Building a Mobile Startup That Makes Money

Global revenue from apps keeps growing, up 17% year-over-year in 2019 to $19.5 billion. That’s good news. The bad news is that only 0.01% of all mobile apps bring in revenue. If you want to join this exclusive club of thriving appreneurs and learn how to build a profitable mobile startup, here are a few steps to help you on the way to your success.

Find a market

According to the Business Model Canvas, product fit or market fit is a combination of a business model’s value proposition (what distinguishes the product from its competitors), customer segments, relationship with customers, and sales channels. In other words, you need the right timing, the right market, and the right place to develop a successful web or mobile app. Can you achieve all these things at once? In most cases, no. But you need to arrive at this combination in the long run.

business model canvas

Twitter shifted its concept through at least seven different markets until it found a way to monetize by offering brands and businesses Twitter APIs and third-party apps for businesses as a means of learning from user behavior. Finally, ads became the primary revenue source for Twitter, generating $2.61 billion in 2018.

Another clear example is Instagram, which started as a location-based service capitalizing on the phenomenon of check-ins introduced by Foursquare. Instagram didn’t have any monetization model for a long time until Facebook decided to roll out an indirect advertising strategy with targeted brand ads. Today, you can hardly find a company that doesn’t have an ad strategy for Instagram. Companies invest thousands and millions of dollars in social media management.

Build an MVP to test your idea

In the context of app development, finding product/market fit translates into creating a Minimum Viable Product (MVP) that solves a problem and addresses a need for a particular audience. 

mvp scheme

Why are we talking about MVPs and not fully developed products? Because a good market fit is not a foregone conclusion. It can emerge and evolve. With an MVP, you can always pivot your strategy and introduce significant changes to your product, as Twitter and Instagram did. That’s why it’s smart to start with an early version that can be developed fast and with a small budget.

However, developing an MVP is not as simple as it sounds. People get attached to the features they plan to build, making it hard to identify the core idea of the app. If you think an MVP is about building a minimum set of features, you’re wrong. It’s about testing your idea, whether you’re giving the world functionality that’s unique or simply that makes your business model feasible. This is our guiding principle when we help our clients map out their MVPs.

For example, Snapchat outlined its core concept in order to create an early version. They launched an app that allowed users to send temporary images to other users. Only after the initial launch and product validation did it make sense to start working on more features and ideas. Buffer put up a single-page website that described what the product was about so people who were interested could leave their emails. After that, Buffer tested users’ willingness to pay for their service by adding pricing plans to the landing page.

Building your monetization strategy has to be done at the MVP stage too, as the monetization model you choose may make you redesign or even completely change your app’s functionality. And that can cost you a pretty penny. So think about monetization while creating the first version of your app.

Promote your product to attract users

A good app only is not enough to become viral. You’ll have to use all marketing tools like search ads, search engine optimization, social media networks, and content marketing. Keep in mind that you’ll need to use engagement techniques so users can find your app more attractive. Finally, there can even be some physical work involved to get viral. Here are some examples of how companies have promoted apps: 

  • Rent the Runway, an online dress rental company, tested its model in person before building the original concept online. They simply offered college students the chance to try on dresses, then asked if they’d be willing to rent them. Word has it that 34% of the girls walked away with dresses, validating Rent the Runway’s MVP.

  • Airbnb used a door-to-door approach in New York. They recruited new users and helped existing ones improve their listings by visiting each of them personally. Y Combinator’s Paul Graham says: “When I remember the Airbnbs during YC, I picture them with rolly bags because when they showed up for Tuesday dinners, they’d always just flown back from somewhere.”

  • Instacart started as an iOS app which allowed users to order groceries from a list. For the first three or four months of the app’s existence, the founders would visit a Safeway supermarket to fulfill orders. They didn’t even have any drivers working for them.

Iterate to monetize effectively

If your MVP passes muster, it needs to be developed further. This is when many startups start thinking about monetization. However, focusing on making money rather than on growth may doom an early-stage startup from ever achieving scale.

In our post about when to redesign your app, we explained that you have to implement changes gradually, as users don’t like massive modifications all at once. Just remember Snapchat, which lost millions of users because of vast changes to its design and functionality. Had Facebook applied an advertising business model early on, we doubt it would have reached the universality it enjoys today. Instead of focusing on money from the outset, Facebook grew a more extensive user base, collected detailed demographic information, invested in building a powerful platform, and only then started displaying highly targeted ads.

Iterative development

Facebook’s experience suggests that you need to focus on your product and its users. The ultimate revenue model, when you create a mobile startup, may differ significantly from what you planned.

Use analytics to keep up the growth

What makes a startup successful? That’s right, growth. The journey only begins when you enter a market. Once you launch on the App Store or Google Play, you have to immediately start tracking your business performance. Pirate AARRR metrics by Dave McClure can be a good choice for this. AARRR stands for acquisition, activation, retention, revenue, and referral — the essential metrics for any startup. Tools like Google Analytics and Mixpanel can help you measure them.

But regularly checking these metrics isn’t enough. You need a measurement plan that includes: 

  • main business objectives, such as increasing your user base, making loyal users happy, making more profit, and introducing new technologies in your app 

  • elaborated strategies to achieve these objectives

  • clear goals for your metrics to measure your strategy’s success

You can learn more about how to properly use pirate metrics to boost your business performance in our blog post.

Find investors or become one 

Before you go looking for investors to fuel your company, you’ll need analytics and statistics to back you up and prove your stable growth. But the right product and optimistic reports won’t be enough to get investments. Here’s what you’ll have to do:

  • Evaluate your company and write a budget plan or, what’s better, hire an outside expert to do it all for you.

  • Exhibit your strengths and tell how you’ll work to eliminate your weaknesses.

  • Build a transparent business plan and state the revenue you expect.

  • Prepare a marketing activity strategy.

  • Show great user feedback and testimonials.

  • Demonstrate a highly organized team.

Keep in mind that investors aren’t the only way to build an empire (though the trends are all about adressing them). Some appreneurs stick to minimum investments or even stay investment-free. These individuals are called bootstrappers. You’d be surprised, but they aren’t doing their best to hit TechCrunch tops and prepare perfect elevator pitches for investors. Bootstrappers are mostly interested in getting actual customers that generate money.

Here are a couple of examples of bootstrappers that came out victorious:

  • Ahrefs, a company that provides a set of SEO tools for businesses, was first a side project that existed thanks to the funds of its creator, Dmitry Gerasimenko. He had an office job for a while until he realized that his side project generated more money than he got from his full-time job.

  • JotForm, a form builder with over three million users, was more of a hobby for its founder Aytekin Tank. He used to wake up at 6 a.m. to answer users’ questions and then go to work. 

The downside to being a bootstrapper is slow growth compared to, say, successful mobile startups fueled by investors. These startups often show high income but low revenue, as they have to spend a lot to keep scaling fast. For bootstrappers, it’s different. They think about revenue first. 

They spend less than they earn and don’t hire PR agencies for promotion. Additionally, bootstrappers don’t hire and fire quickly, and they approach employing people as a long-term responsibility. As a result, bootstrappers get a lot of dedicated workers, and very few people leave such companies by their own will. For instance, only one person decided to quit from Todoist, a bootstrapped business, demonstrating their high employee retention rate.

You’re the only one who can decide how to attract investments, how to promote your product, and what strategy to adopt for your company to live long and prosper. But if you’re only at the stage of creating an MVP and are hesitating about what features to include, feel free to contact Yalantis. We’ll gladly help you build the early version of your app!

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