So you want to buy an app or an app portfolio?
But before you initiate negotiations with the publisher, you will want to go into the process knowing a lot more than: “the app is cool and it has a nice icon.”
So in this post, we will show you how to take a look at the key things that you should research, so you have a much better idea of how much you should pay.
Before we begin, remember that we are app marketers and developers, not lawyers.
This is not legal advice of any kind. It is simply meant to give you a checklist of basic things that you should look at before you approach an app publisher, to possibly purchase their app/portfolio.
Seek the advice of a licensed lawyer or tax advisor if you have any questions about the acquisition process.
Value is in the Eye of the Beholder
There are dozens of reasons that investors may want to buy an app/portfolio. They can include:
- Cash flow
- Acquire a brand
- Useful technology
- Complement an existing current portfolio
- “Fixer upper” potential
- Eliminate the competition
- Get access to a bigger user base
So before you start researching an app, make sure that you are clear about what you want to accomplish with the purchase and focus on that goal.
It can be easy to be tempted to purchase an app for reasons that are not related to primary goal.
Overall Demand While Buying Apps
The first question that you should ask yourself about an app/portfolio is:
Is there demand for apps like this?
If there is very little demand for the apps you are looking at buying, then you should probably stop right now.
Unless there is something that you know about this market that most people don’t, there needs to be proven demand, if you are to have any chance of success.
This may seem elementary, but in the heat of the moment, it can be easy to get caught up in how cool an app is, and throw demand out the window.
To get an idea of how much demand there is for a certain type of app, you can do a couple of things.
First, take a look at the keywords associated with these apps. Is the Search Score for most of these keywords above 20? This is a core ASO metric that shows you how many people are searching for a keyword.
You can also go directly to the app stores and do a keyword search for these keywords. If no suggestions come up for a keyword search, then you might be in trouble.
Second, you can look at the total number of apps that rank for each keyword. Having a lot of competing apps can seem like a bad thing, but it also shows that there is demand for these apps.
If an app has almost no competitors, it probably isn’t revolutionary. It’s more likely that there is very little demand.
Strength of Competition While Buying an App
Now you need to do a competitive analysis of other apps that are in the same niche. This will give you a better idea if you are going to buy an app that can be competitive or if you are buying an app that doesn’t have any chance at all to compete with similar apps under the same niche.
First, get the estimated monthly downloads for the apps that you want to purchase. You can do this by searching for an app in the search bar at the top of the screen, inside the MobileAction platform.
If you don’t have a MobileAction account yet, you can sign up for free account here.
Select your target app, then add it to your watchlist.
After you add the app, you can view the App Report to see the estimated downloads and revenue for the app, if you are subscribed to Market Intelligence.
Next, you will want to see how the estimated downloads of your target app compares to similar apps in its niche. The easiest way to do this is to look at our Top Charts.
Select your app category, app store and country. Then scroll through the charts to find apps that are similar to the apps you want to buy.
Again, if you are subscribed to Market Intelligence, you will be able to see estimated download for each app. This will give you a good idea of how well your target apps stack up against the competition.
The Visibility Score basically measures how easy it is to find an app on its respective app store. This takes into account chart rankings, keyword rankings and more.
So if the competing apps have low Visibility Scores, then that is an indication that this is a less competitive niche. Here is an example of a highly competitive niche.
Barrier to Entry
One thing that you should also look for in certain categories, is a proliferation of clones. If there are a ton of very similar apps out there, then this probably isn’t a good market to get into. It will be too hard to stand out and too easy to create a lookalike.
If there is demand and your target apps can be competitive, then it’s time to drill down into user reviews. What do people think of your target apps and the competition?
You want to find out things like:
- What are some of the features that users wish were in competing apps?
- What do users love about a target app?
- What is the overall sentiment towards the apps you are researching?
- Is there room for improvement in your target apps?
To get a complete list of keywords that you can search for in user reviews to get this information, read Review Mining guide.
Then jump over to category rankings and find out how well your target apps rank on the Top Charts. This is easy with our Category Rankings module.
For example in our article about how Lyft passed Uber in downloads, we showed you how the two apps compared in historical chart rankings.
You can add multiple apps to the same chart, to see rankings over time. This is yet another way that you can gauge the competition.
Caution: If you see an app that is not on the charts, then has rankings that jump up suddenly…around the time that it is being sold…then beware. The publisher may be using black hat tactics to boost their rankings and get a higher sales price. Apps that have a long track record of steady rankings (no matter how low) are much more trustworthy.
This can be a great “fixer-upper metric”.
If an app is already doing well without good App Store Optimization, improving the ASO of the app can dramatically increase the number of downloads of the app…without any additional development cost.
It’s like buying a house that is structurally sound, but is priced way under market because it looks ugly. A little cosmetic work can go a long way.
The fastest way to assess the overall keyword health of any App Store or Play Store app is to use the ASO Report. It will show you exactly how many keywords an app is already ranking for.
For example, here is an ASO Report for a Google Play Android app that could use some help. The app only ranks in the top 10, for 10 keywords.
That is low for the Play Store. If this app is already getting a lot of downloads, then a few ASO tweaks can boost downloads significantly.
Business and App Store Structure
Finally, consider how the current owner of the app has setup the app, portfolio or company that you are interested in.
Look for things like:
- Does the existing publisher account and app meet the criteria (Apple | Google) to transfer the app?
- Can you buy the company that owns the app/portfolio, without having to actually transfer ownership of the app(s)?
- Has the current owner kept good development records of all of the apps in a portfolio?
Buying apps can be exciting, but be sure that you look at all of the details of the transaction. Otherwise, it can end up being more trouble than its worth.
Once you have this information about an app or a portfolio, you are ready to make contact with the publisher. Some of these app metrics, like downloads and revenue, are estimated.
But going in with a good estimate of what you are working with, is better than not even knowing what ballpark you are in. So the next step in the due diligence process is to get verified download and revenue statements from the publisher.
Once you get some solid numbers, it all comes down to your negotiation skills and having the discipline to walk away, if the asking price is too high.
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