Apps and Mobile App Company Valuations w/ Patrice Archer

How to Make an App


In this Episode – Chris & Patrice discuss mobile app company valuations.

How much is an app worth? How to evaluate an app company? Chris and Patrice discuss these questions and Patrice brings his unique financial angle to the table.

Resources and Linked Mentioned in this Episode:


Transcription:

Chris: Hi, welcome to the App Business Podcast. This is Chris again, and again were joined again by special guest Patrice Archer. Hi Patrice!
Patrice: Hey man, how you doing?
Chris: Good, good so were letting David take a week off. He’s a little bit under the weather. But we don’t wanna slow down the roll were on, were having a lot of fun, finding topics and basically talking about them with fun people to talk to, about these topics with. So we brought Patrice back, ahh you remember him from futures, like whats going on with mobile. And for those that didn’t catch that episode, I think that was episode 6. Patrice wanna do a quick intro of who you are and what you do?
Patrice: Yeah, I’ll do really quick. So episode 6, I’ll expand it a little bit more but basically 10 years in investment banking background which when your thinking about mobile app company valuations, for apps its probably quite relevant but a really really different kind of ball game for us is what we’ve kind of companies they use to value. Then 2 years ago, after the birth of my first child I quit banking and setup an app business just because that seem to be the thing to do and we made a bunch of apps mostly diet apps doing pretty well from there and I work for a NBA-driven mobile company making kick apps, huge apps for massive companies. So different angle but really really interesting. And when you piece down the show..
Chris: Yeah, I think you bring a really awesome perspective because not only do you have indie dev experience, but then you also have exposure to what big brands like $100,000 budgets and $500,000 budgets are doing which is crazy to me but..
Patrice: And the rest..and the rest , yeah that’s..ah I see you’re also saying its mobile is still the ugly little brother of the web from these companies. They don’t have the mobile phones mentality. This retailers, random fact for you, 4% of them have gone to tablet optimized site and all of that is non-transactional.
Chris: Its crazy.
Patrice: Yeah, right now I think its about 30, it should be about 40% of people have tablets and its replacing laptops. People haven’t adapted yet.
Chris: Yeah, and you know I’m gonna make them and do this stats over to top my head coz that’s what I like to do. I might be making it up, I’m not sure but something like 40-50% of the web-time like traffic is from a mobile device like a tablet or smartphone. Do you reaction, like people react to a push message compare to an email like 70% take action on a push and like 2% take action on an email. I mean its insane how big the opportunity in mobile is and how slow these big brands are to move in that direction. But as with anything, competition is good. Someones gonna make a move and everyone’s gonna make that move, and you know, we should be as entrepreneurs and small business owners, we should be more agile than this big companies with huge budgets. Their mote is huge budgets, our mote, you know the thing that our competitive advantage is agility. And so we should be able to faster, quicker and..
Patrice: And we absolutely are..
Chris: Yeah
Patrice: And I think that’s really really important point and so from, so right, so what I do on a day to day is maybe not what everybody else does is listening. People listening are probably thinking about starting their first app, and you know that’s it. Absolutely did is a great experience and its not really agile than it was when I started 2 years ago when I started it. I think it is important to realize that big companies, are scared. Big companies are throwing money at it and its fear from their perspective. And its reactive but they take a very long time and all of my class been thinking about this for 6 months for us and nothing..its just red tape.
Chris: Yeah
Patrice: Were agile and nimble.
Chris: Go ahead.
Patrice: I was just gonna say, were agile and nimble as more businesses that we can react to specific trends. So the, I don’t know…when the Olympic games were here in London, you could do apps specifically around that, big companies who take months to plan it. But not unless some people would turn around and lap in a month and just release it.
Chris: Yeah, right.
Patrice: Because they could. This is a trend right now, bam.. go now, do it quickly the best you can
Chris: And i think that’s gonna resonate a lot coz I think the audience is probably finding a good representation of both agencies and indie devs. And indie devs means indie publishers and indie developers. Or even developers at big companies, right? But I think especially for agencies because a lot of their client base isn’t moving to mobile yet or maybe they’re just putting a toe on the water and they haven’t committed and they’re still making the most of their money on building websites and SEO and things like that. You know they’re having to learn from us. Like guys who have 50 apps on the store, have been doing it 2 years, so hopefully all this content is super valuable to agencies specially because a lot of the stuff you bring to the table is the business to business type of relationships and apps and you know whats going on there in the future so all that kind of stuff.
Patrice: Yeah, and well I think it was really, when we talk about topics and the one that just keep jumping here was valuation. And I think its really, whats really important about that now is that the market is changing, so as I said on last episode its really immature market. Its a bit like the wild west mobile at the moment. And actually, mobile app company valuations started becoming highly relevant and I think roughly in tune, when Apple changed their rules so they all could begin. It was before that, if you add 10 apps and you wanted to sell one app, you have to sell all the apps. Or unless you had a personal account, then you might be able to do it
Chris: Yeah, how people were doing it before. They were shutting down the app, selling the code and then redoing the app like under a different name, so you lose all those ratings and lose access to the users, its crazy that there was even much value on apps that way. Coz I mean, a lot of times these apps that have this huge users installed basis there’s a lot of value in that and trying to replicate that with the exact same code isn’t necessarily. You cant take that for granted that’s not necessarily gonna happen right?
Patrice: Not at all. There was a problem in there so Apptopia, so they’ve been looking into buy and sell apps, look at Apptopia.com. I think that’s probably a good starting place. And I’m looking back early start of the year and that was before Apple did a change and you have this apps with 3 users and 2 dollars a revenue asking for $20,000-$50,000 bucks, how can you justify that?
Chris: You can’t.
Patrice: That was exactly what happened, they had to re-skin there to change the whole thing. Crazy.
Chris: Yeah, Apptopia also made a change around that time in June where they charge people to list their apps so it wasn’t just this crazy “Hey, I’m gonna post something and look I’ve got a $50,000 listing, ha ha ha.” You know, maybe some fool will sent me, all you need is one fool right? So now there’s like a little skin of the game, I think there’s a $30 charge to list in on Apptopia. Some other ones that are worth mentioning, Flippa just started purpose big and website sales and they just started listing mobile. Although I look yesterday and they only had like 8 mobile apps, so they must be brand new at it coz they didn’t have a whole lot, yeah. And then Chupa Mobile is another one, but they seem to be mostly selling component code which is a lot like what Apptopia seems to have. Like half of it, I was looking at valuations for this conversation, so I don’t know if I mentioned. The topic of this podcast is mobile app company valuations. And part of the reasons why this is in the news, or why this is topical is because we’ve had a lot of interesting things happen with valuations specifically Snapchat turned down $3 billion from Facebook and what was the other big one,  SuperCell receive a huge, they sold 50% of their cOmpany, $1.5 billion, so they essentially valued their company at $3 billion. And so we’ll dig in to some of the implications of  that and what the math is compared to other companies. But yes, so in researching some of the topics that might be more relevant to someone that doesn’t have, to a publisher that doesn’t have a Candy Crush or Angry Birds or Clash of Clans title in their portfolio, Apptopia is really the place to look, right? And so many apps were being  sold for a $1000 bucks with no users and its just because people want the code base like, “Oh, this is interesting, I can do something like this, I can re-skin this is a lot like where this is all going.”
Patrice: Yeah, it is and people are buying bits of code. So since we started the mastermind. So that’s a couple of years so this year going, something this year, its felt like a lifetime. And people just moved on the way they do apps, and it used to be “Hey how do I recruit a dev on Elance?” How can I review the best dev? I have this idea, how can I wire frame it? By the way, if  you wanna wire frame things, just draw it on paper and okay some people put a type on paper, its an app, put a type on paper and take photos so you can create interactive prototype. Just a quick load tip don’t spend lots of money and that’s the time you learn a new program to do wire frames just do that.

