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0 pointsucaetano10y ago0 comments

Edit including an apology for my harshness.

But on the other hand, the key failure point for the app is pretty obvious: its revenue is a one time fee, and the costs are a function of how much people use the app. Based on the post, they clearly mispriced the app, since it depended on new sales to fund existing customers.

This isn't very different from a pyramid scheme (without the intention to fraud, naturally): you need to keep growing indefinitely to stay afloat, clearly impossible. When sales flattened (which they did) the company would go bust (which it did).

Another way to look at this is treating a sale as an annuity. If I sell an app for $10, expecting users to use it for 10 years with a 10% WACC, this would be equivalent to receiving a $0.13 subscription fee from each customer over the 10 years.

Therefore, if your variable cost per customer is higher than $0.13/year, you're in serious trouble. Even if it's lower, you might still not break even.

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aws_ls10y ago

I doubt if users would have paid much for this kind of App. As its use-case seems to me, a cousin of lot of other free apps like maps (directions), which are done by giants. So basically its something which people need, but have mental categorization of it as a near-free thing.

For roughly the same amount of effort, that you put in this app, you could have a flight search engine. Where you will get something per transaction.

Not taking away from the app. From what I read here, it seems it was nicely done, and must have been quite useful. But its about how much people can pay per transaction (if I can call it that.). Freemium ad based model, has been the dominant Internet culture so far, for information from the web. That is a big barrier, in my experience for these kinds of apps to do well.

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