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The easy way to get into the iPhone app game… buy a proven app

by John Casasanta
October 24, 200815 comments

for sale

Because of the split-up of the company, we’re selling our flagship iPhone app, Where To, which grossed around $200,000 over three short months in the App Store.

Last week, I wrote a post explaining tap tap tap’s future. In it, I mentioned that we’re looking to sell Where To and that I’d post the details of the sale. So here we go…

But first some background

Before I get into all the details, I feel it’s important to go over a few things so that you’ll get an understanding of the type of app Where To is and its place in the market.

Basically, I see iPhone apps being split into two main types: apps that have big, corporate backing and hundreds of thousands of dollars as budgets, versus apps that are created by the rest of us. The big budget apps often have a brand associated with them… Super Monkey Ball, Spore, etc. The “rest of us” apps make up the bulk of the App Store and this is clearly the type of app that Where To is.

The big-budget apps are a whole different ballgame and unless you’re a Sega or EA, they’re simply untouchable by regular people as far as developing one goes, so I’m going to limit my discussion to the “rest of us” apps.

These apps can further be broken down into three main classes:

  • apps that have enough “hook” and need little to no marketing push
  • apps that do very well with the proper marketing behind them
  • apps that stand no chance no matter how much you throw at them

As for the the apps with the hook, a couple of examples are Koi Pond and PocketGuitar. Both of those apps rose to the top and stayed there for a long time. These apps are making several thousand dollars per day with zero or almost zero marketing budget. Hits like these are few and far in-between, but if you’re fortunate to have one of these on your hands, you’re obviously in good shape.

The last class that I listed consists of apps that, no matter how much you market them, stand little chance of success. The App Store has thousands of apps in it, and unfortunately most of them are in this category. So no matter how many success stories you hear about the App Store, never forget that probably 99% of the apps in it are only selling a few copies per day. Tipulator, one of the apps that we developed is one of these apps, so we know this from experience. And I know many, many developers who are, unfortunately, in the same boat.

So that gets me to the class of app that Where To is… an app that can make a solid, steady income with an appropriate marketing push. It’s definitely not an easy task to optimize several advertising campaigns but for the right type of app, it’s definitely worth it.

In all the years I’ve been a software developer, I’ve never had a “hit” app that just did very well on its own. Everything I’ve been a part of that’s had success definitely had its share of marketing to make it work. And that definitely includes MacHeist, too, which is pretty much one giant ball o’ marketing. I generally prefer dealing with these types of things because they’re more predictable and these types of apps have been, and will remain the focus of tap tap tap. But I’m definitely not against having a true hit on my hands if it ever happens. ;)

Sidenote: I recently came up with an idea for a potential “hook app” and we’re anxious to get started on it. But we’re having trouble finding a good OpenGL ES developer to help make it happen. If that’s you and you’re looking to take on a relatively small, fun project, hit us up at HireMe@taptaptap.com.

Keep in mind that both Where To and Tipulator were marketed exactly the same way when we launched them the day the App Store opened. Where To made it and Tipulator flopped. And this was confirmation that with a continuous push, Where To could’ve brought in a good, ongoing stream of revenue.

I have to admit that I was very reluctant to go this route at first. When I was approached by my ad manager from Macworld to start an iPhone app ad campaign, I thought he was on crack. I figured that the margins were just too low on a $2.99 app to make it work out. But I saw another app advertising there and rising the charts, so I figured we should throw a few thousand dollars at it, measure if it would work out, and then go from there. To say the least, for Where To it definitely worked out.

What is Where To?

For those of you unfamiliar with Where To, it’s an attractively designed app that quickly and easily helps you find points of interest around you using the GPS of your iPhone.

Here’s the description we used in the App Store for it:

Where To?

Make ANY iPhone or iPod touch behave more like a real GPS device!

One of the best features of the iPhone is that it’s able to determine your current location, but missing is something that’s become a staple of most GPS systems: a quick way to find points of interest around you. Where To provides that in a slick, intuitive user experience. Find food, places to shop, fun things to do and much more with just a few taps.

Not sure what you want for dinner tonight? Tap “Surprise Me!” to make the choice. Take a chance and find something new and exciting!

