It used to be if you wanted to sell an app to another developer, entrepreneur, or company you had to use your own network to shop it around. Either that, or you could use source-code marketplaces to sell bits and pieces of the app--like a clock element, for example--to developers who didn't want to take the time to code it themselves. Or, you could pray for the unlikely event that somebody would spot it in the wild and track you down with an offer.
But in April an acquisitions marketplace for mobile apps popped up called Apptopia that's a second market much like StubHub is for tickets, SecondMarket is for equity, Sedo is for domains, Flippa is for websites and eBay is for practically anything. Since then, Apptopia has brokered 120 acquisitions worth more than $300,000 and closed a $805,000 seed round of financing led by business magnate Mark Cuban.
Founder and COO Jonathan Kay says the problem with developers selling apps themselves is that buyers have no way of knowing if the stats the developer claimed were true, particularly when it comes to metrics such as user numbers or downloads.
"It's the whole reason that you have a broker or an escrow agent," he says. "Apptopia directly pulls all these stats from the app stores every day so when you look at stats on our site you know that it wasn't the developer rounding up to the nearest 10,000th user. It is an unbiased middle ground where we vet, validate, and verify all the stats every single day and provide escrow services."
How Much Is an App Worth?
While sellers using Apptopia assign the value to their apps, Kay says Apptopia has spent so much time advising them in this area that the company built a separate site called MyAppValue that developers can use for free to figure out how much an app is worth. It's like how Klout mines Twitter, but on a more technical level, he says.
"Honestly, sellers today have no idea what the valuation of their app is at all," Kay says. "We connect to a developer's account with read-only privileges and pull raw sales and download data. We'll then give them a valuation on their apps and break it down into a bunch of relevant sub sections. Our goal is to explain exactly how we got the valuation, how they stack up against the rest of the industry, and what they can do to improve performance."
MyAppValue connects with your developer and analytics accounts and within 10 minutes pulls the necessary data from them, running it though its algorithm, to email you a link to your report, which includes a detailed breakdown of the value of every app in your portfolio in terms of downloads, app sales, ranks, reviews, engagement, and ads.
The Psychology Involved in Selling Apps
Kay says an app is like a micro-business with revenues, expenses, and employees and the barrier to entry has never been lower.
"So what happens is you have all of these very technical people who only have that one half of the skillset to run a business, just building as many applications as they could," Kay says. "And they kept launching them thinking 'This is going to make a million dollars.' And instead of making a million dollars they got like 20,000 downloads--an amazing amount of downloads--and they [realize] this isn't a million dollars," he explains.
Having not created the next Angry Birds they start over with another app, meanwhile neglecting what might be tens of thousands of users who may be valuable to someone else who is able to do more with it because of having stronger marketing or monetization skills, a different distribution model, or more resources.
Carter Thomas has been a developer and app marketer for about a year. "At first I was simply a guy with a blog trying to make some money with one app," he says. "A year later I own about 75 apps and am producing 10 a month with my development and design team."
Using Apptopia, he has made about $10,000 so far (after Apptopia's 15% fee) on apps ranging in price from $500 to $5,000. Currently, he has a handful of apps for sale on the site including one for which bidding starts at $21,000.
Thomas says the reason he sells apps instead of trying to grow them is because while he might make $1,000 on an app over the course of the year, he also has to invest in updating, marketing, and paying attention to it. On the other hand, it might make more sense to sell it today for $1,000 and reinvest the money into an app that might be a $2,000-a-year app that requires the same amount of work.
"Selling apps, for me, is a way to recycle the apps that don't fit into my business model," he says, noting that he doesn't usually make money through his Apptopia sales. But, "it's a terrific way to mitigate my own risk while providing a really valuable tool to someone else."
He says he sold an app a few months ago that wasn't making much money. "The buyer changed a few things and broke the top 100 in his game sub category. What doesn't work for me works for someone else," he says.
Apptopia's Kay says the apps currently selling the fastest on the platform are casino games, education apps, and learning-based apps for kids under 12 years old, as well as time-killing repetitive games that don't have levels.