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Why I won't purchase an iPhone Business for $100000 today

We’ve been reading about it on Twitter for the past 2 days, now even TUAW picked up the story of an iPhone Developer who wishes to sell his entire business for $100000. Leaving out of our consideration that probably nobody has this much money around anyway it’s still an interesting impulse to start thinking of how much your own iPhone business would actually sell at…. should you ever WANT TO sell it.

With the seemingly limited journalistic means of TUAW all the author came up with was some general quotes and rants. I dug a bit deeper and think it’s interesting to write down what I found in neutrally evaluating this offer. TUAW repeats the seller’s offer on how he will support you, hand over everything, yadi yadi yadi.

But we all are children of numbers and algorithms. So I think we deserve a little bit deeper analysis. This I will attempt in this article.

Usually the value of a business is estimated by taking the estimated future income for 5-6 years. The owner of this business claims $100-$150 of daily royalties. This is the amount that the owner quoted to me when I asked him. So this puts the value of this business into the theoretical range of $219 – $328k.

By asking for less than half this amount he’s basically telling the prospective buyer that he “needs out”. And offers an amortization of less than 3 years. Assuming of course that the sales stay more or less constant for this time. If we consider a decreasing long tail of the sales it might take up to 5 years so $100k is a realistic asking price.

As per my suggestion he also put sales data onto his site so that people might form a more founded opinion about his offer. This shows that his business shows a healthy growth until two months ago, with a steep decline in the last month. Total royalties earned so far are 28,156.57 Dollars shown on the chart. So 3-4 years worth of annual sales might amortize your $100000.

100k_business_sales

There’s a downside as well. If 87 apps ONLY make $100 a day, then this means that most of his apps can be only generating around $1 a day, which equates to 1-2 sales a day. This is the typical pattern of apps that very few customers are interested in but still – on a market of millions of iphones – there’s always SOMEBODY who is willing to spend a buck.

In case of business that don’t have any real income (like Facebook or Twitter) often investors judge the value by the number of customers. The theory goes that if you have millions of eyes on the product(s) then the company must be worth something. My friends over at Applyzer where so kind to provide me with a list of sales ranks for JBMJBM. Notice anything special?