Features

  • Includes over 600 categories… find whatever you want without any typing
  • Find places around your current location, any of your contacts, or anywhere in the world
  • Optimized for US locations and English language
  • Works with any iPhone or iPod touch model
  • Gorgeous user interface

And here are the screenshots that we used in the App Store that show how Where To works (click on each for a full-size image):

screenshot 1screenshot 2screenshot 3screenshot 4screenshot 5

Marketing

As I mentioned, marketing and advertising were critical to Where To’s success. I spent weeks optimizing ad campaigns, with the bulk of them being Macworld and Google AdWords. We also did a couple of Daring Fireball Syndicated Feed Sponsorships which were helpful for quick boosts. Ad campaigns, especially AdWords campaigns often take a while to get them optimized and this one was no exception.

But thankfully, after a ton of tweaking and testing I was able to get it to the point where we were turning a healthy profit off all of the ads. They started running close to break-even but after the initial adjustment time, they were running very efficiently and whoever purchases Where To would be able to simply setup the same campaigns on their own and have them running as we did.

Here’s a sample of one of the ads we had running:

Where To ad

Financials

Here’s the part that held this post up for so long. We had a small discrepancy in our accounting but we needed to make sure our numbers were 100% correct here. The issue was that for one ad campaign, we had an invoice that was off by a couple of thousand dollars because not enough ads were served in the campaign. Thankfully, we were able to track this down finally and we’re totally confident in the numbers we’re presenting here now.

monthly sales

The numbers from October aren’t in this chart because we don’t have official numbers from Apple yet but it preliminarily looks like Where To did around 7,800 sales from October 1 to October 12, the day that we removed it for sale from the App store.

For the three months listed in the chart, Where To sold 66,335 copies, with most of them being sold at $2.99. We ran a couple of promotions where we sold it for 99¢ and this accounts for 3,746 of those sales.

The important thing of note in the chart is how the ad ROI significantly increased once we got the ad campaigns optimized after a few weeks of starting them. For September, we had $49,286.30 in net sales. $28,692.87 went to advertising and the profit for the month was $20,593.43.

And this was on the rise. Had we kept going with this, the monthly profits would’ve likely increased over time. At what point would they have peaked, we don’t know. We managed to get Where To as high as #7 in the Top Paid Apps chart and after going through the experience and knowing what I know about how the App Store works now, I’m confident that it could climb even higher in future runs to the top.

#7

Looking at other months here, the initial month was clearly the best. We benefited greatly from having an app in the App Store for its launch and by having it climb the charts so quickly (it made it as high as #12 in July). We hardly did any advertising in July although we worked hard to promote it in general for the launch. So July was mostly profit for Where To, earning us $51,672.60.

August was our weakest month mainly because this is when we spent a significant effort optimizing the ad campaigns. Thankfully, it turned a profit still, although by comparison to the other months it was pretty meager at $6,802.99.

The following table shows the bottom line for the three months:

the bottom line

Again, we don’t have final numbers for October but the sales were approximately $8,500 for the 12 days it was available in the month. Note that all the ad campaigns ended in September and the app wasn’t being promoted at all while we were working out the details of the severance. So this accounts for the slowdown during October while Sophia temporarily took over the app.

Risks

Although I feel the overall risks are pretty small, for the sake of full disclosure, it’s worth pointing out the most significant risks, as we see them…

First off, there’s no guarantee that Where To will be able to maintain the sales levels it’s had over the long run. While sales were growing at a good rate until we pulled the ads, this may or may not be sustainable. While I’m very confident that it’ll be possible to continue grow Where To’s sales and profits even more over time, the App Store is just too new, there haven’t been many precedents set, and the future holds many unknowns.

Another risk is regarding the competition Where To has. The points of interests genre of apps is a pretty popular one and although all indications are that Where To’s done the best in terms of sales so far, it’s possible for other apps to take over its lead and eat into its sales.

Even though free competitors exist, they haven’t seemed to have much negative impact into how well Where To has done so far. My opinion on this is that many purchasers are wary over free apps and would simply rather pay a few bucks to ensure they’re not inundated with ads or potentially malicious things in freeware. I know it’s generally the case for me… I’m not saying that I’m against freeware but I typically feel much more confident in a payware app over its freeware alternative.

