Are you a developer interested in starting a Mobile / Online App or Gaming business?
Then below is a sample business plan template with important factors to consider in your efforts to seek funding.
According to GBR, the true pros of the mobile app industry are reaping hundred times return on their investments for app production in as little as four months of launch.
This includes free apps which also have a profit potential when they go viral.
GBR suggests 6 factors to support their position as to why “the profitability of the mobile app market is no longer a puzzle but is real”.
- Mobile app production cycle can take as short as a couple months.
- Creation of a mobile app can be either cheap or expensive depending on how you go about it. A simple trick to reduce development costs is rolling out the app in phases, limited versions, or portions before launch. Should the app go south, you simply discontinue development. If it becomes a success, you introduce additional phases in short intervals;
- Mobile apps do not require physical distribution presenting an opportunity for cutting down on costs;
- Initial marketing costs can be low if you do it right.
- Popular mobile apps have longer term Return On Investment (ROI) compared to console games, songs or movies for instance. This is due to their longevity.
- The mobile app market is not as chaotic and random as most of the tech journalists would like you to believe.
What's Covered in This Article
What You Need to Start a Mobile App or Social Gaming Business
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Find a Niche for your App
Social media apps such as Facebook, WeChat, Whatsapp, Instagram, etc., and Mobile Games such as Candy Crash, Angry Birds, are the most popular type of app on all platforms. They also make the most money.
This is closely followed by widgets; entertainment and media-related apps such as those for Pandora Internet-based radio and for leading newspapers; social; lifestyle; music; photography; productivity; tools such as Google Maps; communication; and utilities.
However, when considering a niche for your app, the greatest driver should be one that meets a consumer or business need.
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Develop a Viable Revenue Model
As mobile app subscribers are not so keen on paying for apps.
Statistica (October 2018) predicted that by 2022 there will be 258.2 billion app downloads, but 93 percent will be free i.e. only 7% of app downloads will be paid for.
As of the first quarter of 2018, 94.24 % of all Android applications were available for free, while only about 6% are paid for.
Moreover, Mobiversal (2016) notes that: 75 percent of developers earn less than $1,000 a month. US$500 per app per month.
Therefore to effectively compete in this market and generate sufficient revenues from their apps, developers and publishers have to be creative.
There are about 5 main revenue generating models in the mobile app business today:
- Pay -to- download
- In-app advertising
- In-app purchasing
- Freemium
- Subscription
Pay – to – download.
This model generates income directly from the App Store when subscribers download an app.
This model is applicable for almost all apps.
The main disadvantage is that it limits future opportunities to sell the same subscriber.
Once the app is downloaded and paid for, there is no way to sell the app to the same subscriber again.
In-app advertising.
In this model, apps are free to download.
However, ads are placed (usually banners) and app owners get paid by advertisers when the app subscriber clicks on an advertisement.
In-app purchasing
With this model, the app can be free or paid for to download.
Revenues are generally generated by purchasing in-app.
Most apps consist of a portion that can be used free of charge and an additional portion that can only be used once a subscriber pays for it.
It is only usable if the customer decides to buy it.
For instance, a game can have 3 levels that are free to play and subscribers have to pay to play the next levels.
Freemium
These apps are free to download.
Instead, apps using this business model generate income only from other business activities, such as: sale of related products and building a brand (e.g. Facebook, eBay, etc).
Subscription
A subscription model allows subscribers access to an app for as long as they pay for it.
The fee paid is usually applicable for a limited time period and must be renewed after expiry.
Most Magazines and newspapers use this business model.
Factors to Consider When Choosing a Mobile App Revenue Model
- Level of app usage – long or short session times. In-app advertising model works best for long sessions of usage.
- Willingness of target market to pay for app.
- Strength of your app’s value proposition. If the value proposition is compelling enough, pay per download would be your best bet.
- Ability to break down the app’s value and sell it into multiple portions. If this is the case, in app purchase would be a more viable model. Otherwise, go for a Freemium, especially if it has potential to be upgraded as one package.
- Develop a Quality App
The most important factor for a subscriber is the app’s functionality and design.
