App Store Revenue Strategies (Wolfram Alpha & Other Apps)

Anyone visiting recently will have noticed a lack of content since the last article but September’s article seems to have dropped off my blog and I don’t know why. Anyway, I have recovered a poor early draft of the post “Summer Shoots” which can now be seen underneath this article.

There’s a lot of focus on the Apple app store at the moment. Having become a revenue channel / revenue stream in itself, the tech industry as of late has been able to review and assess its progress since the opening of the app store’s doors from July 2008. Wiki states there are currently around 85,000 third party apps within the store, with over 2bn total downloads to date.

One of the issues a company faces, when trying decide where their iPhone app sits within a product revenue strategy, is to try and chart the financial returns and decide what revenue to model to employ. Whether to give away the app to encourage increased contact points, brand awareness or a value-add benefit for the brand, or to just do a straight unit fee charge. This week has started with postings on this topic with a mini debate on a welcome addition to the app store family from Wolfram Alpha.  This is a fantastic application that I am not sure I really know how to use fully but have a sneaking suspicion  that this is going to be an incredibly useful tool for me once I learn how to use it (Note to self, “see if there’s anything on YouTube perhaps?”). Wiki calls it an ‘answer engine‘ but its kind of a data crunching tool that does searches using the parameters that you feed it and comes back with data answers. However, the headline issues relating to their iPhone app launch all centre around the pricing of the application as it hits the app store. I’m sure I saw it last night on my iPhone at £29 (TechCrunch have it as $50. Is that the same as £29?). TechCrunch are not convinced with the current price tag, as anyone who uses the service will know, the app store is not a place for venders to realize full price on their software. It’s the place to go and see what free stuff you can find that might be worth pulling onto your iPhone. Next come the apps that you don’t mind paying a little bit more for. For me, the £1.79 I paid for my little Chirp bird spotting app was bargain of the year. However, as I look though my iPhone apps, aside from the freebees and fun stuff, the only “must have” app on my phone is 1Password. This comes in at £2.99 for the standard version or the big boy app at £4.99. I’m currently debating whether or not to ’splash out’ by bring over a favourite mind mapping tool of mine that I use on the laptop called MindManager (made by MindJet and weighing in at a hefty $349). The scaled back, stripped back iPhone app version of the product is on my UK iPhone at £4.99.

The MindJet approach above illustrates the typical approach adopted by companies who usually discount (or give away free) a reduced feature set of their product on the app store. Possibly to help introduce their product to a new audience or to consolidate their brand in the market place but either way, the thing about the app store, aside from taking a punt on various frivolous games or utilities, its not the place where you go to get more the more serious and weighty software apps. There’s no reason why it shouldn’t be but at the moment that is not how it is generally used. Sales of this particular app will be keenly watched over the next 12 months. Apple have always maintained that they don’t really make much out of the app store, like its a loss-leader but maybe they are starting to look at taking their app store to the next level. Good luck Wolfram, let’s see what you can do.

As a little aside, how about this article which says that Apple are soon to allow free apps to themselves offer ‘In-app purchases.’ That means you can download an app that itself can bill customers.  Might the likes of Ebay, Skype and PayPal be the first to lead the way here with iPhone billing.

Whilst here talking around iPhone apps and the app store, I was quite excited to learn of a new developers kit that can be downloaded to help you make your own iPhone apps. It comes from a company called Tap Lynx and here’s an article on the product/company.

Anyone there like to comment on their iPhone app ‘buying’ or downloading strategy, are you a freebees only type of person? What are the apps that you don’t mind paying £5 or over for? Has anyone had to configure an app pricing strategy? I’d be interested to hear any thoughts or comments on any of this.

Summer Shoots – Early Stage Seed Funds

With news that we are officially out of the recession, barring of course a dose of double-dipping, it is welcome news to hear of a few new (predominantly) tech funds that have appeared over the Summer months, both in the UK and US. I picked up in a previous blog that some VCs were either 1) playing safe doing M&As and not reinvesting for the time being, or 2) beginning to play at the earlier stage of the venturing chain. It is now the time for those at the more fearless entrepreneurial end of the scale to start laying their cards on the table. There is a sense that despite all else that is going on, why should a downturn prevent us from getting on and making things happen. When there is a downturn, there sure to be a little bit of upturn somewhere. You just have to work harder and smarter while the deadwood is being cleared away.

Over the Summer there has been a lot of activity in early stage seed investing from Sequoia and Spark Ventures. Additionally, Step5 Ventures is the latest early stage fund to launch of which an article can be seen here.

Just in also recently are two very significant UK funds, Ace and ProFounders.

Fundraising & Startups

They say that a downturn is the best time to get your startup going, so I have gathered together a few good links below with a few thoughts on this topic. This article will also push out a few thoughts on approaching fundraising. There is a lot out there on this topic but I want to give a slightly different perspective and look at it from the people/person that assist the companies in securing their investment.

5 Startup Myths

The first link is a website called ‘Small Business Trends’ which was sent from my Google Alerts and I have chosen it because it approaches the subject by debunking some prevalent startup myths. The Small Business Trends article can be found here.

