Flip This App: Secondary Mobile App Market Quietly Taking Off

alphadogg writes "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. '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,' says the founder of one app trading site. 'So there's this massive demand, but kind of a little bit of a barrier to entry.'"

Comments

Coming soon - secondary app "bubble"

[Andy Prough]

Flipping apps, investing in secondary apps? Soon there will be app-backed derivatives, and Wall Street will melt down over bursting of the global secondary-app bubble.

Bubble?

[Anonymous Coward]

I wouldn't worry yet: it's when you start seeing "Hello World" going for thousands of dollars.

Re:Bubble?

[KZigurs]

Give it 6 months, Microsoft might just get desperate enough...

Missing the commissions

[vlm]

Now, the secondary market for Android and iOS apps is beginning to see the same pattern.

I'd disagree in that the housing bubble needed a FIRE economy sector based primarily on earning sales commissions and ignoring the underlying value, which this second hand app market doesn't have.

So with a house, regardless if its a good investment or not, a whole bunch of parasites adsorbed commissions each time a property changed hands: Real estate agents on each side, mortgage broker/bank, house inspector, title insurance, credit reporting agency, advertiser/PR firms, moving company if any, house stager if any, etc etc. You can end up with quite a bubble that way because everyone wants prices to go up regardless of value... no one has a responsibility or interest in holding the price to the value.

With this, you've got, what, maybe two lawyers more or less fixed hourly fee to handle the contract issues to trade iFart apps? I'm not seeing anyone with a motivation to raise prices other than the usual suspects (sellers, clueless investors, etc).

Furthermore I'm not seeing strawberry pickers buying these things on 105% margin looking for capital gains. And the app market is not "too big to fail" so the govt will bail out the big players and leave the small fish to fry.

I'm just not seeing "bubble" here.

Re:Missing the commissions

[tomhath]

The housing bubble started back in the 90's because banks were required to make a certain percent of their loans to low income borrowers. In return the government agreed to take over those loans when (not if) they want bad. It took a few years for the inevitable scenario to play out, but here we are.

This "secondary market" looks more like a press release from someone trying to flip an app trading site.

Re:Missing the commissions

[capedgirardeau]

Nice right wing talking points there.

There is no evidence that "Community Reinvestment Act" loans ( the loans you are talking out your rear end about about without knowing what you are talking about ) are generally considered decent loans without a major percentage being defaulted on.

Instead it is commercial loans that are often underwater and being walked away from as regular business decisions (see: strategic defaults, it is always ok when businesses do it) and home equity loans, not CRA loans that were a major factor in the 2008 melt down.

For a good set of references on the actual facts see:
http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Alleged_relation_to_2008_financial_crisis

Re:Missing the commissions

[vlm]

may associate flipping with the recent bubble - it's been going on for a long time. Flippers make their money wherever prices are rising

Although they have the same name, there is little relationship between old style home remodelers and the HGTV viewer inspired flipping.

One (older) type of flipping involves actually knowing what you're doing basically being your own GC and also putting up your own financing money, the other is TV infomercial fodder like "You painted your living room beige, house value just went up $75000"

That's because nobody mentioned a bubble

Using the new definition of flipping, any flipping is a bubble activity. Using the older "real" definition OK theoretically possible.

Not a good deal

[Bogtha]

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

There's two main problems with this. Firstly, a lot of app developers write shitty code. I've worked on some projects that I've inherited from fairly large, well-known app developers, and even they are pretty terrible. Secondly, these people buying the apps won't be able to make substantial changes because they can't code. So where does that leave them? Putting a new lick of paint on, doing some promo work, then trying to resell? There's not going to be much money in that.

The comparison with real estate is not apt. The people who buy houses, develop them, then sell them on have two things working in their favour. Firstly, they know how to actually improve a house. As the summary indicates, the people targeted by these app trading sites aren't in this position. Secondly, the demand for real estate is growing, yet supply remains the same. You can buy real estate, hang onto it for years, then sell at a profit without doing anything. That is not true of the app market. Every day there's more and more competition with apps. If you buy an app, hang onto it and don't do anything to develop it further, it will lose more and more value and eventually be worthless.

If I were to liken the app trading market to anything, it would be sites like Flippa. These are overwhelmingly made up of auto-generated sites populated by crap to sell onto shady SEO guys - just about the lowest value there is. Good luck applying that to a market where the barrier to entry is a review process that is notoriously finicky about quality.

80% of people ....

[GNUALMAFUERTE]

'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,'

Well, 80% of people who want to get involved in brain surgery don't know how to operate on the brain or don't know a brain surgeon.

If you know jack shit about development,don't get into development, you freak.

Re:80% of people ....

[Octorian]

Except somehow, scores of people have become convinced that there is a difference between "mobile app development" and "computer programming." Thus, every Tom, Dick, Harry, Web Designer, and Marketing Douchbag is now convinced that they want to and can become a "mobile app developer" even if they never learned (and have no aptitude for, or even interest in) actual programming.

Re:80% of people ....

[BasilBrush]

There is a difference. A big difference. Programming isn't the only part of developing. There's coming up with the concept, designing the UI, doing the artwork, creating the sounds, setting up the business, doing the marketing. etc. Usually programmers aren't very good at those things and need to outsource at least some of them.

There's no reason why someone who is skilled in some or all of those other things couldn't equally outsource the programming.

Re:80% of people ....

[GNUALMAFUERTE]

Except in most companies that have actually succeeded in the industry, the founder was a technical dude. Maybe not the main engineer, but at least somewhat technical. Apple, Google, Microsoft, SUN, Autodesk, Oracle: Regardless of your opinion on this companies, or they founders, you have to agree they where all techies, and they worked themselves on their first product, and it was this product that made the companies huge (Woz built the Apple 1, Page and Brin developed the google engine, Gates and Allen developed their basic interpreter, SUN's founders all came from Stanford and Berkeley, John Walker developed AutoCAD, and Larry Ellison developed Oracle for the CIA. There is a reason why I can't name so many examples of IT companies founded by non-techies: The giants of the industry all started in garages, with their later CEOs building their first product by hand.

There's an app buyer born every minute

[xxxJonBoyxxx]

I get about 2 or 3 of these in my inbox every day.

Location: United States
Asking Price: Between $500 Thousand and $1 Million
Summary: Simple is superior! Such is the case with this app. Featured in Forbes, having over 1 million PAID downloads, generating over $1,000,000 in sales and boasting a 5 star average rating with over 21,000...

I'll bet this works like this:
1) Company A writes an app
2) App goes out in store as freebie
3) App starts generating some money thanks to advertising via Company B
4) Company A goes up for sale, somebody writes big check to Company B for Company A
5) Company B rebrands a copy of Company A's app, spins up Company C and uses the same advertising campaign it used to prop up Company A's app to prop up Company C's app
6) Goto 2

$1 million dollar flashlight app.

[cherry-blossom]

There might be a few decent apps that go up for sale on apptopia, but most are ust rehased versions of apps that already exist.

Apptopia: Home of the $1 million dollar flashlight app.
http://www.apptopia.com/listings/flashlight-by-i4software

Return on investment in 1-2 years.

[cherry-blossom]

A friend just bought a package of iOS apps directly from a developer. The things he was looking for were:
Verifiable income.
Payback on investment in 1-2 years based on the current revenue.

If the app he is buying is generating $1k/month of verifiable revenue he would be looking to pay between $10-24k for the app.

There are too many clone apps and free apps out there to justify a payback time any longer than 1-2 years.