing here — have little to no knowledge of what actually goes into making an app.
Well into the 21st century, apps are so ubiquitous that they’re almost taken for granted. Technologies such as Facebook, Uber, and even Candy Crush have fundamentally changed our culture, but no one stops to think about all the blood, sweat & cold hard cash that went into launching them.
So, if you’re in this category, consider the following your crash course on how apps actually work and whether you should spend another moment contemplating any pipe dreams of creating one.
Apps are Expensive (As In Warren Buffett Expensive)
Ok, maybe Warren Buffett wouldn’t curl his lip as he whipped out his checkbook, but apps are extremely expensive. Salaries for mobile app developers hover at around $100k per year, and that ain’t too shabby.
Even for a freelancer, the app industry is extremely lucrative because it demands a very unique and valuable set of skills. This is to say nothing of the long hours and intensive work it entails — even for so-called “easy apps” that require no database, backend development or API integration.
The simplest app I’ve ever encountered is probably the Zippo Lighter App — a functionally useless trinket that probably comprised nothing more than some styling and front-end dynamism. And yet, the ingredients that went into its development likely included thousands of dollars worth of UI design and testing.
Factors that go into app development can include any or even all of the following:
- Pages of content
- UI design and development
- Database and/or API integration
- User account registration
- Web 2.0/user generated content functionalities
- Compatibility with multiple devices (i.e. iPhone vs. Android)
- Security & DoS Protection
This is to say nothing of the additional costs you’ll incur after your app has been prototyped, which may include:
- Alpha & beta testing
- Customer support
- Marketing & advertising fees
- App store fees (ranging anywhere between $25 on Google Play to $99/year on iTunes)
When all is said and done, you’d better have a budget that spans at least 5 figures. Conventional industry wisdom dictates that costs begin at $10,000 and scale from there based on the aforementioned features you’ll need (for example, Android app development is generally considered more difficult, time-consuming and therefore more expensive than developing an app for iPhones).
Apps are a Risky Investment
Ok, so maybe you have the capital to throw into such an expensive endeavor. But here’s another question you ought to be asking yourself: is the juice ultimately going to be worth the squeeze?
No one is less objective about an idea than the innovator him/herself, so this is a tough question to answer. If you have a great idea for an app, of course you think it’ll be worth it.
Keep in mind, though, that the majority of apps fail. The vast majority of them fail. In a press release issued December 2014, technology consultants Gartner Inc. predicted that less than 0.01% of apps will be financially successful by 2018.
Up-to-date statistics show this to be more or less accurate, and there are a few reasons for this. One, which goes without saying, is that Silicon Valley is extremely cutthroat. Everybody and their mother is working around the clock to get their applications seeded, and they’ll undercut their competition by any means necessary.
This leads to another primary reason that so many apps fail from a financial standpoint: the majority of them are free, and an even greater proportion of the most downloaded apps are free.
The prevalence of free apps has raised each consumer’s discretion, and they now think much more cautiously: is this app truly worth it? Think about the last handful of apps you downloaded. Did you pay for any of them? If you did, what about the app made you think the benefits were worth the cost?
Chances are the app offered a service that you deemed absolutely necessary, and you couldn’t get this service for free. If you could have, you would have, and your bank account would be a few bucks heavier.
Apps Must Have Meaning
The fact is that most apps were never intended to be primary revenue earners in the first place. Netflix, Twitter and all the other tech giants launched their apps to streamline their own services. They started with their primary platform (movie/television streaming, social networking, etc.) and then moved to an app in order to increase their customer base. They don’t make money off of their apps. They make money off of their users.
Think about it: you don’t have a Facebook account because you downloaded their app. You downloaded their app because you have a Facebook account, and it’s more convenient to log in through your phone rather than through your computer.
In other words, apps seem to be more about brand awareness than they are about making money. Of course, the two ideas aren’t mutually exclusive. But at the same time, you can only be in the red for so long (especially if you’re a startup). And there are much less expensive methods of building brand awareness.
Creating an app is like creating a whole additional business, and like the latter, it’s always a smart move to have a plan. You ought to be able to answer these questions:
- How will you use the app (i.e. to make money or to augment your existing revenue stream)?
- Does the app offer something that is not only unique, but is also unavailable through some other service that is cheaper or more convenient to use?
- How do you plan on marketing your app?
- Which specific platforms will it be used on (i.e. iPhone, Android, or both)?
- And finally, do you have the time to commit to this app? For all intents and purposes, you’ll be managing two distinct businesses, so you’d better stock up on caffeine.
A Litmus Test for Developing Your App
Historically, apps have been successful (meaning they’re used and downloaded on a mass basis) if they’ve integrated with or added to the platform that they will be used on. We’ve been talking about smartphones here, so it’s no surprise that all the apps you use take advantage of the smartphone interface. They usually fall into one of the following categories:
- Messaging (WhatsApp, Viber, etc.)
- Productivity (Outlook, Wunderlist, etc.)
- Travel & Transportation (Uber, Waze, etc.)
- Video, Music & Entertainment (Pandora, Hulu, etc.)
- Games (Candy Crush, Clash of Clans, etc.)
- Photos & Videos (Snapchat, Instagram, etc.)
- News (Huffington Post, New York Times, etc.)
- Social Networking (Facebook, Twitter, etc.)
Yes, there are definitely exceptions to every rule. But that doesn’t prove that people will download your app that tells them which celebrity they look like the most. All of the apps in the categories listed above pass the necessary litmus test: they add to the functionality of the smartphone.
People were already able to listen to music on their phones, but Pandora and Spotify added to that feature. People were already able to stay up to date with current events on their mobile browsers, but launching CNN straight from their dashboards made it all the more convenient.
So, for the moment, forget about whether your app would add value or even be convenient. The most important question you must ask yourself is this: would my app be consistent with the way people are already using their phones?
To answer this, you must think of the core functionalities of a phone, which are:
- Camera & Video
- Voice & Sound
- Push Notifications
These are the ways that your target market is using their phones. Chances are, you’re probably not going to revolutionize this with your app, no matter how ingenious you think it is.
Conclusion: To App or Not to App?
Let’s recap for a moment and reflect on what we’ve learned today:
- Apps are insanely expensive to develop
- Apps are even more insanely expensive to market and maintain
- The vast majority of apps are (and usually will be) failures from a financial standpoint
- Successful apps have historically exhibited two qualities:
- They exist to bring customers closer to the brand, not to scale business or make it more profitable
- They compliment the features and functionality of the device on which they are used
So does this mean you should abandon your designs for the app that’s going to change the world? Absolutely not. Please don’t let the rants and raves of one cynic crush all your dreams. But at the same time, remember who told you so if and when those dreams get crushed on their own.
Remember that TM34 Marketing offers app development as a service. It’s not like there’s any ulterior motive in telling you not to create your app. On the contrary, it’s because we spend so much effort helping companies grow that we caution against treading down the app rabbit hole.
And this brings us back to my original point: I’m not against apps or developing them. I just think it’s not for everyone. It’s only for a few people and a few companies, the companies that pass the litmus test, that have the necessary funds, that plan on using apps both correctly and creatively.
To those companies, we’re here to help plan, wireframe, prototype, develop, and market your app. Schedule a call at (561) 320-6279 and we’ll get started right away.
For the 99% of other companies out there, don’t get discouraged. There are dozens of other ways to market and grow your business. Give us a call and we’ll prove it to you.