Opinion and Return on Technology

ALTOM: Businesses should be suspicious of app trap

May 19, 2012

Today’s mobile app mania reminds me of when the Web was young and every business had to have its own website, which fueled a gold rush among nieces and nephews with some HTML chops.

Most business folk had no idea how much a website cost to produce, maintain and update. But, by golly, everybody else was getting one, and no one thought a modern company could survive without one.

Soon, the budget sites began to look like what they were—cheap—while the big-money sites looked better and more expensive, because that’s what they were. Even today, few businesses make much money on their sites. They don’t even make much that’s traceable to their sites.

Just as the “gotta have me one” phase was passing, along came smartphones, tablets and apps. The conga line formed again, with businesses longing to develop their own apps. Many have come to regret it.

I should say at the outset that I don’t believe all apps are wasted bytes. Parkindy.net, for example, has an app for finding open parking spaces along Mass Ave, in Broad Ripple, and on Monument Circle. I haven’t tried it myself, but it’s something that drivers have dreamed about for years. I suspect the app has limited use at peak times when you really need it, because by the time the space is detected, processed and sent out to you on your phone, you couldn’t get there in time. Still, it shows how apps can, theoretically, be useful. The problem is getting them to pay for themselves.

App costs can vary by orders of magnitude, just as websites can. Most are intended to feed content to subscribers, just as websites are. Local bands, discount retailers, businesses with variable hours, restaurants with quickly changing menus, and the like are probably the most likely to be tempted by the siren song of writing an app.

They’re also the ones most likely to use cheap app services. For example, MyAppBuilder (myappbuilder.com) can convert your blog into an app for a nominal cost. Bigger content vendors, such as major magazines, ramp up both expectations and cost by essentially feeding their product to handheld devices. Those costs also include middleman money, such as Apple’s insistence on taking a cut of app download revenue from its apps store.

Apps come with other expensive challenges. Smartphone screens don’t read like tablet screens do, so the content may have to be offered in more than one format, dramatically increasing costs.

Apps can also be limiting. They’re sometimes called “walled gardens,” because they’re lovely but sealed off from other content. They lack the links that Web visitors are used to.

Despite the energizing hype around apps, most don’t get used much, and most don’t make anybody any money. Surveys demonstrate that apps are downloaded for the same reason people buy candy bars at the checkout lane, as an impulse item. The difference is that the enjoyment provided by the candy bar might last longer. Most app downloads are used a few times, then never again.

A few apps, like Angry Birds, take off spectacularly. Most fail spectacularly to do much of anything. An app can cost tens of thousands of dollars to develop, and might sell for a buck a download, which means only the big winners can hope to make back the investment. Games might just limp across the profitability finish line, but anything else has a much harder time. Apps pour into the online world at the rate of some 2,000 per day. What do you think the odds are that yours will stand out in that ocean of distraction?

Marketing gurus often tout apps as today’s newest marketing solution. I have my doubts, based on the evidence already presented. To get any bang for that buck, you have to give away the app and hope your prospects and customers download and use the thing in enough numbers to have a detectable ROI. You’ll need to keep your website, too, with all its attendant costs and hopeful return on investment.

I’m not a big believer in charging off all such fanciful collateral to the marketing budget, where sensible ROI goes to die. I don’t deny that “branding” has some value; I just don’t like relegating it to the hidden lines in the balance sheet, like families used to conceal crazy relatives in the attic.

Apps might work for you, just as barcodes or an expensive website might return value for you, too, if properly applied. But I believe in careful planning, cheap experimentation, and monitoring. Insolvency? Yeah, there’s an app for that.•

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Altom is an independent local technology consultant. His column appears every other week. He can be reached at taltom@ibj.com.

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