Chris: By the way, well put another divergent topic, David his real baby, okay you wanna drop down your ideas, I got the best solutions – pen and paper. You know like , that still works.
Patrice: Its a barrier, people just put this barriers in front of them. Its I have this idea. I don’t know what to do about it and I want to learn this, this wire friendly program, that well some make, which is you know, pretty easy to use but cost money and can cost money and takes time to learn. Just try that. I do design on my diet apps last week and two hours with pen and paper and I sent it to a, I’ve got  a joint venture the dev friend and he’s doing all the – and he got it, right? He was like yeah perfect. Two hours.

Chris: I use a Google, whats Google’s PowerPoint called, Google Presentation or something? Yeah I use Google Presentation, I mean I’ve been working with the same dev, agency for a little while so we have a good report going. But yeah I mean I just , I don’t even use, well I use some of it when I was first starting because its really helpful to go through the exercise of knowing where the back buttons are and remembering to put menus in the right place and stuff. But now I kind of got that cold, so yeah I use the pretty thing called Google docs. And they have no problem with it, and you know its nice interactive or you can share the docs. So okay, where were we at? We totally diverse.

 

Patrice: Well, its only about Apptopia and mobile app company valuations and how Flippa opened up the market as well and I think, so you can buy, so the point is yes you can buy bits of code. And another good one is Code Canyon, of the code inventory.

 

Chris: Yup.

