In the early days of app stores, when tales of developers striking it rich on mobile applications were everywhere, app development was like a gold rush for indie developers and large companies alike.

Soon, like websites in the days before the dot-com bubble burst, every brand, movie, and celebrity under the sun needed to have an app. Google’s and Apple’s app stores went from having hundreds of apps to having thousands (and then millions) in less than 10 years.

But as the amount of apps has increased, the amount of money they generate has declined — and so has the number of users adopting new apps into their routines. Now, on average, more than 75 percent of newly downloaded apps are opened once and then discarded. What once was seen as a sure thing is now just as likely to be a money-loser.

Look Before You Leap

None of this naysaying means an app can’t be successful — only that it’s no longer the easy path to success it used to be. An app can still find a sustainable audience if it delivers on advertising, builds a large user base, or acts as a platform to make money through digital, physical, or service-oriented sales.

But with costs of quality app development hovering around $200,000 and the average monthly revenue per iPhone app a mere $4,000, it’s clear relying on a large user base or an app’s advertising value can no longer be considered a solid reason to jump into the app game.

Before deciding to build a company app, ask yourself these five questions:

  • Can you afford to market it? With a glut of apps clogging up the app store, and with Apple’s notoriously terrible app search soon adding paid results into the mix, word of mouth is no longer enough. Marketing is a necessity and should be factored into the cost of building an app.
  • Do you have a content team? An app can’t just be a side project; it needs a dedicated team willing to make its content compelling and dynamic. If users open your app and aren’t hooked by what they see, your app is toast.
  • Can you handle the maintenance costs? No app is perfect out of the gate, but if it continues to be buggy because you can’t fix issues quickly, having an app might damage your reputation rather than help it. Even if your app is “perfect,” it must be regularly optimized for increasing numbers of users and annual operating system updates.
  • Do you have a product manager? Will someone take the reins and guide the app to evolve it over time? Will someone analyze customer feedback and constantly iterate based on acquisition and retention? If the answer is “no” to any of these questions, it may be time to rethink your strategy.
  • Can you afford to create a long-term platform? Some companies assume they’ll be able to sustain their platform by selling in-app purchases or offering subscriptions, but they forget Apple and Google take a cut. Considering how razor-thin many apps’ margins are, this can be the difference between a sustainable platform and one that bleeds money. Creating a platform that delivers a physical product or a service to a large user base (think Airbnb, Amazon, and Uber) has more potential to be hugely valuable.

3 Things to Do Before You Blow Your Budget

Even if you can check off all those boxes, there’s still the question of whether your app idea is compelling in the first place. Luckily, there are some things you can do before you launch that will let you take its pulse:

  1. Do some design sprints. Build out a minimum viable product or prototype, and start testing that with users. If people love it and it’s a great concept, you can try to raise some money to make the real thing.
  2. Build a web app. While a full-featured, responsive website will still usually cost more than prototyping, it’s far shy of the cost of building out an app. And it’s an excellent way to create buzz and get feedback before committing to a native app.
  3. Start with just a landing page. If you don’t want to commit to a full site, start with a single page that explains what your app idea is. You can promote it on sites such as Product Hunt or BetaList and get feedback, or even use it to start crowdfunding through Kickstarter or Indiegogo. If the app has legs there, it’s a good sign you’ll have some staying power.

Apps will continue to be a trend for the foreseeable future, but for everyone but tech giants, the get-rich-quick shine has worn off the market.

The apps that people are using — Facebook, YouTube, Google Search, Google Play — are industry incumbents with massive investments behind them. Now, with less venture capital available, it’s more difficult than ever to build an app to dethrone them.

So unless you have clear goals and a compelling reason to build an app, think before making that six-figure bet. Until then, put your company’s chips elsewhere.

Image courtesy of Shutterstock.