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Flip this app: Secondary mobile app market quietly taking off

Low-level app sales help drive startups like Apptopia forward

By , Network World
October 12, 2012 03:17 PM ET

Network World - The practice of flipping is probably most familiar to the general public from reality TV shows like "Flip This House" on A&E. The idea is to buy a house for a lowish price, fix it up a bit, and then sell it on to a buyer, hopefully at a profit.

Now, the secondary market for Android and iOS apps is beginning to see the same pattern. App creators without the time or inclination to service or monetize their apps can simply sell them off for a flat, up-front sum of money. Buyers can then either tweak them as they like or not, and either attempt to monetize them themselves or re-sell the apps to still another party.

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To Jonathan Kay, founder of app trading website Apptopia, much of the market is driven by an imbalance between supply and demand.

"Probably 80% of people who want to get involved in mobile either don't know how to code an app or don't know an app developer," he says. "So there's this massive demand, but kind of a little bit of a barrier to entry."

The typical sale on Apptopia -- which has attracted investment from Mark Cuban, among others -- ranges between about $1,000 and $250,000, he says -- hardly Instagram territory, but more of a "micro-scale."

Kay uses the example of humor site 9gag -- which had modest success with an iPhone app, but not nearly as much as an Android app created by one of the site's users.

"Oftentimes, paying an app development shop in New York City $100,000 to build your app isn't valuable because they don't understand your business," he says.

"We have a buyer on our site ... I believe he works at a hedge fund. So he kind of has the mentality to begin with. He bought this [9gag] app for $25,000, and I'm almost positive his intent is to then flip this app back to 9gag."

Depending on the eventual fee, this might not look like a great deal to the original creator -- who could wind up with $25,000 having done all the actual work, while the speculator takes home the rest. Kay estimates that the speculator could sell the app to 9gag for $80,000 -- $120,000.

However, Kay says, some developers are creating apps specifically to sell on Apptopia. Something as simple as a slot machine app -- though it obviously couldn't be played for real money -- could nonetheless be profitable, based on the huge number of potential ads served, he says.

The emphasis, according to Kay, is on letting developers focus on what they're good at.

"Building a good app, getting a good user base ... and then they can sell it to someone who knows how to monetize it," he says.

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There are other possibilities provided by a thriving secondary market in mobile apps, according to Ty Rollin, CTO of business mobility specialist Mobiquity.

"The cool thing about this model is the analytics collected could help inform the value of an app before a developer even builds it. We're not sure how big this is yet, but like any secondary market, if there are arbitrage opportunities, people will find them!" he said in an email.

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