How to pick an app idea that’s guaranteed to make money

Footage from User Camp’s inaugural hackathon (2011)

I don’t know exactly what your idea for the Next Big Thing is, but I can guess. It’s probably something like this:

“There aren’t any other apps in the app store like it — it’s the first of its kind. It’ll take me a while to build the perfect app but it’s going to be beautiful. Once a few people start using it, the ad dollars are going to roll in!

Here’s what I want you to build instead: a soulless, boring app that’s devoid of cleverness — a stodgy monument to practicality. I want you to do this because I want you to make good money instead of bad art.

I’ve done it both ways and I’m never going back. Now, we only develop apps that are guaranteed to make us money on the day they’re released. If you’re disciplined about what you build, you can do the same. Here’s how.

Rule #1: Seek competition

Our most profitable app had about three hundred competitors when we launched it. Many were good. Some were downright intimidating. That’s exactly what convinced us to enter the niche — a hot space full of successful apps is incontrovertible proof of customer demand.

Pick your next niche by opening the app store’s top charts and looking for clusters of competition. Here are some examples that might lead you to your next app. (If you’re reading this, I bet that you can crank out one of these apps in two weeks.)

  • 7 photo collage apps in the Photo & Video top free chart on iPhone
  • 12 document scanner apps in the Business top paid chart on Android
  • 9 wallpaper apps in the Mac App Store overall top free chart

Before you get too excited, check that your future competitors aren’t succeeding because of some secret sauce:

  • Are they “Internet-famous” and driving lots of downloads from a massive Twitter account? (Just because Tim Ferriss could succeed with a workout app doesn’t mean you will.)
  • Is the app only succeeding because it has a ‘big brother’ in another app store, or a popular website that’s driving traffic to it?
  • Are they backed by a gajillion dollars of venture capital funny money?
  • Are they only succeeding because they’re faking their reviews, squatting on trademarks, or otherwise juicing their app?

A niche is ripe when it has lots of competition in the Top charts, and the incumbents have earned their place from honest work or good luck.

“But…isn’t that copying?” — You, probably; that’s what you’re like

Entering a niche because it’s hot isn’t ‘copying’ any more than opening a menswear store in your city’s fashion district is copying. You’ll bring your own spin to the space. There’s plenty of room for everyone.

Rule #2: No inventions

Is your app idea a clever new way for people to use their smartphones or computers?

Unless you have your Series A lined up and nothing else to do for the next five years, save it for your B.Comm. business plan competition. These dangerous ideas have no place in an indie app developer’s roadmap.

Make an app that helps people do the things they’re already doing. Don’t get into a situation where you need to create the demand for your app in addition to the supply.

Pro-tip: If your app has no direct competitors, then it’s an invention, and may God have mercy on your soul.

Rule #3: No gatekeepers

We spent $50,000 developing and marketing our first app. It was a stock market tracker for iPad.

It was beautiful — it had 3D-accelerated charts that you could pan and pinch, and it was rendered in gleaming skeuomorphic aluminium (very chic in 2011). It’s the hardest I’ve ever worked on an app, before or since.

We got press, viral traffic, and thousands of sales. Then, six months after launch, we shut it down and handed out refunds.

We were spending $5,000 a month on the stock market data feed, and our cost per user was much worse than we expected. The app lost money on every sale we made.

If you want to build the best app for browsing real estate listings or travel deals, or an app that uses your favorite website’s undocumented private API — don’t. You’ll compound the technical problem of building an app with the business problem of accessing someone else’s intellectual property.

And if there’s a capability on your platform that’s only given to a blessed few developers, or you found a cheeky grey area in your developer agreement, and you want to build an app around that, forget it. Don’t build an app that depends on a special dispensation from your platform’s landlord.

In short: Any app that you need someone else’s permission to build is a bad idea.

Rule #4: Profit from every user

An ideal app business has zero marginal costs — that is, it should cost you the same to run your app business regardless of how many users you get. But some niches (especially those with gatekeepers) have unavoidable marginal costs due to proprietary data or expensive backend processing.

If you must enter these niches, cover your costs with a subscription or usage-based charge to your users. Don’t sell your app for a one-time fee, or you’ll dread your customers actually using your app. That’s perverse.

If you think this kills your app idea because no one will pay for a subscription to it, that’s great! Your app idea was terrible. You just saved a lot of time by not developing it.

No matter what, don’t “sell at a loss and make it up on volume”. You should profit from your first app install, and also from your millionth.

Rule #5: Be allergic to perfectionism

Our most popular app launched in 2014. It was an ugly, bug-ridden piece of crap — our crash-to-session ratio was something like 30%. But it still got thousands of downloads per day (and had a 4.1-star rating) because it was focused on a single use case, and it handled that scenario well enough. Most of our customers didn’t seem to mind the lack of craftsmanship.

If you’re small like us, or you’re making an app as your ‘side hustle’, you probably can’t deliver perfection without years of work. That’s why you should pick a niche where your app can be valuable to users before it’s perfect — or even before it’s decent.

You’ve probably seen this drawing before. It shows you how to make a minimally-viable product (MVP):

Image credit: Henrik Kniberg

But there’s another way to read it. You’re small, so be realistic — you might never get past step one. Pick a niche where you can help users even with the skateboard. Let the big teams have the niches where you need the sports car just for table stakes.

Rule #6: Make money

I shouldn’t have to say this, but: apps in your niche should have an obvious way to make money, and you should have it figured out before you start coding.

This is more complicated than stuffing in a banner the day before you launch. It needs to be baked into your app design from the start. Give monetization at least the same amount of consideration that you give the transparency effects on your hamburger menu.

The best strategy depends on how customers use apps in your niche, not how they’ll use your app in particular:

  • Interstitial ads are for app types that can naturally interrupt a user’s flow with an advertisement — between levels in a game, when a new file is created, etc.
  • Native ads are for apps with content streams or timelines, where you can design a compelling, native-looking ad unit that fits seamlessly into your app. (Normal banner ads are almost worthless.)
  • In-app purchases are for apps with extras like themes or features that you can pile into an IAP to add perceived value. Alternatively, IAPs can be used to sell subscriptions. An IAP that just removes ads and “supports the developer” isn’t good enough to justify making a new app.

If your idea doesn’t fit any of the criteria above, then it should be a paid app. And if you think no one will pay for your app, then you shouldn’t develop it.

Use your power for good (money)

You might be smart, but you’re not better at knowing what customers want than the customers themselves. As an app developer, you can build almost anything — why not build something that users are guaranteed to want? Unless you’re the next Steve Jobs, you should be making faster horses, not inventing automobiles.

Instead of bringing your ideas to users, let them bring theirs to you: be humble, and build an app that you are absolutely certain users want. Build it smart, so you can profit from it. And build it fast, so you can move on to the next one.

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