Apps that look great and perform well definitely stand out from the app stores.
According to James Kaye, for your app to score well with potential subscribers, it should, at the bare minimum:
- Be intuitive
- Maximize user experience
- Minimizing battery drain and data usage
- Solve a problem/pain point for the target user
- Drive repeat usage
If you do not have software development skills, the next thing to do is to get a developer to do it.
Talented mobile app developers abound on freelancing sites such as Fiverr, Upwork, Guru, etc.
One advantage with these sites is that there are a lot of developers listed giving you a wide pool to choose from, especially if you’re on a tight budget.
- Select a Suitable Platform for you App
According to BusinessOfApps, there are more than 300 app stores worldwide today and still counting which can be categorized into the following major platforms:
- Android App Stores
- Cross-platform App Stores
- iOS App Stores
- BlackBerry App Stores
- Manufacturer-specific App Stores
- Chinese App Stores
- Operator and Country-Specific Stores
While deciding on the best mobile app platform is dependent on several factors, each platform has its pros and cons.
According to MobiForge, the main advantage of Android is that it has the largest market share, in terms of sales; while iOS is the most crowded app store in proportion to the number of users. B
Microsoft has less market share, but there are also far fewer apps to compete with in the app stores and for the users and the vendors’ attention
According to VisionMobile:
Developers using HTML for Web development have access to a much larger user base comprising desktop and mobile users, irrespective of platform.
Among HTML developers, subscription-based revenue models are much more popular than on native platforms, pointing to established online content or service businesses that have expanded on to mobile.
- Find an App Store that Best Meets Your Requirements.
Unless your app is web-based, you are going to need a store to publish your app. Some of the most common mobile app stores include:
- Google Play. 2018 Statistica ranks Google Play as top mobile app store by count of the number of apps on it. This is attributed largely to the ubiquitous Android operating system.
- Apple. In second place, just a little ahead of Microsoft’s Windows.
- Microsoft. Microsoft’s store is ranked in the third place.
One major disadvantage with listing your app on an app store is the large amounts of revenue share that the store owners require.
Another disadvantage is that there are too many other apps already listed.
Therefore, it becomes more challenging for a new app or game to get discovered in the heap. This is one of the reasons some developers are turning to web-based apps that don’t require stores to host.
How to Start a Mobile App or Social Game Business – Sample Business Plan Template
Product or Service
Before investing in app development, you must be clear on what the app is supposed to do.
What goals is the app expected to accomplish?
Pricing
As of the first quarter of 2018, 94.24 % of all Android applications were available for free, while only about 6% are paid for.
As of September 2018, the average price for a paid app in the Apple App Store was $4.37. For Google apps, the average price for a paid app was $4.86 as of the first quarter of 2018.
Most paid-for apps are free of advertisements.
Marketing and Promotional Plan
An app that solves a customer pain point, coupled with superior performance and design and a well executed marketing strategy is a sure winner.
Like any other business venture, the marketing and promotional plan needs to be thought out way before development of the app starts. Not doing so is like signing up for failure.
Some promotional channels to consider include:
- A website,
- other apps in the portfolio,
- email or SMS campaigns;
- Paid-for media e.g. – mobile ads, paid search, etc
Competitive Analysis
With more than 4 million apps published across the Apple and Google stores alone as of the third quarter of 2018 – it’s more than likely that whatever kind of app you plan to build, competition will be a constant factor to deal with.
One way to go around this challenge is find out what areas your competitors are failing in and try to do it better.
Factors to consider in Competitive Analysis:
- How well established competitor apps are
- Number of subscribers they have
- Number of downloads
- Number of active users
- Time it took and how much it cost the publisher to reach this point
- How famous the app publisher brand/company is.
- How large their reach or marketing budget is
- Advantages and Disadvantages of competitors apps
- What makes the app popular or unpopular with subscribers. A good source of this information is available from the app reviews.
- Competitors’ Promotional Strategy
- Whether focus is on competitors’ existing client base or new ones.