 

Patrice: And you buy bits of code and then you re-skin it. You put your own graphics, or maybe doing them either maybe just put a little bit of different monetization, different title and see how it flies. So making apps now is quite easy but time back to the valuation element, whats happening with that is people are creating code and sending it 20 times making money, but also people can monetize it potentially some of the simpler game type apps which I think a little bit dangerous. What do you think about that?

 

Chris: Yeah, I agree. So you know part of this app flipping and re-skinning model and really anytime your creating a product you should have an idea of what the value of the product is. It makes a big difference and difference in how much you invest in it right? So you should have a good sense for what your products are worth, really simple part. But with the app flipping, you know lets say your buying code and your building 10 versions and the code your buying is something like 4 Pics 1 Word, you know everyone has that. And you create 10 versions of it and they might do really well. When you’re going to sell that, how much do you think its worth if you have a bunch of other people also selling the same code? And you know they might be doing just different niche but have the same performance. I don’t know that there’s a lot of value in a me2 app, when there’s 200, 400 versions of the app out there. So,I think that kind of skews mobile app company valuations to the low end because, you know, yeah it affects like what is that worth? 3 months revenue? Something like that?

 

Patrice: Yeah, maybe, maybe it did, I think this goes back to the old plan, I think the whole point of the podcast generally is all about mobile marketing is learning best practices so a lot of the guys who looks about code may not know how to market it, generally. And if you gonna buy code and do your stuff, you need to learn how to market it. I i sorry, let them ask over to come in, dip your toe if you want, don’t be put off by what were saying, you can make, you can buy code for 100 bucks, it’ll be 400 bucks you can have them at okay for 800 maybe even best not, and you can learn how to market, and you can easily make your back if you played the cards right. So I think, maybe we’ll always saying here is when we started a couple of years ago, I didn’t know it exists, you have to do the whole process. Creating an app, putting all that stuff, all the hard work. But now its a lot easy to get into and learn how to do it properly.

 

Chris: Yeah, I absolutely recommend beginners a, they, one of them have their great idea and I say don’t, if you think of so high on your idea, then do your awesome ideas second and buy some code and learn the steps even if your not working with a developer to create the app from wireframe to completion. Your still having to say “Hey, change my ad network ideas and my publisher ideas and that experience enough, I mean the publishing step enough is a big enough step. You know for people like you and me who have done a bunch, we got it down cold, but I struggled with it when I first started as most people do. Its just that you can learn with a lot less worries and a lot less skinning the game by buying code, making three versions and going through that process with the designer and developer.

 

Patrice: Absolutely. It is a sub typical of “cute puppy syndrome” but I love developers, no offense to developers listening, I love you guys may recognize yourselves, you just wanna strangle that cute puppy that is your app. You spend months building it up and yet you don’t release it. So 3 bites of  lean startup, you know MVP, send it out, take the learning, eat the rose, its the same thing with your app and your app business. Clean app, send it out in their world, see their reaction, run from it and learn and then create a big app that you have at the back of your mind for months.

 

Chris: We need to do a chat with you here with David here because he represents devs. We always get a laugh at of how different we view things. We’ve been teaming up on him which would be unfair but yeah, I mean its, I’ve seen it in lot, the more technical you are, and the more you can do, if you can develop in Objective-C and build on iOS from scratch then yeah you’d never stop tinkering and its like, stop. Stop, get it out there and see if there anyone even wants this thing, you know. Its another bit of resistance where a business type publisher type person. You know an indie dev that can’t develop, so what is that called, an indie publisher? They might mess around with like your saying, quit, get through the resistance of boss army, get a wireframe, just use pen and paper if you have to. Well the devs version of that is they can’t stop tinkering with their app, and it has to be perfect and they need to get through the resistance there and just get it out there.

 

Patrice: Absolutely

 

Chris: Okay so one thing, okay I ask this in the earlier podcast real quick. Your impressions, Snapchat, $3 billion, stupid or smart, they turned it down. Stupid or smart?

 

Patrice: That’s a stick in a medium potatoes. I think its a really interesting one, its also really tricky one. And I think personally, I would have taken the money and run. Absolutely, yeah you’d become a billionaire with the money and its incredible.

 

Chris: Yes, that’s right.

 

Patrice: However, I can see why. So you compare Snapchat you have some pretty context, say Facebook, so I guess the original social media, the original thing around there. I was doing investment banking when that went and did its IPO. People are at a $100 billion for that, you gotta be kidding

 

Chris: For which one?

 

Patrice: Facebook.