The following is a snapshot of the most popular apps in the Navigation category around the time that we removed Where To from the App Store. Even though free app downloads usually outnumber paid app downloads by orders of magnitude, it’s easy to see how well it’s fared even against its free competition:

popular in navigation

Here are the apps that I regard as Where To’s main competition, based mostly on similar features and function, and the app’s popularity:

Vicinity

Vicinity
  • price: $2.99
  • significant points: has been featured by Apple in their commercials, although it’s currently fallen off the top 100
  • more info: at the App Store
where

where
  • price: free
  • significant points: corporate and VC backing
  • more info: at the App Store
iWant

iWant
Places

Places

Huge upside potential

Now that the risks are out of the way, let’s discuss the positives.

I’ve analyzed Where To since it’s been released to try to figure out why it’s been as popular as it has. What’s made it so popular so far will likely contribute to its longevity.

The first thing is something that was pretty conscious on our parts… we worked hard to make sure the app looked great and that the UI was very slick. We’re doing this with all of our apps and it’s simply a carryover from our Mac apps. I’d much rather use a good-looking app with a well thought out UI than a mediocre one and we were confident that our customers would feel the same way.

The next thing is probably the most important thing to contribute to Where To’s success… its recognizability. The first thing you see when you run across Where To in the App Store, whether it’s on the iPhone itself or in iTunes is its icon. In the US at least, the icon is immediately familiar to just about anyone. It encourages the potential purchaser to get more info about it and you instinctively know that the app does something to help you find someplace you’re looking for. We had the choice to go with icons that had better graphic design but we chose to go with the exit sign for this reason (we knew it’d have an impact but honestly, I think we underestimated how much it’s actually seemed to have).

We worked hard to tighten up the description so that the user would immediately feel like they needed the app. And the great thing is that because Apple doesn’t have a feature like this built into the phone, most iPhone users do need it.

Of course, there’s the major marketing effort which I’ve already discussed that’s contributed to Where To’s popularity in a very significant way.

All of these factors have worked all along for the app and they’ll surely continue to work for whoever buys it from us. People want and need points of interest apps so Where To will very likely have a long, long shelf-life.

One thing that we feel is critical to Where To’s longevity is that development continues on it and a that some important features and functionality are added. The biggest criticism of Where To is its lack of fully integrated maps and this was one of the next things we were planning to add to it. In addition, overwhelmingly most of the Where To sales have been from US customers (around 90%) and adding localizations for other languages will go a long way to driving future sales. Sophia has done most of the low-level work for this for the unfinished version 1.5 and has most of the German localization working.

Is this for you?

If you’re under the illusion that having success is the App Store is a cakewalk, you’re delusional. I can’t count the number of time’s I’ve read a success story about the App Store with the first naïve comment in the post being something along the lines of, “Well, I guess I’d better go download that SDK now!” I wish it were that easy.

Making this or any app be successful is going to take work. Hard work. Both in terms of marketing and future development of the app.

In my opinion, the most optimal buyer for the app is someone who has previous software experience either on a mobile platform or on the Mac. In fact, most of the people who’ve contacted us so far have been exactly this.

It’s no secret that I’m not a huge fan of VCs. And in this case, I feel that if someone with a wad of cash just wanted to throw it at this, it’s likely to fail. It’ll take dedication but I’m confident that with the right buyer, it’ll work out for a long time to come.

Terms of the sale

Once the app is sold we’ll transfer ownership of the copyright over, along with all the source code and artwork for the app. Included are all the marketing materials like ads and such.

You’ll also be supported by us for a reasonable time post sale. We want to ensure that you’ll be successful with the app so we’ll do our best to help get you rolling. This includes both some engineering support like explaining how parts of the app work and discussions about future features. And we’ll also be providing marketing advice so that you’ll be able to quickly get Where To up on the charts as soon as you put it live again.

There’s a chance that some of you who are interested in Where To may not have it installed on your iPhone for testing. If so, we’ll make an “ad hoc build” available to you so that you can fully test it.

