January 2, 2023

Why developing an app is not the same as making money.

ORIGINALLY FEATURED IN FORBES https://www.forbesargentina.com/columnistas/por-desarrollar-una-app-sinonimo-hacer-dinero-n24244

In today’s world, companies believe that developing an app will make them revenue and that everyone should have one. In reality, an app is a consequence, it is the vehicle towards an objective. It is a tool that allows you to extend or directly support a business model, but if that business model is not profitable, an app is not going to achieve anything but frustration and the misuse of funds.

Why? Because we must stop seeing apps as the end. It is important to first understand what we want to achieve, what is the best channel to achieve it, and how the business must change to use this new channel. We could say that the creation of an app should be the result of a company’s need to transform, of adapting to a new context where that app will generate income, traction and awareness, but the ultimate goal should never be the sole creation of the app. An app is the means to a goal, not the end in itself.

Take for example the case of AirBnB, which we all know. AirBnB did not achieve its success based on an app, but was the vehicle to bring its business model closer to the world. This business model was created from the opportunity of temporary rentals and particularly due to the cost of renting in the most important cities in the world. The AirBnB pitch deck is famous today and explains very well the challenges, opportunities, and the size of the market. This business could even be supported by other channels, but an app was the best channel for that time, for the type of interaction, and the context of its audience.

Instead, let’s see what happened to Google+, Google’s social service. It is estimated that the money initially invested in the platform was US$ 585 Million (according to 2011 data) and it is known that registered users spent only 3 minutes per month on the platform. Google+ was born as a response to MySpace, Facebook and others, and it was the company’s 4th attempt to enter that space. A space that clearly was and still is far from Google’s core business model.

An app must be the result of a company’s need for transformation.

While it is undeniable that the market was and is huge (the market size is estimated to be US$ 225 billion in 2022), it must be taken into account that without a valid business model it is difficult to obtain a percentage of the business and hold it. In this case, it can be said that imitation is the best form of flattery, but not the best way of doing business.

Finally, I think that for some time now we have seen the phenomenon of FOMO (Fear of Missing Out) in companies, a very emotional reaction that distances us from our values, vision, and mission because of the fear of not being left out, of being excluded. That is why if you are thinking about creating an app, the first thing I would recommend is to ask yourself: am I doing it to support my business or am I doing it just because the company next door is doing it?

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