The Top 4 Reasons Most Mobile Apps Never Monetize

January 05, 2021

By:  John Tomblin, Senior Solutions Architect
Los Angeles Bizz, a division of Sofvue, LLC

Just because you can build and launch a mobile app does not mean you should, and just because it works does not mean it is going to monetize. In fact, it could be the exact opposite. There are some terrifying statistics to prove my point. According to a 2016 Inc. Magazine article from Stacey Macnaught, Director at TecMark, "The average mobile app costs $270,000 to design, build and launch" and according to a Gartner press release January 13, 2014, "Gartner Says Less Than 0.01 Percent of Consumer Mobile Apps Will Be Considered a Financial Success by Their Developers Through 2018", and do not let the year of these reports fool you... it's going to be even more competitive in 2021.

As a mobile app solutions architect, developer, SaaS owner, project manager, and morning coffee brewer, I have been a part of a lot of projects, and there are a few things I have learned over nearly two decades of working with clients across multiple industries, many states, and here are my top 4 reasons why most mobile apps never monetize. So, let's jump in.

1) Missing a Master Scope Document

If you've read any of my guest posts on numerous other sites, you know that I am a huge proponent of wireframing and developing a well-defined document containing all the wireframes, business and programming requirements needed to build an app. Without a doubt, the single greatest failure point of a project is not having a well-defined document with all the "thoughts" and "processes" already ironed out. I have had companies call me who have spent upwards of $100K in programming and development services based on a ten-page document with a list of "wants"-- and not a single wireframe anywhere. That is insane, but I see it every day. This approach might work for a responsive Wordpress site, and it often works in big companies who can absorb the learning costs of a project because they have done it a hundred times before, but for small enterprises with less than 200 employees, it is completely different. How in the world would you expect a programmer or several programmers to understand exactly what to build when you have not defined it for them?

What must you do? You must flush out the screens, components, modules, programming, and business requirements, use cases, and user stories first. Then, when all of this work is done, you can think about coding... maybe.

2) Lack of Capitalization

I once had a start-up call me and tell me he had a $5K budget for his mobile app e-commerce project. He then asked me what I could build for $5K. I suggested to him that if his budget was $5K, that he should consider opening an Etsy or eBay store and use the money to build inventory and start a marketing campaign because all you can do with $5K is fail. When a company calls us and we begin talking about their project, I bring up the money in the first call because there are only four options.

a) Either you a rich and are self-funding your project ( it happens, but not very often)

b) You have the funds to get to an MVP and then plan to raise capital from investors, family, and friends (pretty good approach)

c) You already have your lender, investor, or private equity group set-up and you are ready to begin

d) You've three years of corporate and personal tax returns, have a good credit score, and can work with a local bank, SBA, or credit union for funding

Here is the question we hear every week. "How much does it cost to build a mobile app?" and I'll tell you exactly what I tell every person who calls Los Angeles Bizz. Development costs vary from an entry point of about $30,000 to over $500,000.

So what is a company supposed to do when they don't know how much it is really going to cost to build an app? It is okay to start a project with limited funds and/or with savings, but unless you are independently wealthy, you will need to quickly assemble a plan where Los Angeles Bizz can help you create your MVP... because, without an MVP, no one is going to give you a look.

3) A Poor Marketing Plan

Let me be the first one to say that on more than one occasion, I have crashed marketing plans 10 miles short of the nearest runway. It was not pretty, and it was very expensive. As a general rule of thumb, I recommend to our clients that for every $1 they spend in creating their MVP and/or mobile app, that they have at least another $1 set aside for marketing. Launching a mobile app on the app stores means nothing, especially when you consider that 70% of apps launched never have a download past the third day of release, and some reports say it is as high as 80%.

So, what marketing tactics can be applied to get your app into the marketplace? Three things. First, you must have a group of friends, evangelists, and family who are willing to download and use your app during the testing phase of a project. This may not sound like marketing, but it is some of the best damn marketing you will ever do because your family and friends will be brutal… and brutal is good. Second, know who your audience is and start culling their contact details and prep for major release announcements, and not just with postcards and email. You need to be on social media platforms like Facebook, LinkedIn, and Instagram. You also need to contact business-friendly resources like Business Radio X, KABC Talk Radio, and KEIB "The Patriot", and Third, launch your accompanying app's website. Yes, the website. If you are a start-up, you will still need a great domain name to go along with your app's launch, and if you are an established business, you will need to modify your existing website to reflect and accommodate downloading the app from the Apple Store or Google Play.

4) Unable to play the "long game"

The statistics are shuttering. I have heard everything from 50% to 80% of all mobile launches fail. A common stat is that a mobile app is launched every 8 seconds, and that may very well be accurate, but the more accurate statistic that no one talks about, assuming the 8-second rule is correct, should be "of the 11,500 apps launched every day, 9,200 will fail in a matter of weeks". Why do you think Apple and Google, when first applying for access to their stores, require the first year to be paid in advance? Even Apple and Google understand the high mortality rate of mobile apps. That said, you must be able to play the long game. This is not a new concept. The long game has been a business strategy in place for centuries. The problem with a lot of mobile app projects is that people falsely believe they have crossed the finish line when they launch. What we tell our clients is that the day you launch your mobile app is the day you have gotten your app to the starting line. Now you have to actually race. So, you must have a long term strategy in place that includes milestones, such as X number of downloads in the first quarter, second quarter, etc. You must also have funds available to iterate your app, and do not worry, your customers will tell you what they love or hate.

Recapping, as the famous project management quote so eloquently puts it, "you can't manage what you can't measure", and mobile app development is no different. You need a well-defined stack of wireframes, use-case scenarios, algorithms, programming, business, and functional requirements before any programming starts. For start-ups, you must have the right amount of capital to get to market. Never ask a mouse (your budget) to eat a watermelon (app deliverables). The mouse dies every time. If you are a start-up, call us to get funding help... then start your scoping/MVP. If you are an established company, put together three years of tax returns and P&L's, then call us. We have resources to help you get funding up to $2MM. The adage "if you build it, they will come" does not work with mobile apps. You do not necessarily need a one-hundred-page marketing plan, but you need a plan and a plan that you can change as you roll out the app(s). Lastly, Starbucks had (1) location from 1971 until 1984. That is 13 years with one location, so you could say that Starbucks was definitely playing the long game... and it paid off. Unless you have the idea of the century, that is already past the provisional patent stage, plan long term.

John Tomblin is a software and mobile app solutions architect. He has provided hundreds of presentations to audiences from 3 to 300 from California to Texas. He is a twice published author of two books, and he is the founder and general manager of Sofvue, DataTitan, and Office Atlas, a SaaS application platform with over 24,000 office developments and 8,000 member companies.




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