 

Chris: Oh okay, yeah, yeah

 

Patrice: Yeah you know its not so dissapointed. And the point is monetization. Facebook, people look at that one but its not really making that much profit. Guys, you can make that much revenue, yes. And I kind of what it was, it might have been something like $2 billion ah revenues that they had. That’s 50 times their revenue, for us its profit itself. Because some traditions, so my background is valuing companies. So from venture capital, private equity, and yes merging acquisitions. The way you value a company is you look at its profits, and then you go hey its making a billioner profits, I’m gonna value it at 5 times its profits. Then that’s worth $5 billion. But then whats going on, so this is relevant for apps. Whats going on with apps is, things like Snapchat is, they’re not making profit. They’re not making any money whatsoever and but again valuing it at crazy revenue multiples. Snapchat has got a lot of users and that’s what people say “Hey, you have a bunch of users, your getting incredibly far, that’s hence we go value at x and m of your users, not even your revenue, not even your profits. And I think frankly I would personally take the money and run.

 

Chris: Yeah, if I was Snapchat, and those are my first company, I would definitely do that. I would definitely take the money. I think probably whats messing those guys up a little bit is they have investors and they’re saying is “Hey, we expect this, so we want more”. But you know another thing that’s going on is Instagram was purchased for a billion dollars and I’ve seen “Gosh, its ran for a billion, its a photo editing thing, well but you know what it is. Its a social media platform, right? And now its probably worth $10 billion, so its hard to know even if you can’t monetize users what the value of the network is worth and what value of users are worth to whoever is buying, whoever you know is buying these guys.

 

Patrice: And that I think is a really important point. People are buying, they’re buying a potential, they’re buying the user base. So Facebook is going back to them again. They got demolished, as soon as they launched, their project price collapsed divided by two, pretty much?

 

Chris: yeah, yeah

 

Patrice: And it was a bit of a jerk, bit of a laugh. The reason why they divided by two is people said, “Hey, Facebook , its what we’ve been talking about, they don’t know how to monetize mobile.” Facebook know how to monetize mobile now and they’ve only known that in the last 6 months.

 

Chris: Right.

 

Patrice: And they’re absolutely killing it. So people salute the potential, and so the ability to monetize it back, short price back up. And Instagram, you know what? It can’t, it already make money not as Twitter , they have the potential and that’s where you monetize. And that’s true for big companies, but also to get down to a niche level, small apps, they have 10,000 users, no revenue, there’s potential value in that to someone else. And I think we should always talk back to these smaller companies, a lot to that,  yeah I mean Twitter is around fifth, third is Snapchat its a massive bubble man, theres not enough to it.

 

Chris: So  in doing research for this conversation, I look up at some recent IPO’s, or some recent valuation. So there’s a Korean chat company thats preparing an IPO. They’re looking for $5 billion valuation, and then are you familiar with the Korean messenger service LINE?

 

Patrice: I said, it is especially big in Japan, they, that’s a bit of 200 million users roughly.

 

Chris: Is that like a Skype alternative, or is that like a WhatsApp alternative or what is that app?

 

Patrice: So whats funny is how you localize it, so people loved it in Japan. So I think its about a quarter of the population use Line like clearly teenage girls are the key audience, mostly female. And what they intend to do in terms of monetizing , is they sell stickers which sounds absolutely crazy unless your a Japanese I think. Little stickers, cute little icons and people absolutely love it.

 

Chris: 28 billion

 

Patrice: 28 billion

 

Chris: $28 billion, so that’s why I’m thinking it has to like a Skype service or something. So to the audience guys, I’m sorry I’m running an app company and I’m trying to research  this topics. Yeah, i don’t know what Line is but $28 billion valuation.

 

Patrice: That’s the valuation. They actually made money coz they make the brands pay. So what they’ve done very cleverly is you know, they got 200 million users. I think its 95% of the revenue is all in Japan I believe. But basically, they’re killing it in Japan, that’s the go to place. If we make the brands pay, so if you’re a brand, you want to advertise on social media, then you go to Line. These guys actually making money, $28 billion is really excessive.

 

Chris: But so basically if you have users and you can monetize, oh man just put a zero at then of your valuation, right?

 

Patrice: Yeah, exactly. Another one that’s interesting to mention actually is like changing from valuation generally The WeChat is actually the fifth most used app in the world. And number is Google, Facebook in there, Youtube, Google+, the WeChat. WeChat is fifth ahead of Twitter, Skype, WhatsApp which is going incredible coz you probably have never heard of it. And it has 400 million users so its huge in China, and hello China is waking up and its now moving to South America and you.. there ambassadors, …footballer..these guys are going to make valuation absolutely amazing. Whats interesting there is threat, so Facebook throws X, hey WeChat just appeared, massive competitor. Really really interesting whats going on I suppose.

 

Chris: Yeah absolutely. And it doesn’t, so what we can take it as indie devs if you don’t have a Clash of Clans like what were saying in your portfolio, or a Candy Crush is the benefit maybe of localizing. Sensor Tower has a cool tool that’s pretty new that helps you identify other apps in your category and where they’re localized and if they’re having success. So that’s a cool tool to play with and see where maybe you should invest in localization effort. If you don’t have your keywords localized, that might be worth exploring.

