3 Things Website Investors Should Know About Buying Apps

Buying and selling mobile app businesses is a relatively new concept compared to buying and selling other digital assets, such as websites and domain names. Since 2014, U.S. mobile users are consuming more of their digital media on their phones.  Mobile apps eat up more of our time than desktop usage or mobile web surfing, accounting for 52% of the time spent; however, mobile ad spend still lags behind mobile media consumption. There is a tremendous growth opportunity for the mobile app industry, which in turn indicates a great opportunity for mobile app investors and entrepreneurs.

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If you are a website investor, you are already familiar with different aspects of a web business. Most of your knowledge about web businesses can be easily translated into app businesses.

Website Traffic vs. Mobile App Usage

For most types of web businesses, traffic is always the most important aspect to look at when measuring the performance of a website. The quantity and quality of traffic can directly impact the bottom line of a web business.

Most websites have Google Analytics installed so that traffic can be easily monitored. Data such as Page Views, Sessions and Unique Visits can give you a pretty good idea of how well the website business is performing. Similarly, any apps listed in Apple’s App Store will receive usage tracking data from Apple. You can always verify an iOS app’s data by asking for the access to App Store Analytics from the app seller. There are also many other great app analytics tools out there such as Flurry, App Annie, Sensor Tower that provide more in-depth app usage insights. Most analytics platforms allow their users to share analytics data with others. Using Apple’s App Store analytics as an example, types of data sets such as Downloads, User Sessions and Active Devices give you pretty intuitive numbers that can measure the “traffic” an app gets. Average Session Durations and Retention Rate are also very good indicators of the app user’s engagement. Retention Rate tells you how many people are still using this app after a particular amount of time. We usually look at Day 1, Day 7 and Day 30 retention rates. In regards to Android apps, research shows an average 30-day retention rate of 9.55%. 

SEO vs. ASO (App Store Optimization)

Most apps get downloads through organic searching of the app store, social media, press release and paid ads. According to Forrester Research, 63% of apps are discovered via app store search. That’s why App Store Optimization (ASO) for apps is as important as SEO for websites.

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Different from SEO, ASO is not all about keyword rankings. Once someone finds your app through a keyword search, you also need to make it visually appealing, so they download it. This means having compelling screenshots, a beautiful app icon and other elements that will help convince a person to choose your app over your competitors.

There are some good free ASO tools out there that could help you understand an app’s keyword rankings. App Annie gives you top keywords an app is ranked for in the U.S. store. Sensor Tower’s keyword research tools give you much more in-depth information on an app’s suggested keywords, each keyword’s search volume and difficulties to rank for those keywords.

Mobile Action gives you many more recommended actions on how to improve an app’s visibility in the app store, and it helps you track that app’s visibility score over time. Many apps with good usage data but low downloads have a lot of room for growth with proper ASO effort.

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Example of SensorTower’s Keyword Suggestions
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Example of Mobile Action’s ASO Recommended Actions

Website Business Models vs. App Business Models

Most websites are monetized with one the following business models: Content/Advertising, Ecommerce, SaaS (software-as-a-service), Digital Product/Service.

Most indie developers’ apps are monetized with advertising, in-app purchase/subscriptions and app download sales. That revenue could easily be verified through App Store/Google Play Store Sales Reports and ad network income reports.

Google AdMob, Apple iAd and RevMob are some of the most popular mobile ad networks. Doing proper ad placement optimization can help increase mobile apps’ ad revenue. In-app purchases allow customers to download the apps for free and pay only for optional premium functions. More and more indie developers start to offer their apps for free for user acquisition purpose and monetize with in-app purchases.

In terms of costs and time required for running a website business, content websites usually require generating new content and doing SEO on a regular basis. Ecommerce sites deal with customer support and sometimes inventory and order fulfilment.

A mobile app business is similar to a SaaS web business. Once the app is up and running in the app store, there isn’t much work you need to do to maintain the app itself. However, sometimes you might want to update your app to fix bugs, to add new features and to adapt to new iOS versions. You can always outsource this work to freelancers for a low rate.

Buying and selling apps is a very new business. Apple just allowed developers to sell their apps in 2013. In general, the mobile app industry has a growing revenue trend compared to websites. The good news is, as a website investor, you can already apply some of your existing knowledge about websites to apps.

Given the emerging resources available, it is more than achievable for one to learn to identify apps with growth potential and to effectively increase their revenue. ASO, mobile ad placement optimization, developing new in-app purchase features, and user acquisition through your existing website resources are all good ways to run and nurture your app business.

As with any investment, there are risks – but there are certainly more rewards to be had with being an app investor.

If you have questions about buying and selling mobile apps or you have insights about growing app businesses that you want to share with me, please drop an email at [email protected].