Mobile Applications on the rise
Mobile app designing in India is on the rise. With that comes the prospect of making, selling, and using it. In 2017, Statista forecasted that the number of mobile application downloads would be 197 billion. Now that we’re almost halfway through 2019, the numbers have only heightened.
Which is to say that the demand for mobile applications in the market has been on the rise since the last couple of years. And it is going to stay so for a lot more. Thus, knowing how much your company’s application is worth can prove very helpful. So, how exactly do you go about that?
There are certain parameters that can be used to value an application. Go through them below.
14 app valuation parameters
To everyone’s disappointment, there is no set formula or procedure to value an app. However, there are selected parameters, which upon integration, give an idea of what’s your app worth. From the number of users to security measures, these metrics cover all major facets of an application and its position in the market. They look something like this.
- Number of downloads
- Ratings and reviews
- Growth rate
- User engagement
- Customer acquisition costs
- Coding quality
- Ads inclusion
- Industry standards compliance
- Piracy Threat
- Revenue regularity
The first rule of any mobile application is that it is created for a purpose. It serves a particular market, working on some aspect of it. This very thing is called its niche. And in the world of mobile marketing, some niches are more popular than the others.
For example, a gaming app is received well if it has the right graphics and is interesting to play. Which puts the gaming niche a bar above most other apps.
Hence, the niche of your application can sometimes play a major role in deciding its value. However, there are exceptions everywhere. If the service your app provides in a certain sector which is unique and helpful, the app is likely to be showed love.
Number of downloads
One of the most esteemed metrics on the question ‘how to value a mobile app’ is the number of times it has been downloaded through trusted app stores.
Usually, the success of your mobile app is directly measured by how many downloads it receives. Thus, if an app has a great number of downloads, it can be valued very high. To increase the number of downloads, you have to make sure that the app reaches the audience on the app store. And after that, it is your job to make it look worthy of a download.
On the contrary, if your app isn’t a favorite amongst the public, you may be going wrong with marketing it or in the user experience. Moreover, the downloads should be consistent. If the app has been downloaded a lot in the past but doesn’t see many conversions now, its value may drop.
As the age of a mobile app changes, so does its value. In its very first year, the app is still too young. So, metrics like annual revenue, the effect of marketing, app stability and sustainability cannot be judged in the first year itself.
The time after that can be used to plan the selling of the app. By the end of the second year, it is easy to value an app and convince buyers in its favor. And finally, after its third year, the app can be sold at premium prices. This, because by then, it has the peak number of downloads, users, and revenue.
As evident, the age of a mobile app can play as a deciding factor in its worth.
Ratings and Reviews
If you’re wondering how to calculate your app start-up’s valuation, you may want to shed some light on the ratings and reviews. For this is the factor the seller can use the most in their favor.
With good organic ratings and reviews, you create a good impression for your app. It is a known fact that the audience online checks reviews and ratings of the app most of the time before downloading it.
Hence, ratings and reviews affect the download density, popularity, as well as the valuation of your app. To increase ratings, you can encourage users to rate and review your app by adding that feature in the app itself.
The growth rate of your business directly affects the worth of your app. In the initial stages, the growth is minimal. Once the start-up figures out the audience they’re targeting and how to reach them, the growth sees an upward graph.
If the start-up is successful, it will evolve into a big company. With that, the growth will be on the rise for some time. After that, it may become steady or deplete a little, due to limitations and steadiness. If your company’s growth rate is sufficient and increasing, the value of your app also increases.
If you want to learn how to value an app start-up, consider this metric as a top priority. Without user engagement, an app won’t be successful for long. If a user downloads an app, that’s just half the battle won.
Once the user downloads the app, they may forget about it amidst the clutter of all the other apps. This can lead to less user engagement. To improve user engagement, you can post attractive offers on a regular basis. Sometimes, simply reminding them about the app also works.
Research shows that sending 1 push-notification to invite a new user to the app during the first week of its download increases retention by 71% over the next 2 months. Which proves that to keep the users engaged, you can send personalized messages, push notifications, or use other marketing strategies.
Isn’t traffic what everyone is targeting when it comes to digital marketing? Mobile apps are no exception. If you’re able to drive traffic of the app store towards your app, it increases the chances of conversion.