 

Patrice: Sensor Tower doing amazingly well,  I’m gonna say I’m so impressed.  I think they made a nation in the market and they’re really pushy. I really recommend, a lot of, any at the time, some dev say this but I really really recommend everybody check them out. And if you’re putting an app out without checking some Sensor Tower, they’ll go turn to the WhatApp code.

 

Chris: Not cause they bought the dot.com but yeah app code.

 

Patrice: Well yeah, there’s two alternatives, but Sensor Tower is being really really proactive.

 

Chris: Yeah, Alexie is the guy that runs that. I’ve gotta get him on the show. We haven’t even started taking guest, like your a co-host right, so you’re not even a real guest sorry. But I think co-host is quite better man.

 

Patrice: Awesome.

 

Chris: Yeah, but Alexie, I’ve chatted with him a couple of times in email. He’s gotta be an interesting dude to interview because he just, I mentioned him on another podcast. He is providing a tools that I don’t even know I want yet, you know..this is cool. Ah actually, talking about mobile app company valuations, they have a tool for app valuation. Both you and I have played with this tool before. It is not, we need to get him on just for this reason because it seems way way over , there seems like

 

Patrice: They justified  themselves there, what the alien team is which way too hot.

 

Chris: Way too hot.

 

Patrice: Its so, so if you’re talking about app valuations, can we talk very briefly about SuperCell and then moved down to see what Apptopia values things.

 

Chris: Yeah

 

Patrice: So SuperCell if people don’t know, its a, sounds Hay Day. And whats the other one?

 

Chris: Clash of Clans

 

Patrice: Never heard of that game. These guys are making like 2.5 million bucks a day, so that’s the reported figure. That was back in May, when they published that.

 

Chris: Yeah, something like that.

 

Patrice: Back in April, so I was looking them up, back in April they were valued at $780 million bucks. And now, so $780 million bucks, that makes $75 million per month. So your valuation is 10 months of revenues, effectively. So you forget profits with this kind of company, so profits, you need pretty close to be assure of revenue.

 

Chris: Yeah, I think so, well actually I think their gross profit was reported at 52% which is insanely high for that type of game I guess.

 

Patrice: Absolutely. Probably they invested a lot of money right in making it games so yeah, credit to them. And interesting a bit of a test. Not a test in apps in Canada before we will see it.

 

Chris: Yeah

 

Patrice: Yeah, but talk about localization in a test market. But interesting is that SuperCell is now worth, $3 billion according to Southbank. Southbank is a very clever investor, it was a company. That’s 40 month worth of revenues. So you talk about SnapChat being worth $3 billion, I can see how SuperCell however can, I really can.

 

Chris: Yeah in fact, I want to bring that up. I have SuperCell, obviously they’re valued at $3 billion because they just got sold 51%, $1.5 billion. But so  if they’re two and a half million revenues, and that’s in May right? That puts them at 3 years revenue valuation, that seems really low for a, your not buying Clash of Clans and Hay Day. Your buying the engine that creates this mega games. And they’ve proven they can do it twice. They weren’t a one hit wonder, they did it twice. They, seems to me that that’s a bargain at 3 years. I mean I don’t have one and half billion to buy 51% but it seems like that is a bargain at 3 years. That’s top line revenue, you know? So maybe, thats 6 years profit, I mean, I don’t know that seems crazy.

 

Patrice: Its insane. If I was SnapChat, I would have taken the $3 billion, reinvest it straight away in SuperCell, you know gave them one a half billion, coz they’re gonna be killing from now. And so whats interesting to know, to me is thinking about app valuations is base on revenues. As well as Freemium, free apps with an element of buying in a protest is how your making money and how your valuing businesses. So SuperCell is truly worth as much if no more as Angry Birds or let me finish Angry Birds.

 

Chris: I do

 

Patrice: You do?

 

Chris: No, no I take it back. I have King, sorry. I don’t have Rovio.

 

Patrice: The point I wanna make on that is whats really, really interesting Angry Birds has a monetization model where you pay for the apps and (sometimes you have free apps but I think they don’t get as much, whereas the lifetime value is going to be X). Clash of Clans and Hay Day, free apps, go in there so you maximize the number of people that wanna download your app. So as you talked about with Facebook, Instagram, SnapChat, number of users you have has independent value. And these guys, they’re killing it because it turned a free user into somebody’s fan sphere. I don’t work averages but its quite a lot to face like 10 bucks or something, its not more.

 

Chris: Yeah.

 

Patrice: I think that’s where there getting it right.