First Time Fundraising

If you’ve never really approached fund raising for your business outside of bank loans or an overdraft, then you probably have a lot of new ground to cover. Perhaps you are considering trying to secure private investment from business angels; ‘trying’ very definitely be the operative word as you embark on trying to convince an investor that they can make stacks of money with your highly lucrative business proposition.

Bootstrapping

Before you start entering into such conversations, let’s look under the hood a little first, just to make sure your approach to business will not scare off investors upon first sight. Are you operating a lean operation by ‘bootstrapping’ your business and keeping your operating costs as low as possible? Here is a good article (from a new media/new tech perspective) by ReadWriteWeb on Bootstrapping. Then there’s this article too from Doug Richard on how to survive a downturn (it’s mainly for established businesses but has some good general nuggets that can be applied by startups and established businesses alike). And finally, some good nuggets here too.

Investment Ready?

Ok, so your now operating lean, you’ve pulled back the operating costs and believe that private investment is the way forward towards your hockey stick growth curve (see point number 3). First big lesson, private investment is not a variation of getting a bank loan, i.e. you can meet all the criteria for a bank loan and have a reasonable expectation that you will get your loan. With private investment there are numerous reasons why you might not get the investor’s cash, even when you can successfully tick all the given criteria. For example, the returns might not be high enough, they might disagree with you on how big the size of market share is, they might not believe in you or your team that you can deliver what the business plan says, or, they just might get an itch that you might not get on well together. Getting equity investment can be a lengthy, time consuming and in many cases, fruitless task. They might love you, love your product, believe in the exponential growth potential forecasts but the whole process can go belly up once the due diligence process kicks in.

Another point worth taking note of is that in most cases it will cost you money to get money, unless you have managed to get direct access to a range of ‘high net worth‘ or ‘sophisticated‘ investors, you will have to go through intermediaries and they will want paying for their work. Typically, they often take around a 5% ’success fee’ for funds secured. There may also be fees for additional work undertaken, depending on whether you work with an agent like me, or with one of the angels network.

I would also advise against thinking that all that is needed is for your business plan to be thrown out there to land in the inbox of multiple investors. It’s more than just emailing your businesses plan (or executive summary) out to a database of investors. Investors are too busy to look at numerous business plans every week. Someone somewhere has to be paid to soft through them all and pick out the good ones. Investors also rely and prefer often to work via recommendations. Even if you are one of the good ones, you still have a million and one reasons why even after being successful in getting a pitch opportunity, you might still not get the money.

[I have a lot more written on this. If a get one or two requests (comments can be added below) then I might consider putting more in here on this subject, or do feel to contact me personally about this].

Some thoughts

• Realise that it costs money to get money.

• Most (over 90%) businesses that apply for investment, don’t get invested in. You might need to: try – fail – make adjustments – try again.

• Have you or the other Directors put money into the business also? This is kind of expected and gives investors a degree of comfort to know that you believe so much in this venture that you have put your own money in also.

• If there is IP, have you taken steps to protect it?

• Have you got a ‘plan b’ in case you get partially funded, could you roll out in stages instead?

The VC Shuffle

Parts of the VC sector have responded to the economic situation by downsizing, or more precisely, by moving into early stage activity. It has become tough for VC firms to find enough M&A and latter stage deal-flow activity that a number of organisations are looking to generate opportunities at the other end of the venturing spectrum. The following excellent article gives very recent activity status and charts the drop in VC activity, even over recent weeks. It’s all stateside but to an extent I am sure we can expect to see a mirroring of this activity in Europe too. Just like us, American’s are prone to propping up both decaying industries and unsustainable levels of business but what they do do as second nature in times of recession, is innovate or lead with entrepreneurial endeavor. President Obama has pledged $250 million a year in federal funds to seed a regional network of incubators organizations, an effort aimed at growing jobs and innovation.

See the article here.

As the VC press have little M&A or IPO news to report on, it seems that VC activity focused on early stage venturing is getting some prime coverage. Below is a great article on VCs that have invested into seed funds, accelerator programes and incubators.

Full article is here.

GruvMe – New Kid On The Media Block

I’ve just picked up on something that could be very big news for the delivery of multimedia on mobile platforms. A free application download called GruvMe enables you to pull down HD quality movies, videos, music and games on your mobile – most platforms are supported. This of course could have huge implications for Apple’s iPhone and iTunes. It’s only in public beta at the moment but this has definitely got to be one to watch.

A related article is here.

M3X Media’s website is here.

VCs Moving Upstream

I’m not sure of what to make of recent activity in certain quarters of the VC community but some VCs are delving into the messier and murkier business (at least in terms of traditional VC activity) of early stage risk capital, Spark Capital being the latest with their new seed fund.  I know there are numerous reasons why they tend not to get involved in seed and early stage investing (VC and angel funding are two totally different beasts and require divergent business skills to undertake) but I think it totally makes sense. I liken it to the situation in the football Premiership whereby many of the top clubs have lower league feeder clubs nurturing talent for them. 

