Expert notes

Some thoughts on development, production
and future markets

Topic: Market trends

Should you invest in a mobile app?

Nick Mortikov, Commercial Director

The amount of apps in Google Play and App Store combined is more than 3 000 000. In 2017 this number will double according to forecasts. No surprise the number of those willing to invest into mobile app development is growing accordingly. But here’s the catch 70% of these investments will never pay off, so is there a way to secure the production of an app, that won’t turn into a wasted time and money? We believe there is, if you focus on product first and set the goals right.

Product focused

We have excluded mobile games out of this analysis by purpose, because the gaming industry, its mechanisms and tools is a vast and complex topic that requires a separate discussion.

At Improve Group we envision an App as a product embedded into your business ecosystem. If you treat the App as a vital part of your business model, you will act accordingly: understand it’s function, the problem it has to solve (it could turn out that there’re are several solutions and an app is just one of the many), the target audience — take all the usual steps you do while launching new product.

Our experience shows there are three cases, when an app truly serves its purpose.

  • 01Internal use

    A mobile solution to improve your internal business process: logistics, communications, planning. The app is not available for a wide audience through usual stores and is provided for your employees only.

  • 02Additional service

    Support tool that completes the overall customer experience. This option is mostly for the big players with sufficient pool of services and audience. The App serves as an additional service, or loyalty program, something that will simplify access to your products and enable customers to use them more often. For example a mobile bank client app that will not only provide access to customers account management, but will also help to promote additional bank products.

  • 03Stand alone product

    An app is your main product and source of profit. The monetization model is key here: is it a one time purchase, or subscription, or you’re planning to earn using in app purchaise and additional content?

It’s getting better all the time

Each day our managers receive tons of questions and request for mobile app development. And the taxonomy above first was created to process them in finite time. Our statistical analysis suggest that a demand for the support and internal-tool apps has grown. Business began to count the efficiency of the investments (which is new compared to what happened just a couple of years ago), they won’t start the project before all the data is collected and the goals, KPIs, monetization model are set right.

It’s totally different for stand-alone products. Business angels and venture capitalists are looking for any idea that seems to have a minimal amount of reason and potential. But the stats are not that great: we refuse 90 out of 100, and after market analysis and consult 8 out of the rest 10 reconsider their initial plans and ideas.

We believe there are several reasons that explain these trends.

  • 01Everybody does it

    Mobile market grows rapidly, but despite that not many apps managed to become successful and just a few real «hits». And even those who did in time turned to be dead unicorns like Evernote.

    Vadim Mitiakin, founder and CEO of Gals Soft, suggest to open your smartphone’s first screen, scroll through the apps and then ask yourself «which do I use on a daily basis» and «how many of them are profitable?» as a first step before the development.

    «The thing is, if an app is popular and has millions of installs, this doesn’t necessarily mean profits and prosperity for the developer. Success is measured in KPI that you had set and the goals you wanted to achieve. This concerns the apps that don’t generate profit by themselves in the first place, like Yandex Maps.»

  • 02$ 10 000-20 000 is enough to build a good product

    Mobile development market hasn’t reached its maturity yet, thus there are still no uniform requirements for the developer and project budget. If you go to BMW and ask for a 1000 car, they’ll laugh you out. Unfortunately, mobile market is full of such offers: a new BMW X7 with all the functions you need, but 20 times cheaper.

    If you are serious about a mobile app, $ 50 000 — 100 000 would be a comfort start, plus an equivalent sum for promotion, support and further development.

    «The most demanding part in terms of time and money are surprisingly business idea development, app promotion and customer support. But that’s the trick most people miss, writing working code is just a part of the job, still important.»

  • 03Anyone can create and app in a day provided the means

    Just as anyone can build his own blog with Wordpress, or tumblr a couple of templates and a html/css manual, you can use free tools to build a decent calculator app, or shopping list, but will anyone else need it? Building a profitable app requires all the same process as any successful market product: planning, design, development, customer support, server development, various service integration, testing, publication etc. Each developer must have 5-7+ thousand hours of experience in his field. Developers team in turn needs an experienced product manager, and so ad nauseam. In the end you’ll find that there are not so many agencies with such expertise.

    «Why do you think there is just a few really good apps? Not that many could go the whole way from idea inception, production planning, and development without losing something essential along the way.»

So you’re ready to take the risk

Developing new product is always a risk, but you should already know that, if you’re in business. Professional investors always know that a year work could be easily discarded and the money lost. Always get prepared for the worst that will help you stay realistic about the idea.

If you are serious about entering the mobile market, spend some time on researching the existing products, understand their pros and cons, why some of them are popular while others are not?

Finding answers to these simple questions could be key to your success:

  • What’s new about what you’re doing? Why is it unique?
  • What problem is your product pised to solve?
  • What are people forced to do now because what you plan to make doesn’t exist yet?

We also advise you to learn what other great companies answered to that questions. For example Dropbox application to Y-Combinator could be an inspiration and full of insights.

«The problem with the unexperienced investors and developers is that the question: ’how does your future user solve his problem now?’ comes as a total surprise to them. They focus on their initial solution more than the problem itself, which is wrong. Go out there, talk to the people, they already have all the ideas you need. The best consultant you’ll ever have is your customer.»

It’s hard to find an example of the app as an independent entity. Usually it’s always somehow connected with your business processes. If monetization model requires in app ads, you need to find those who has the same target audience as your app and convince them to advertise, create clients support just for them — thought nothing of this is directly connected to the development process, it plays a crucial role in the whole project.

«We use a business-model generation technique by Alexander Osterwalder and Yves Pigneur. Among all other books these two are great because they help to structure all the ideas, focus on really important questions and connect the dots, also they are modern so they understand the context and pace of changes in the modern business world. Only after the business-model and KPIs are set we proceed to technical specifications and actual development.

This is just one of the many methods, you can use any tool you like that gives you a new perspective, an edge and a strategic view on your idea.»

Even after successful launch the profits may not look as good as planned, or your whole assumption about user behavior could be wrong and a pivot would be necessary. Are you prepared?

As a conclusion I’d like to share two news. First, today’s technologies grant high speed access to the web for anyone anywhere using almost any device he wants, and that means mobile is the new web. Second — mobile market is an aggressive competitive environment with strong players involved, oversaturated app stores and exacting customers. Choose your destiny.

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