- Promotional channels
- Competitors’ Revenue Models
- Reasons for chosen model
- Whether model is a success or a failure
6 Metrics to Forecast in a Mobile App or Social Gaming Business Plan
When writing out a business plan for a mobile app or social game service, there are certain fundamentals you should incorporate into your business plan.
Aside from the pro-forma financials such as income / profit and loss statement, cash flow statement and a balance sheet, below are eight key issues to factor into your business plan:
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Traffic Forecasts.
Traffic to your site is the first step towards getting future customers for your app or game. It is therefore to forecast these numbers at the business planning stage.
Thereafter when you start-up, it is important to track them. Some numbers you can forecast include:
- Unique visitors per day or per month.
- Number of visits.
- Average time spent on the website
Both Google analytics and websites such Similarweb are valuable sources for tracking these numbers.
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Number of Conversions.
Conversion basically means turning your traffic or website visitors into paying customers.
Thus, your marketing efforts need to incentive potential users to download and repeatedly use the app.
To break the Top 10 chart in Google Play requires on average 2-13 thousand downloads per day …. and most of those downloads need to come in the previous 24 hours.
Useful projections to consider when writing your business plan includes:
- Potential subscribers to free versions of your app or game after visit
- Potential conversions from free versions to paid versions of your app or game
- Number of downloads
- Ratings and reviews – more positive ratings leads to higher rankings
- Download velocity – trend of downloads.
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Churn Metrics.
Plainly put, churn means that users stop using your app or quit playing your game.
As of the first half of 2018, the average three month user retention and churn rate of mobile apps worldwide revealed that 55% of mobile app users are likely to leave your app within a month of downloading it.
While it is a given in the mobile app and/or social game business, you can reduce the churn numbers by planning adequately for them.
It is therefore important to consider this metric as it directly impacts your profits, especially in paid-for business models.
Every customer that abandons your app or game translates to lost revenue on your part.
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Marketing and Advertising costs.
This is includes calculating factors such as customer conversion costs [(pay-per-click + related marketing costs)/ paying customers]; and Customer acquisition costs [(sales and marketing costs)/total number of customers].
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Customer Lifetime Value.
Calculated as [Average revenue per subscriber per month multiplied by average number of months the subscriber stays].
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Retention rate.
This is an estimate of how many subscribers actually download your app and use it over and over again. Not just once and delete/abandon it.
According to statistics from Statistica (October 2018), 38 percent of users returned to an application 11 times and more.
Tips for your Mobile App Social Gaming Business
a. Have a Privacy Policy in Place
According to Nielsen: a large number of subscribers (73%) are concerned with the app’s collection of their personal information; as well as location identification (55%) via smartphone apps
b. Encourage Subscribers to Review and Rate your App
The higher the ratings, the higher the chances of the app being downloaded.
You should also promptly respond to all feedback, whether positive or negative.
c. Design a Catchy Icon for your App
Having a catchy app icon is a first step towards grabbing the attention of potential subscribers.
d. Actively Participate in Online Forums Dealing in your Selected App Niche
You should be as active as possible in forums targeting your selected app niche and try to integrate with your comments a link back to our app’s web site and/or store where it is published.
e. Maintain a Blog About your App
It is important to start and regularly update a blog that documents customer issues that your app is trying to cover or solve.
In closing, remember that with a high quality mobile app coupled with a solid mobile app business plan you can generate significant sums of profits per month.
Statistica estimates that by 2020, mobile apps are forecast to generate around 189 billion U.S. dollars in revenues via app stores and in-app advertising.
Believe it or not, but it is true.
Market intelligence firm Newzoo estimated mobile gaming revenues will account for 76% of the expected $92.1 billion mobile app revenue in 2018.
Additionally, an October 2018 Statistica Report estimates that:
- In 2017, consumers downloaded 178.1 billion mobile apps to their connected devices. In 2022, this figure is projected to grow to 258.2 billion app downloads.
- In 2019 the number of mobile phone users is forecast to reach 4.68 billion.
- The total number of iOS app downloads in 2016 – 25+ billion (Source: App Annie)
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