I think it shows that some VCs are very aware of current activity and gains to be had in the digital and TMT (technology, media and telecoms) sectors and with last week’s news of the latest foray into seed funding coming from Spark Capital, those with both the funds and foresight know that if you are in a position to invest now, then it is a great time to sow ‘your own‘ seeds for the future. There’s a world of difference between VC and angel/seed investing, so why not just buy into a group who operate at the seed level, an outfit that has the potential to spot the Google, Facebook, Twitter etc of tomorrow.

Previous moves of a similar nature have been from Sequoia Capital investing $2m into Y-Combinator and (I believe but am not quite sure) Index Ventures into Seedcamp. Here’s a bunch of articles on the Sequoia and Spark buy-ins:

• Technorati on the Sequoia investment.
• XConomy on the Sequoia investment.
• TechCrunch on the Sequoia investment.
• Paid Content on the Sequoia investment.
• Y-C’s Hacker News on their new investment.

 

• Tech News on Spark’s buy-in.
• TechCrunch on Spark’s buy-in.

iPhone App Revenues

Although there are some great developer success stories, it’s not all glory for mobile app developers. Streaming Colour (the makers of an iPhone game widget) explain their revenues from a $4.99 iPhone game they have made called Dapple. This article is quite interesting because the metrics of costs and royalties are broken down. He has incurred a heavy front-end development cost of $32,000, which gives his break-even of around selling 9,150 units but has sold around 151 copies, despite great reviews. His next step is to bring the price point down by producing a ‘lite’ version with the hope of bringing in more volume.

The full article can be seen here.

Irish Happenings

What’s going on in Ireland? Don’t the Irish know there’s a recession going on? Well perhaps not. It seems that €148.75m has been committed to 8 early stage investment funds. Great stuff I say. The six who have complete their first closings are: Delta Partners [100m fund], AIB Seed Capital Fund [30m fund], Atlantic Bridge Ventures, Kernel Capital Partners [70m fund], Fountain Healthcare Partners – life science fund and NCB Ventures – [75m fund] – closed its fund in November. So many good things seem to be coming out of Ireland from the digital front at the moment. They have got their infrastructure to speed and are now accelerating young digital startups

Aparently, the fund has €30m still waiting to be used. A recent FT article went out recently, to announce that they are looking for co-investment opportunities with UK VCs. Thinking of applying? Enterprise Ireland can be found here.

And what is the mood of the Irish in this current climate. For some economic finger-on-the-pulse feedback,  see this and this.

Web Mission 09: Raising Our Game

With a delegation of UK digital startups being given the opportunity to trot off to Silicon Valley in San Francisco for Web Mission 09, one could get quite excited at the prospects and the future that awaits our digital and technology industries (at least we could have done so until we started leaning about what words like sub-prime meant). I totally agree with this sort of initiative. For those that this will be their first business trip abroad, The contacts and learning that they pick up should not be underestimated.  Their business worldview will be expanded and many of them will be prompted to dream bigger dreams and raise their game. I speak from experience because in the days of Web 1.0 I got myself over to Cannes for a for a few trips to the yearly Milia event. Such events for me were no ‘jolly.’ As I watched the great and good around me, I both aspired and watched, to see how those who were at the top of our game worked (and it must be said – played too). After trips to Milia I started to think, plan and aspire to bigger and better things within my industry and it was not long before I started developing international connections and opportunities. I soon realized after one or two foreign trips that any fool could collect business cards from their business heros. I knew that I needed to drive opportunities and watch out that my vanity did not lull me into a false sense of achievement, just because the so called great and good from the established brands are all around me at whichever industry bash as was at at the time. 

These days I am more critical of my time and activity and whatever industry event I attend I try to get some concrete results wherever possible. Because of my time spent stretching my vision at foreign business events, I now have international aspirations. In about three to five years time I want to be involved in developing business opportunities in Asia. My database of Asian contacts and investors is currently looking quite chunky as I prepare  for future business activity and initiatives over in Asia. I am priming my contacts now and exploring in readiness.

Going on trade missions shouldn’t just be about expanding your Linked In contacts. For those soon off to San Francisco and other similar trade missions, I hope they go not just to present their businesses but also to scout out and assess new territories or opportunities; to also question the way they do and think of business. If they are really sharp, I hope they will push themselves to make the most of a unique business opportunity, by trying to secure some form of business that would never have come your way if you had stayed at home.

Free The Postcode

I saw an interesting article on TechCrunch about our national postcode database and how the Post Office owns it and only currently sell it on with a high-end corporate price tag. The article informs that if there was an alternative free postcode database system that could be developed via GPS collaboration, this would open up a host of location oriented apps. The Techcrunch article can be seen here.

I was so looking forward to exercising my citizen’s protest against the Post Office. I now have the app on my iPhone after visiting the iTunes store (here) but I can’t seem to get it started. It seems that I have to get my location accuracy to under 50 meters. I’m sitting here in my apartment popping in the postcode and it still says over 1000 meters. How did you get on with it? I still think it’s a good idea.