 

Chris: Absolutely. We talk about this on our very first podcast,in the value of Freemium. And were talking about, like who, like I’m not the target market for my apps and whose spending $10 per app? Like in a game like Clash of Clans but then you know what, I’m also the guy that was raised on Nintendo and Play Station. So to spend 50 or 60 bucks for a video game doesn’t seem abnormal at all. And well that market is still thriving. I guess if I grew up with iPads and it wouldn’t seem crazy at all to spend $10 on Clash of Clans or a game I enjoyed. So that’s really what were looking at is, its not as much crazy as it sounds like. And I think, Clash of Clans is converting it better than $10 per user, although I’m not sure how if they consider a download a user or the user apps to pass some metric.

 

Patrice: Daily averages and metric, that would be very really interesting to figure out

 

Chris: Yeah, so here I got another question for you, I got a quick poll. King.com, or King? The Candy Crush guys versus SuperCell. How much, whose worth more?

 

Patrice: Ah, its a really tough one. Actually King, its a working , Kings got a working for me. And yeah, they must be driving nice cars man. To me again I go back to, I maybe dull, I’m gonna go back to SuperCell, that one.

 

Chris: Me too

 

Patrice: So I can see more, I can see more valuing the model long term. And interestingly Hay Day and Clash of Clans is actually similar, speaking like what we talk about Chris all the time. Platform apps.

 

Chris: Yeah.

 

Patrice: People don’t know what we mean by platform apps is, you create an app and then you re-skin it and have a different look and feel to it. And bam – you can sell 10 of it , right?

 

Chris: It a little bit

 

Patrice: Clash of Clans

 

Chris: Yeah, its a step away from pure re-skinning where you’re not just doing 4 pics 1 word ten times. Its a little bit, more of the game mechanics and the game engine are the same but the details are very different, right.

 

Patrice: And its a different target market, so they got it really right. So Hay Day, a female, teens all the way to say hit 30’s until Clash of Clans – completely different target market.

 

Chris: And they did it twice. That’s the thing I think, is so impressive is they have two of them that work, you know.

 

Patrice: Yeah

 

Chris: Okay, so King is a, file for an IPO, according to, I’ll send the link in the show notes. $5 billion, so they’re asking for $5 billion in their IPO.

 

Patrice: Again, if I was them, I’d absolutely take the money if I can get it. But talking about IPO’s, that’s an interesting. So valuations in IPO is a very very important, its where investors will buy at and basically investors say, I see value in this business at this price. I felt I would get money back and because Saga with King, makes money, that’s great. But we’ll be seeing at, say in the market generally is there’s a lot of, there’s a bit of a bubble and there’s a lot of fluctuation in prices. So a bit of a tension perhaps, but you’ll be kept people like trending video and media or Yume. They took internet videos, and I think that’s not with mobile videos in there. Advertising type things. These guys were threading at 4 to 10 times revenue and trending  video fell like 47% in one day.

 

Chris: Wow.

 

Patrice: And imported ad text, so they call Ad tech companies. All the ad tech companies, that surround that dev. You know what they did wrong? They reported figures, that did not grow as much as ad they expected. Its mostly IPO, its expectation with you.

 

Chris: Yeah

 

Patrice: And they grew I think something like 20%. They’re still making an awesome business and they made a 7 big that wasn’t expected. Yeah, were talking like what percent more of expected,  40% of the valuation. Its a different ball game.

 

Chris: Yeah, and you know also if Clash of Clans or SuperCell rather goes public, that’s a whole different thing too. They’ll be valued much higher than $3 billion because their investors are looking for 10% returns, 20% returns. Not growth but your returns and investors at a VC round are looking for a much higher return, right? So they’re taking more risks coz its more early on the company’s life and a, so they expect.

 

Patrice: They’re expecting valuations, yeah and I know were talking about that before but were talking about people like a, bigger ways, multi media. So thinking about valuation of companies, SuperCell to me fells tangible, in some way. What begin in there is pretty strong, it something there. Angry Birds, its Rovio, its something there. Instagram, its a little tight form fetched. Interesting companies if your thinking about valuations is Uber. So they’ve done a couple of rants of funding and they valued for a lot of money. I know Tim Ferris was one of the early investors, actually.

 

Chris: Yup.

 

Patrice: He’s indeed killing – this guy, a good friend, hes a legend, lets be honest. Again you have potential for business model, its disruptive, its changing things, yet a real business there. And I think there’s more valuation in there, long term when there is in something like the SnapChat, which is to me a fad.

 

Chris: Yeah, certainly more use of it you get your hands around something like that. And, so here’s my plan Patrice. I’m gonna write a book that changes thousands of peoples lives and then I’m gonna be invited to all their boards. And be an early investor, that’s my plan. That sounds easy enough, right?

 

Patrice: Yeah, calling it for our apps is ..

