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Introduction: Chapter 1 of The Math of the App Business

Welcome to the business of apps

It should be abundantly clear by now that it’s not enough to just think up a good idea for an app, build and ship it in order to be successful. The question, then, is:

What can you focus on to make sure you’re prioritizing the right goals and tasks and making progress on a regular basis?

Simplifying and focusing your approach requires understanding the math behind your app business. When you understand the core drivers of your business, it’s much easier to measure your progress and to identify when you need to make a change in order to achieve your goals.

Over the past year, the Apptentive team has worked closely with developers on the iOS, Android and Mac OS X platforms to understand the core drivers of the emerging app business.

As more software purchases are made by consumers and large brands embrace the importance of being on consumer handheld devices, some common themes have emerged that give us confidence in our understanding of the overall app business landscape.

We hope that by sharing what we’ve learned with you and being concrete about actions you can take to improve your business, we’ll help the entire ecosystem of developers grow.

Start with the math and go from there

The app business has a simple equation.

Over the past year, we’ve been fortunate to learn a lot about the metrics and measurements that app developers are focused on in order to determine how their apps are doing. While each app has unique activities that lend themselves to differing metrics, we kept coming back to a few consistent items that make the most sense when measuring the business, regardless of the app. The items are:

  • Installs
  • The percentage of Installs that have been retained as active users on a monthly basis
  • The monthly active users
  • The monthly average revenue per user

Understanding these consistent data points enables us to say with confidence that the app business does, in fact, have a very simple equation. That equation is:The formula for revenue: Monthly Active Users = Installs multiplied by Monthly Retention Percent; Revenue = Monthly Active Users multiplied by Monthly Average Revenue per User (MRPU)

The beauty of this equation lies in its simplicity. When making decisions about your work you are able to quickly assess if you’re moving the needle on any of the components.

As we work with developers on how they can impact this equation, we find ourselves returning to the equation on a regular basis in order to track progress. Importantly, successful developers are now routinely working against this equation when thinking about their product roadmap, features and their customer feedback. Categorizing your work in terms of the impact and results you anticipate driving is a very clear way to ensure that the tasks that are most important are getting done.

In our Appendix you’ll find an example of a simple tracking worksheet that some developers use to map the equation to work items. Feel free to use it if it’s helpful for you and to share with others.

Continue to Chapter 2 — Impacting the math of your app’s business

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Post by:

Robi Ganguly