Keep in mind that we’re looking for serious buyers and as I’ve mentioned in my last post, for you to be able to demonstrate that you’re serious and qualified to purchase the app, we’re requiring that you put some money in escrow. We feel that $5,000 is a fair and reasonable amount for this. So the risk on your end will just be the fee from the escrow service (around $150) if we’re unable to reach a deal. If we do work out a deal with you, the amount in escrow will serve as your down payment for the app.

So, to reiterate, the potential to do $20,000+ per month in a sustainable business is here with Where To (that’s $240,000+ per year… we’re talking Joe the Plumber levels here, people!) And as the iPhone gets more mainstream, which it surely will, the potential goes up with it.

If you’re interested in putting a bid in on Where To, contact us at WhereToAcquisition@taptaptap.com. Hopefully we find a good fit in a buyer with this method so that we can avoid the tacky “eBay exit”.

Follow-up: sold!
Follow-up 2: Details of the acquisition can be found here.

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15 comments

  1. Itai Ferber
    5:43am, October 24, 2008

    Oh, how I’d love to buy WhereTo?…
    If only I had the money…

    Anyways, great post! I love how you keep things very transparent, and I’m sure that definitely keeps people interested in your writing and apps.

  2. mike
    8:25am, October 24, 2008

    where do youget your data from?

  3. Sean
    8:52am, October 24, 2008

    Second Itai’s comment – love the transparancy..
    The best with the sale of Where to!

  4. Julian Schrader
    9:06am, October 24, 2008

    All the best!

    Though I’m not able to participate in this, it’s great to read posts with such a high level of transparency—there’s much to learn.

  5. Allewar
    9:29am, October 24, 2008

    When WhereTo first came out, I didn’t doubt buying it. I love apps from you guys, because you make’em really great.
    However, my experience with WhereTo faced an issue when I wasn’t able to find almost anything around me. I’m in México, and I guess that google maps data available for this region is not as vast as it is in the US.
    I juts would like to see that the people who get their hands on WhereTo, will continue the development and perhaps expand its coberture to more regions.
    I guess data topic is more related to google maps, but you could publish resources/tips/advices so the users can help build that database.

    Great app.

  6. TokenFinn
    10:50am, October 24, 2008

    Thank you for being so transparent, there is much to learn about your published numbers for even folks that are not participating in the bidding.

    I don’t think that not having the app in the store during the sales process is good though. It means that the historic data (no matter how accurate) can’t be compared to current trends and against competition at the moment. The app store is growing by almost 10%/ week, so hiatus can really hurt.

    Increased uncertainty –> higher risks –> lower price.

  7. Jeff Lilly
    12:07pm, October 30, 2008

    I agree with TokenFinn. Since the app has been removed from the App Store, past sales become somewhat irrelevant. In the weeks the app has not been available, competing apps have had time to take a bigger piece of the marketplace, reducing Where To’s value even further.

    I might have been an interested buyer. As it is, I’d simply be buying source code and design elements. Since the app is no longer an “ongoing business” it truly is not worth bidding on.

  8. Krishna
    8:58pm, October 30, 2008

    I agree with Jeff & TokenFinn. The Apps that launched with the AppStore initially had the early-mover advantage. I am not sure if that is the case any more. So I don’t expect to see similar numbers going forward.

    Also, AppStore has modified the way it worked late early Oct. I assume that was partly the reason for your app to drop in ranking and you tried countering it by a drop in price ($0.99).

    I am a prospective buyer. But the numbers shown here doesn’t necessarily represent the numbers the buyer will see when the app is back on AppStore. There are lots of changes in AppStore recently.

    Good luck and Great App.

  9. John Casasanta
    10:44pm, October 30, 2008

    @ TokenFinn, Jeff Lilly, & Krishna:

    As I’ve stated in the post (and the figures back this up), what drove the bulk of Where To’s sales was the marketing and advertising. Once we turned off the ad campaigns because of the company splitting, the app began to drop in the ranks.

    We’ve had a couple of runs to the top and they were all driven by the marketing. I’m totally confident that once the ad campaigns are turned back on, Where To will immediately jump back on the charts and will climb up again as it’s done before. It’s pretty much formulaic at this point. I just hope that the future apps we’re working on behave similarly.