 

Chris: I already did the App Fastlane coz I figured its kinda like the millionaire fastlane that book fed by MJ DeMarco, which is so good.

 

Patrice: Yes. That’s a good title. Its a plugit, that’s a good book as well, very good book, there’s more to go, when your gonna be starting apps so you actually make some money from it.

 

Chris: Okay, thank you. Okay, so lets bring it back down to whats relevant to our portfolios. Right, someone that maybe you’re getting. I mean, portfolio is generating 10,000 downloads a day or you know a couple million a year is a strong portfolio for an indie dev. That’s you’ve got a small business going. You’re making some decent coin. If your monetizing at a good rate, you know 10-20%, which would be not very good if you got a game. But if you got a wide range of apps and your well diversified, 10 million, a million to ten million is pry the range of listeners if you’re not  a complete beginner. But even beginners their just future people like 10 million dollar, I mean they just haven’t got the downloads yet. Next year they’ll be calling us with 10 million downloads, right?

So, whats the best way, what do you think Apptopia valuations, what signals are you seeing from them as far as what apps are worth and what are this apps worth? When we build an app that has downloads and revenue, where can we sell things for, what do you think?

 

Patrice: That’s a really good question. And so I get back to guys, its a really immature market, its moving massively and if you’re an indie dev with and your generating some downloads you can probably get say ace of 10 times. Ten times your monthly revenue is potentially weak and get for it. But it depends on the quality of the app, the reviews, all that stuff, the amount of downloads you have. That’s what were talking about. Interestingly, you’ll seeing a number of people approaching you directly, so I’m really seeing that. What would cold offers, just saying “Hey, I will buy your app for X.” Staying there they can maximize their return more than that. So I guess, if your on that position, if you’re getting approached by people and you have a couple of apps, what do you do? Before you sell, read up about mobile marketing and listen to the podcast and find out all the tips and tricks you can maximize how much revenue you make is what people are looking at in terms of valuation is whats your last 3 months in terms of revenues. And then you, you end your own way and then you monetize it. Then you play from there, and you say 10 months of the last 3 months of revenues. So that makes sense?

 

Chris: Yeah, absolutely. Ah just another thing that we didn’t even have but ratings and reviews. If you got  a 2 star app but is generating revenue. People are buying it and wanna try to fix your code. So maybe fix whatever bugs or causing those 2 star reviews, and that will help jump your valuation as well, I’m sure.

 

Patrice: Yeah, I guess the interesting point of that is so if your thinking of starting an app business, your thinking about sending your app straight away is probably enough. It depends on two different types of people. So maybe, think “Hey, I’ll do some apps re-flipped it straight away. I’ll start selling it. I can now maximize my money.” That’s a valued business model and others who have done quite well, is “I’ve got a buddy, lets just introduce him before you guys knew and Chris. Good guy, he had the number 1 app in the US. I think he still does. Its like Talking Pet and he’s you know, hes a proper hard core dev. Came across a good business model. Hasn’t really match to monetize it properly, so he’s killing in terms of downloads, or maybe moving in terms of revenues and now his first move was sell. How do I turn this around? And how do I sell it? I think I’ve seen it on a lot more people realizing actually. So its a bit of a trend going on? Sell the app, and do another one.

 

Chris: Yeah, absolutely. And frankly this is why I became so interested in app monetization because I felt like developing apps and winners are a little bit of a crap shoot. And development sour guys are a little bit of a commodity. I mean you can go on Odesk and you can hire someone and I know people have different skills. Obviously there’s a range of skills and skill sets there but being really good in app monetization can make the difference between what, I mean obviously, what an app with a bunch of downloads makes for you and what you can ah..then ten times that right? 10 times the monthly revenue get in to your, that can make a huge impact on your bottom line. Just humongous, so yeah I need to socket them right? You encourage me to talk to, didn’t you?

 

Patrice: Yeah, yeah, just to say you’re such a global marketing representative developer. The developers can hire them on odesk, they’ve got a bunch of skills ab, hahaha…what are those skills I don’t care. Devs can be commodities which is a horrible thing to say and I think this is a whole point of this, this podcast and what were doing is the mobile marketing is what its at. That’s where you actually make the money.

 

Chris: Well, yeah and I don’t mean to disparaged developers coz design you can argue is a commodity too but development design both there’s obviously a wide range of skills associated meaning not like the languages you know necessarily. But some designers are better than others. Obviously, right? So the same things goes to developers, but things like ASO, that’s a little bit of a commodity as well. You can, there’s a, its less art and more science, right? Whereas mobile app monetization, its changing so much from week to week and month to month and quarter to quarter. Its a nice way to differentiate yourself and your apps. And you know make your investments in apps worth five, ten times more than if you weren’t really good at monetization. So, yeah.