With more traffic, the popularity of your app increases. That can eventually lead to better business. And as the business rises, so will the demand of the app.
The next time you wonder ‘how do I estimate my app?’, make sure you’ve figured out the abandonment ratio of your app. For it is going to be a significant factor in app valuation.
Abandonment can be defined as the tendency of users to abandon the app before actually using it. The number of downloads may be on the rise on record. But if the abandonment rate is also just as high, the value of your app drastically decreases.
Stats show that 21% of the users abandon an app after using it just once, which defines the app abandonment rate.
It shows that there are issues in the user interface. Or that the app is not as well-designed as it should be, and thus fails to give a smooth user experience. Hence, beware of app abandonment if you want the big bills.
Customer acquisition costs
CAC or customer acquisition cost is the cost that a company incurs to convince a customer to buy their product or service. An important business metric, it can be a make or break for the company.
If the CAC is too high, it means that the company is making less profit. And if you’re applying CAC in your mobile app, it means that the company that has the app will have to take up all of the cost.
This may convince some buyers against investing in your app. Hence, CAC is something which should always be kept under check. If your product rates are making up for the CAC, it’s well and good. As soon as the ratio goes weak, it calls for trouble in business.
Mobile application development services should have their prime focus on this feature while making an app. The code is what decides the framework of an app. If there are any faults or limitations in coding, the app will eventually fall apart.
Hence, as a buyer, you must closely inspect the coding and documentation of the app you’re eyeing. And as a seller, make sure that the coding is flawless, so that the app can retain its functionality at all times.
The more robust the coding of an app is, the better the user experience it will offer. Hence, agreeing to use industry-affiliated coding methods and following best practices proves beneficial to the business as well as the trade of app.
Many mobile applications have allotted sections for advertisements within their design. These ads, to say the least, pay well. If your app is popular, companies will always be willing to buy some advertising space on it. This keeps a steady income at hand. And obviously, if your app is ad-inclusive, its value rises.
If your app requires an internet connection for usage, including ads can add to its value. It is also a good way to monetize the in-app traffic. Hence, when you’re investing in mobile app designing in India, make sure to go for advertisements.
Industry standards compliance
No matter how small or big your app is in the market, it is crucial that it is operating as per the industry rules. This point will always surface when one is trying to sell their app. For standard operating procedures make transferring the app credits and ownership from one company to another easy.
Moreover, if your app is compliant with the set standards, users will trust the app easily. Hence, it can also add to your company’s and app’s impression.
If you are a mobile app development company, piracy threat should be a major concern of yours. Illegal product duplication has proven as dangerous to all progressing companies, and app development is a victim of the same.
Hence, it is important to build an app which is void of piracy threats. If the buyer senses any kind of doubts or problems regarding piracy, they are going to turn away and run in the opposite direction.
Apart from that, piracy can also prove as a threat to the growth of your business. Hence, to increase the value of your app, invest in piracy protection.
In case you’re selling your app, it is sure that the seller would want to earn a regular income out of it. Thus, they will be interested in knowing how much revenue the app brings and how regularly.
Naturally, higher the revenue, more the value of your application. There’s also the regularity of revenue to consider. If there are periods when the revenue drops or spikes up, that can affect your app value positively or negatively. In case this whimsical behaviour cannot be controlled, it should be at least predictable to keep the value intact.
How to sell an app?
After you’ve calculated the worth of your application, you’re almost all set to sell it. Morally, you have to be considerate, honest, and willing to back up all your claims, and even give demos.
Technically, like selling any other thing, selling an app requires patience and strategy. Sitepoint has explained the procedure of selling an app in a simple block diagram.
If end users are customers
If your app and business function such that the customers are the end users themselves, here’s a formula for calculating app value.
App Value= NUMBER OF USERS X (USER LIFETIME VALUE [LTV] – CUSTOMER ACQUISITION COST [CAC])
Here, LTV is the amount of money the users will spend on an average on your product or service.
Be it to sell or just to keep track, knowing the worth of your mobile application can help a lot. For one, it can help you in making it even better, guide you in the further marketing of the app. Thus, when you sit down for mapping the worth of your app, make sure you take under consideration all the parameters we listed above.