Fuelled by billions of smartphones, trillions of sensors and powered by nearly 5 million developers worldwide, the global app economy is entering a new and critical phase of growth.
But the sheer volume of apps (1,200 apps coming online daily based on January 2015 figures from Pocketgamer.biz) exposes a dangerous disconnect between the strategies app companies and developers must pursue to grow their business, and the app store and the financing models that will allow them to succeed.
This is why Pollen VC, a fintech company headquartered in the UK, is gaining traction with an approach that bridges what it calls “the funding gap” — the period when app companies can run out of steam waiting to get paid for their app sales or in-app purchases from the leading app stores.
In many cases the lag time between making a sale and getting paid by the app store can be up to 60 days, or more, which is an eternity in the mobile world—particularly for bootstrapped startups.
Pollen VC’s approach is to provide app and game developers faster access to revenue they’ve already earned from sales of their apps and in-app purchases, speeding up the pace at which developers can reinvest their revenues back into whatever it takes to build a sustainable business. “The app or game alone funds its own user growth, so app developers don’t need to spend their own money—or burn venture capital—to improve their app and ultimately grow user numbers,” notes Martin Macmillan, Pollen VC CEO.
By taking a feed directly from the central billing system of an app store, Pollen VC has visibility into app sales information and data that allows it to advance developers 95% of the total revenue they have earned with their apps every seven days. App developers can also choose to reinvest 100% of their daily revenues directly into paid advertising campaigns to reach and acquire new users. In this scenario, app developers can control their UA spend using the Pollen VC dashboard to monitor and add credit to ad networks accounts on a daily basis, based on their accrued app store sales.
To date, Pollen VC, founded in 2014, counts more than 50 customers including Pixonic and Sumoing and is growing rapidly. The company recently expanded its footprint beyond its London base to open offices in San Francisco, Amsterdam and Helsinki, in part to take advantage of what Macmillan observes are the “tremendous opportunities arising from a burgeoning middle class of app developers and a fair number of million-dollar apps.”
Indeed, the emergence of a ‘long tail’ of app developers (in many cases making their money with apps that target consumer tastes that run outside the mainstream) shows the app economy is evolving and maturing. It’s also a development that Pollen VC—together with Priori Data, a mobile app store data intelligence company headquartered in Berlin—was first to discover and document as part of their ongoing research program to size and analyze this dynamic digital marketplace.
A snapshot of the data produced in the first phase of the research program was released exclusively to the Harvard Business Review (where I analyzed the data and key findings).
Known as Millionaire Index, this research draws on recent app store data and a review of ‘ranked’ apps, defined as apps that have been listed among the top grossing apps in the iTunes App Store and Google Play, and tracks growth in the number of ‘long tail’ app developers and their monthly revenues. Among the findings:
- There were 1,887 App Store “millionaires” in 2015.
- Overall, over 20,000 app developers and companies will have made over $100,000 in revenues—or $8,333 per month—from their apps in 2015.
- Nearly half (45%) of app store revenues—or $2.3 billion—will have been generated by apps and games outside the Top 100 ranked apps in 2015.
At one level, the findings indicate that popular app developer surveys suggesting over half of developers live under the so-called ‘app poverty line’, or make less than $500 per app per month, might not be telling the whole story. In my view this discrepancy is likely tied to a difference in methodology, as the snapshot is based on concrete app store data and, on the other hand, popular surveys draw from the input of app developers willing to reveal their monthly revenues.
At the other end of the spectrum, the findings also prove what Pollen VC’s Macmillan calls a “recalibration of the app economy away from blockbuster app and publishers that clearly favors the emerging long tail of middle-class and millionaire app developers and companies.” And he’s not alone.
Mark Mulligan and Karol Severin of MIDiA Research, a market research and analysis firm focused on digital media content, noted early signs of the coming shift back in 2014. In their App Bubble Burst Report, they observed that “inflow of big publisher hit games was slowing” with fewer blockbuster games coming online to replace old incumbents such as Candy Crush, thus indicating that a “correction” of the app economy was inevitable and would ultimately result in a more level playing field for smaller developers.
In a November 2015 follow up post, Severin confirms the market correction is now finally underway with Monthly Active Users (MAUs) as well as Monthly Unique Payers (MUPs) for several top mobile game publishers in decline.
Connect the dots, and you will realize app revenues are no longer completely concentrated among a small number of app companies. It’s why American Banker reports fintech companies including Aprenita are also lining up with lending offers to ease the squeeze on app developers, “filling a need not being met by traditional banks, and only partially by venture capitalists and invoice-financing companies.”
However, app developers need more than a cash advance to compete and win in a marketplace where app discovery is fatally flawed and user acquisition costs are rising through the roof. They need a firm grasp of the tools and techniques that—coupled with hard-nosed business advice—will allow them to turn their apps into a smart and sustainable business.
Pollen VC 360: helping app developers with UA, so you don’t have to
Against this backdrop, it’s easy to understand why Pollen VC took the wraps off Pollen360 this month, a user acquisition advisory offering.
The centerpiece of the service is the complimentary coaching sessions open to small and medium-size app companies in the process of launching or scaling an app or game. The sessions — led by Pollen VC’s user acquisition team — take a detailed look at the developer’s existing marketing metrics and strategy, providing advice on ways and strategies to maximize reach, response rates and return on investment.
According to Pollen VC, eligibility for the initial coaching sessions will be on a limited basis and depend upon an assessment of business metrics. App developers and companies that sign on as clients can participate in additional one-to-one sessions to support them throughout their launch or scale campaigns.
To make sure the learning doesn’t stop there, Pollen VC says it will offer support sessions with resources and information via an online hub, as well as content and events showcasing expertise app companies require at every stage of the app lifecycle.
The concept gets high marks from David Lane, founder of Fat Fish Games, an independent games studio in the UK: “For us, a six-man studio with angel investment, it was about getting the best quality users into our game without dedicating a UA team to the task,” Lane says. “We had the creatives and the talent in-house, but what we lacked—and got from the session [with Pollen VC]—was an understanding around how to drill down into the data, segment and target users based on the data, and link this all back to our ROI.”
Clearly, the incredible growth of the app economy and the avalanche of apps, pegged by MIDiA to hit 6.6 million on offer by 2020, creates both issues and opportunities.
On the downside, app store search will surely be stretched beyond its limits, making it harder for apps to get found or just stand out from the competition. ASO will also stretch to cover the complete marketing funnel, requiring time, money and —above all— expertise for app companies to stay relevant and drive installs.
On the upside, companies like Pollen VC are supporting app developers and companies with models to unlock revenues, thus allowing them to advance their business while they wait for the check from the app store operator(s). Pollen VC’s new advisory offering can position the company as a new kind of ‘app bank’, providing a mix of business advice and financial services aligned with the requirements of the app economy and tailored to the needs of the app developers that power it.
About the author: Peggy Anne Salz is a mobile analyst, author and frequent guest contributor to a variety of industry outlets and blogs, including Forbes, Harvard Business Review and VentureBeat, as well as Pollen INSIGHTS where she writes about app industry research. This post is an unpaid contribution and her list of paying clients, which includes the Mobile Marketing Association and Alcatel-Lucent (Nokia), can be found on her company website.
Photo courtesy of Pixabay.