 

Patrice: Exactly and I think that, yes I didn’t want to seem disparaging at all to devs. You know I really need them and of course you really can buddies with devs and what I found is you create a joint venture with them and mark them as dev, it rans beautifully and on top of that devs need to learn the marketing side. That’s where they make the real difference. So if you have dev guys from a previous mastermind, they’ve learned the marketing side, its been eye-opening to them and they think you make businesses on massively. I guess what were trying to achieve here is, look at the mobile marketing. Its a lot science around it.

 

Chris:That’s really interesting

 

Patrice: Frankly I find it so fascinating, digging into analytics and all that stuff is actually current.

 

Chris: Yeah, I do. And I haven’t even completely dug in to users segmentation and specific offers to various user segments? I do that a little bit coz you can do that in MoPub, but theres, I mean time analytics to specific offers. I mean there’s just so much that you can do. That’s why I tend to be a buyer at 10 month revenues. So if apps are selling a 10 month revenue, then I might not gonna sell my apps because I can keep experimenting with ASO to keep improving or maintaining downloads. But then, I can improve my monetization rate just by experimenting with new things things that work. Just implementing video ads as oppose to static interstitial ads, it greatly improves the value of the app. So, if anything..

 

Patrice: So how much goes in the middle in terms of eCPM , I’m gonna say if you got for extended, interstitial to a video instead, …how much is that metric?
Chris: So, I’m getting about $8 eCPM for video and I was getting like 2-3 on static interstitials, but like many things with ad networks there tends to be a hot one and  then it goes away. So unless you’re like ride on top of win that hot one isn’t gonna be hot anymore. So I’m average like 1 and a half to two bucks on single image interstitials. Although I implemented MoPub and I opened up the MoPub marketplace, so I have people bidding real time on my inventory and that has been like four and a half dollars. I only have that on a couple apps, so I don’t wanna say like I have enough, a larger enough sample size, but that’s been really great. So between the MoPub marketplace and incentivize video ads, man my apps are no less than doubling in value from the ad side. In-app is decreasing a little bit, although you know I expected to decrease but it hasn’t really yet, in fact its gone up because I think more people are engage with the app because coins are a little bit looser and so they’re used to buying hints and stuff. So were not buying but spending coins, right?

 

Patrice: What you’re suggesting with your listeners of the metrics, you said of your listeners, so you’re killing it with Apple users and you’ve done nothing, I was gonna swear them in French but you’ve done nothing in terms of Android.

 

Chris: Yeah.

 

Patrice: And yeah, as people should know, I think were talking about 70% of handsets out there are Android and that’s gonna keep growing. Apple’s fantastic, users spend more money, that’s where all developers published. There’s initially tend to get down the Apple world, its because spend whats there, demographics totally higher usually and Android users are more by the Freemium level. Paid apps and Android, are just, it just doesn’t work and its a highly specific utility or productivity.

 

Chris: Yup

 

Patrice: That’s a, that’s really to jam-packed your advertising strategy where you get them paid off

 

Chris: I got a couple of apps that I got in Cocos2d that well go to Google hopefully, you know by the end of this month, so on the next 10 days.

 

Patrice: Nice

 

Chris: Yeah, but you’re right, my apps are perfect for Google.

 

Patrice: Yeah

 

Chris: And I haven’t just done it yet, so

 

Patrice: That would be really interesting seeing how you succeed at that coz this is exactly where you need to have an awesome monetization strategy within the app as well as, yeah the advertising strategy of the app , that’s gonna be an interesting to see actually

 

Chris: And note for the listeners, so where all growing together right? So I’m growing as well and I’m trying new stuff and I’m you know I’m one man and I tend to say that from time to time like this is one man’s opinion, right? And Patrice is another man , so its two mans opinions. But yeah, certainly not the expert in everything, no one is in this market, that’s what it comes down to, but we like to have the conversations and keep pushing the conversations for and keep experimenting so with that, if you had sold an app on Apptopia or at another of these platforms, or even direct, it’d be really interesting what your multiple was and using Patrice’s or Apptopia has kind a method of last 3 months divided by 3 times ten, right? So using the last three months as your monthly rate and then times it with whatever that multiple is. How many months worth of revenue did you sell your app for? And that would be really interesting to share with other listeners and we became to see it. So..

 

Patrice: That’s true.

 

Chris: Alright Patrice, thanks man, yeah that was great. We’ll have you back again soon and for the listeners check out the show notes we mention an awful lot of resources and I’ll put some actionable tips in there as well. It seems like the best strategy is build the Clash of Clans app, right? Or write a book that changes tens of thousands of peoples lives. One of those two things and you’ll be a billionaire. But until then, keep checking out the podcast, keep reading and we’ll see you next time. Thanks Patrice

Patrice: Thanks Chris.