One year has passed since I acquired Where To? from tap tap tap. Time to ask myself: was it all worth it? But first of of all, some background: Where To? was one of the first ~500 apps when the App Store launched in July 2008. The sales numbers where really impressive in these gold rush days of the App Store. When the app was put on the acquisition market it was removed from sale in the App Store for about two months. Two months in the iPhone app market is an eternity. Time for new competitors (and copy cats) to enter the stage. And time for customers to forget about your app and look for alternatives. So we expected way lower monthly sales. Basically, we had to start from scratch in terms of ranking and reputation.
Also, many apps in the store show a peak behavior with an initial spike and a following irresistible decrease in sales. In some cases apps started a second life at a lower price point (typical for many games, but also for apps like Beejive). We always hoped that Where To? would rather achieve sustained success allowing to develop new functionality on an ongoing basis. Also, this was a key factor in my plan to amortize the investment in 18 months.
It turns out, Where To? is not the kind of rocket-like app that flies through the roof and then crashes on the hard surface of negligible sales. Since the takeover in mid December 2008, it made a total of $325.055,07 in gross sales, that’s $227.538,55 after Apple’s cut:
- What is it: find points of interest around you
- Price: $2.99
- Gross sales: $325.055,07
- Net Sales: $227.538,55
- More Info: at the App Store
Admittedly, there is a large volatility caused by factors such as new versions, featuring by Apple and advertising. Speaking of advertising, we experimented with all kinds of different media and types. While in the first half of the year we had decent success with cost-per-click campaigns such as Google Adwords, in the recent past virtually all sorts of paid advertising were totally ineffective (with Admob and Facebook offering the worst value in terms of ad dollars spent per sale). The root of the problem is that at a sale price of $2.99 ($2.10 after Apple’s cut) and typical click-to-sale conversion rates of 5-10% the maximum affordable CPC is at around 10-15¢. For apps priced lower than $2.99 or promotional offers the maximum CPC is even less. At this level, however, the available inventory is nearly non-existant. This is the reason we drastically reduced our ad spending since September. Overall we spent roughly $50k in ads so far which is far lower than initially planned.
I feel the most effective marketing are continued improvement, word of mouth and of course positive reviews both in the App Store (yes, you’re welcome to take this as friendly reminder to review Where To? and all your favorite apps you use everyday – Thanks!) and in the press (e.g. TUAW or iPhoneFootprint). After releasing new versions, Where To? achieved rankings in the top 50 of all paid apps in the US, #2 in Germany and it climbed up to the top position in the Navigation category in the US, Germany and other countries. Clearly, this strategy wasn’t too bad.
Another interesting subject is our internationalization strategy. In contrast to other app genres local search is highly dependent on a good adoption of the local language. So localization has a completely different importance in our case. Throughout the year we added localizations for all major iPhone markets. Including our recent Japanese localization, Where To? is now localized into 9 different languages and contains local categories and brands. This contributed to a noticeable increase in non-US sales: Before the acquisition the US accounted for 90% of the sales, in December ’09 the non-US share increased to almost 50%.
A Worthwile Investment?
So was it all worth it? – Yes, absolutely. While the bottom line of our sales was lower than expected, the profit turned out better than planned due to the lower than budgeted ad spending. So there’s a good chance my $70k investment will pay off sooner than expected. In terms of the make-or-buy decision, I think I made the right decision. Although meanwhile, the acquired code only contributes to a small percentage of the whole code, the (unchanged) basic look-and-feel and the market reputation of the app are critical success factors. Also, my point of time-to-market being a key factor now holds true more than ever. With more than 100,000 apps in the store, every day a new potential competitor enters the market and it’s important to be first.
What would I do differently today? – Well, I’ve learned the hard way that the transfer of an app into a different iTunes vendor account is practically not possible. Should I acquire an app again, I’d avoid the disaster and do the account switch right away.
Despite all the trouble we had with Apple last year, we’re absolutely thrilled how the App Store ecosystem grew in the last 18 months and what amazing potential it offered to developers. We’re more than happy with our outcome and take it as an incentive to achieve even more in 2010!
We always said that new apps are being planned. Unfortunately we didn’t deliver on that promise so far. We sincerely hope to change this the sooner the better. (If you happen to be a talented Cocoa developer anxious to get your hands at some interesting new projects, please get in touch.) Also, we do have a great roadmap for updates of Where To?, so I’m happy to welcome year 2 in the history of FutureTap!