Thursday, July 31, 2014

Building a Business, Not an App

Ben Thompson:

[Mike] Love thinks the fact he started from day one with the new business model in mind gave him a competitive advantage to the dictionaries already in the store, but I think he sells himself short; after all, it’s been five years and only now are most independent developers starting to realize that free with in-app purchase is the only viable monetization model. To put it another way, Love differentiated himself again by being a student not just of APIs and frameworks, but of business models as well.


This point blew me away. Love invested real money into differentiating his free app (Love still had the great handwriting engine, but iOS’s built-in handwriting – while hugely inferior – had lessened that advantage). Love was confident that after he won in free, he could make up the difference with his plethora of paid add-ons, which at this point included not only additional dictionaries – several of them exclusives – but also modules like stroke order diagrams, different fonts, a document reader, and a year later, optical character recognition (OCR).


Much of that time has not been spent on development or design. Rather, it’s been spent understanding and listening to customers (which led to the aforementioned bundle change), making business deals with slow-moving publishers, careful consideration around pricing and app store presentation, investments in both free and paid differentiators, and a whole bunch of time spent on an Android app that doesn’t make that much direct money but that marks him as a leader in his space.

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Creating an app is hard, but identifying a niche is much, much harder. Once you identify a productive niche, and you listen to your customers, it seems, a lot of the app decisions sort themselves out automatically, and these decisions often have little to do with code. Competent execution of the app design is necessary, of course, but some of the standards of "beauty" and "elegance" that Apple devs apply have nothing to do with the app's success.

I've always found Patrick McKenzie's example instructive here too: he's the Bingo Card Creator guy. He built up an ugly Java app into something that generated about $25K or more in profit annually, then converted it into a web-based Ruby on Rails app that generated as much profit: his niche is schoolteachers creating bingo cards for their classroom activities. He blogged about the business side of this a lot, so much that he became in demand as a highly-paid marketing consultant until he stepped back to work again on new product stuff. He almost never blogs about code unless he's warning devs to patch their Rails installations to prevent the latest exploit. He's certainly a competent engineer, but his head for business seems much more rarified.

You'd think, that as smart as developers are, the business side would be easier to learn. But in my experience it's not. I run a decently successful business unrelated to software that pays my bills, but even the knowledge I have from that doesn't carry over into the software realm very well. My hat is truly off to those developers who build successful businesses, as well as polished apps.

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