    And it’s important to note that there isn’t a single “points of interest” app in the Top 100 right now (unless I’m missing it). Given that this is a category of app that’ll always be in great demand on the iPhone… and that we’ve had the most popular paid one… and that we’ve gotten so many prospective buyers so far, there’s clearly huge long-term potential for Where To.

    Now that we’ve discussed things in detail with most of the prospectives, we’re now at the stage where we’re about to start taking bids.

    Hopefully the company or individual who ultimately buys the app is ok with us discussing the terms of the deal here because I’d like to keep it all public but that’ll be up to them.

  10. Jeff Lilly
    12:09pm, November 4, 2008

    But that’s exactly my point, John. If Marketing and Advertising are the thing that drove sales, there’s no value (as on ongoing concern) in the app itself. What the buyer is getting is source code. That’s it. There’s no real goodwill value here, and there’s no value for the business itself.

    I’m not saying the source code is not worth anything — it is — it’s just that the value is a whole lot less than it would be had you not pulled the app off the market.

  11. John Casasanta
    1:46pm, November 4, 2008

    @ Jeff Lilly:

    You seem to be missing the point. I suggest you re-read the post and my comment above.

    Where To is the kind of application that’s proven to be very profitable, assuming that it’s properly managed regarding marketing and advertising. This is in contrast to the other two types of apps that I’ve mentioned in the post.

    The people I’m talking to now regarding the sale of Where To fully understand this. You saying that there’s no value beyond the source code makes absolutely no sense since once the app is put back in the App Store and the marketing is turned back on, it’ll almost certainly do very well again. And I’m not saying that it’s not without its risks… I’ve been very open in the post regarding Where To’s risks.

    If you look at the release of Classics, which we’re co-publishing, you’ll see that because it’s been given the proper marketing push so far, it’s doing very well. We’re going about marketing Classics very similarly to Where To and so far it’s been extremely successful (it’s made it as high as #13 in the App Store within a couple of days of its release).

    Is Classics’ success purely a result of the marketing? No way… like Where To, it’s the kind of app that works with the proper push. But if the app itself isn’t solid, you could throw all the money at it in the world and it just won’t turn a profit. And we’re hoping that our upcoming apps will work out very similarly for us. I just feel more comfortable dealing with an app that behaves fairly “predictably” in the market, rather than a fad app.

    Will Classics be able to maintain its position as Where To did? We’ll see… we’re in a bit of a different situation with Classics since it’s a co-publishing situation and ultimately Phill and Kaz have the final say as to how it’s marketed and how much is spent on advertising. But Phill’s pretty savvy and he, of all people, knows the power of marketing. Phill would never just take an axe to a marketing campaign that’s proven to be highly successful and profitable. So I’m confident that Classics will enjoy a long run in the top list in the App Store.

  12. Andrew
    2:25am, November 7, 2008

    Hi John. Excellent post.

    Would you be interested in a deal which paid out based upon certain ‘trigger events’?

    e.g.
    - You receive a Base Price immediately.
    - If Sales Figures hit X over the first week/month/3 month period, then you receive additional payments.

    This would aim to get over some of the risk concerns raised above… You could agree to the Ad strategy and have full visibility of the relevant PPC account for transparency thru that period.

  13. Marc
    11:14am, November 18, 2008

    Hi John.

    My understanding of this application is that under that neat inferface, you’re pumping data from google

    maps. Basically it is the same info you would get in maps.google.com if you type RESTAURANTS by example

    from a certain location.

    Understand me here, no flames about you. Interface is very nice and the idea to use existing web service

    like google is smart idea to put something live quickly on the appstore. You did it and you deserve it.

    My only concern is about the fact you’re not fully in control of your application. I mean by that: what

    happens if Google decides you’re not License compliant ( and believe me they lawyers are very good). That

    may not be your fault (or the new owner in this case) but Google may decide that many hits coming from

    those applications or whatever the reason is. The risk is there.

    This is just my opinion and i’m opened to hear from others point of view.

  14. Marc
    9:36am, November 26, 2008

    Euhhh. Is this topic dead ? no answers from my emails either.

  15. John Casasanta
    5:26pm, November 26, 2008

    Sold!


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