Name Rank Category Price Country
Aggieland VIP Card 53 Business FREE Uruguay
San Marcos VIP Card 86 Business FREE Egypt
Rule Of 72 55 Finance $0.99 Qatar
Sit Up Counter (Accelerometer Auto-Counter) 61 Healthcare & Fitness $0.99 Pakistan
Sit Up Counter (Accelerometer Auto-Counter) 63 Healthcare & Fitness $0.99 Russia
Antz 66 Lifestyle $0.99 Argentina
Antz 10 Lifestyle $0.99 Brazil
Antz 12 Lifestyle $0.99 Colombia
Antz 60 Lifestyle $0.99 Costa Rica
Antz 41 Lifestyle $0.99 Czech Republic
Antz 97 Lifestyle $0.99 India
Antz 78 Lifestyle $0.99 Lebanon
Antz 53 Lifestyle $0.99 Mexico
Antz 31 Lifestyle $0.99 New Zealand
Antz 80 Lifestyle $0.99 Panama
Antz 11 Lifestyle $0.99 Qatar
Antz 24 Lifestyle $0.99 Saudi Arabia
Antz 99 Lifestyle $0.99 Singapore
Antz 14 Lifestyle $0.99 South Africa
Antz 26 Lifestyle $0.99 Thailand
Antz 69 Lifestyle $0.99 United Arab Emirates
Antz 25 Lifestyle $0.99 Venezuela
Antz 9 Lifestyle $0.99 Dominican Republic
Antz 45 Lifestyle $0.99 Estonia
Pool / Billiards Rules 79 Sports $0.99 Argentina
Sport Rule Books – Locally Stored 83 Sports $0.99 Austria
Pool / Billiards Rules 27 Sports $0.99 Brazil
Pool / Billiards Rules 13 Sports $0.99 China
iSexyRef2 (Sexy Referee Signals) 80 Sports $0.99 China
iSexyRef2 (Sexy Referee Signals) 99 Sports $0.99 Colombia
Hockey Rules 78 Sports $0.99 Costa Rica
Pool / Billiards Rules 79 Sports $0.99 Costa Rica
Soccer / Football Rules 86 Sports $0.99 Croatia
Poker Rules & Hands 54 Sports $0.99 Denmark
Football Rule Book 84 Sports $0.99 Denmark
Pool / Billiards Rules 44 Sports $0.99 El Salvador
Poker Rules & Hands 96 Sports $0.99 India
Pool / Billiards Rules 72 Sports $0.99 Korea
Tennis Rule Book 75 Sports $0.99 Kuwait
Poker Rules & Hands 48 Sports $0.99 Lebanon
Pool / Billiards Rules 85 Sports $0.99 Lebanon
Poker Rules & Hands 76 Sports $0.99 Luxembourg
Pro Rodeo Fan 6 Sports $0.99 Panama
BIG Red College Sports Fan (Arkansas) 61 Sports $0.99 Panama
iReferee (Referee Signals) 76 Sports $0.99 Panama
iSexyRef2 (Sexy Referee Signals) 91 Sports $0.99 Peru
Pool / Billiards Rules 74 Sports $0.99 Phillipines
Poker Rules & Hands 65 Sports $0.99 Portugal
Pool / Billiards Rules 26 Sports $0.99 Qatar
Basketball Rule Book 53 Sports $0.99 Romania
Pool / Billiards Rules 82 Sports $0.99 Romania
Soccer / Football Rules 93 Sports $0.99 Saudi Arabia
Poker Rules & Hands 84 Sports $0.99 Turkey
Pool / Billiards Rules 30 Sports $0.99 United Arab Emirates
iSexyRef2 (Sexy Referee Signals) 72 Sports $0.99 United Arab Emirates
Pool / Billiards Rules 53 Sports $0.99 Vietnam
iSexyRef (Sexy Referee Signals) 62 Sports $0.99 Vietnam
Poker Rules & Hands 32 Sports $0.99 Dominican Republic
Poker Rules & Hands 12 Sports $0.99 Uruguay
Pool / Billiards Rules 3 Sports $0.99 Moldova
Basketball Rule Book 23 Sports $0.99 Malta
Twenty One (Blackjack, 21) 19 Sports $1.19 Latvia
iSexyRef2 (Sexy Referee Signals) 41 Sports $0.99 Latvia
Pool / Billiards Rules 8 Sports $0.99 Ecuador
Twenty One (Blackjack, 21) 57 Sports $1.19 Egypt
Gas Pedal 80 Games/Racing $0.99 Slovenia

Hm, these apps are absent from the biggest (read “toughest”) markets USA and Germany. This again serves to prove the point that the resulting income is luck rather than high quality produce. Since there is no focus to any market that could easily be upsold to new or improved products it is even more of a tough sell.

I am not saying that this guys’s apps are crap. I did only glance over the list and have a look at the rankings in Applyzer. But all the indicators tell me that this business comes with a maintenance hell. On his eBay page he gives “time consuming” as one of the reasons for his wish to find a buyer. I believe this to be a serious understatement.┬áThe first thing a buyer would have to do is to seriously simplify the portfolio. Most likely also folding several similar apps into one and selling the different content via in-app-purchase.

To also say something positive: This guy has to be commended for having the tenacity that is necessary to create that many apps and the stubbornness required to get all those apps past the critical eyes of the Apple Review Team. And finally for stirring some emotions in all small-time iPhone developers thinking to themselves “Hm, I could take a shortcut into a working business. Then I would not have to come up with so many app ideas”.

I came to the conclusion that I will have to pass on this opportunity because I don’t think this business is working or at least workable in the long term.


Categories: Business

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