Two Real-Life Approaches in Building an App to Be Sold
June 8, 2023
Here are my further observations on the diverse business strategies pursued by tech startup founders. I believe these strategies directly impact app development and the overall trajectory of the project.
With over a decade of experience as a developer, I have come to the realization that application owners can pursue the most diverse objectives. In fact, it's not always their primary focus to achieve financial gain. It is not uncommon for clients to prioritize user acquisition over monetization in the early stages, as I have detailed in my previous article.
Another strategy, where the app owner doesn't prioritize profitability, involves capturing a portion of the market with the intention of selling the business later. To illustrate how this can unfold in real-life scenarios, I would like to share two additional projects in which I was directly involved. In one instance, the entrepreneur's strategy paid off completely, while in the other, events took an unexpected turn. I invite you to evaluate the choices made by these clients and the outcomes they yielded.
Case #1 - Group Buying Website
This website was launched during the peak of group-buying services' popularity, facing intense competition. The client's focus was on a specific local market within an American state, aiming to attract customers away from the two leading discount coupon websites.
It wasn't just another Groupon clone. The client made sure that their service offered distinct advantages, setting it apart from the two major competitors in a favorable way for both buyers and sellers. Buyers benefited from the advantage of being able to choose from a wide range of products and services when purchasing a coupon, unlike other comparable websites that only offered discounts on identical items. On the other hand, the ability to change the prices of their goods and services in accordance with the quantity of customers who used the coupon attracted sellers. Additionally, the entrepreneur patented their unique discount model to safeguard against any attempts at replication.
Along with the website's development, the client meticulously planned a comprehensive marketing campaign. This campaign included extensive online promotion of the new service as well as offline activities to advertise it at major regional events.
As previously mentioned, the entrepreneur's strategy paid off in full. The client successfully negotiated discounts with local suppliers for their products and services and attracted a significant number of visitors to the website who were eager to purchase discount coupons. The development of this project took approximately a year from start to finish. Ultimately, the website was acquired by one of the two major competitors that had been the entrepreneur's target.
Throughout its entire existence, this project was not focused on generating profits. Building a profitable business in such a highly competitive environment would have posed significant challenges.
Case #2 - Online Travel Marketplace
In contrast to the first case, where the entrepreneur's motivations seemed primarily driven by calculated decisions, the second project stemmed from the client's personal passion. This client had a strong passion for travel and wished to expand the definition of travel beyond the typical flights and hotel accommodations provided by online travel agencies. His inspiration came from the thought of developing a platform that would unite providers of various and exotic adventure activities, such as participating in ethnic rituals or underwater fishing.
While the first client competed in an already occupied territory, the second client aimed to carve out a completely new niche by offering unique vacation options that were previously unavailable online. However, like the previous case, the ultimate client’s goal was to bring the idea to life, demonstrate the popularity of the new service, and eventually sell the business to one of the giants in the travel industry.
While we were working on the website, the client dedicated significant effort to sourcing and partnering with small companies worldwide that specialized in arranging diverse tourist activities. Similar to the first scenario, profit generation was not the main focus of this project. In fact, the website didn't even include an online payment feature. Instead, after finding the desired tour on the site, tourists had to directly negotiate with the organizing company. Just as the entrepreneur expected, travel enthusiasts warmly embraced the availability of these new exotic tours. The platform attracted a substantial user base. However, the client failed to capture the interest of the intended buyer with it.
In the face of these new circumstances, it became crucial for the project to become self-sustaining in order to survive. The costs associated with running this type of business proved to be significant. Unlike the first entrepreneur, whose business operated within a small territory, the second case involved tour organizers scattered across the globe, many of whom had no prior experience with online operations. To effectively interact with these tour organizers, a large staff of employees was required. In fact, the client had to establish a full-fledged travel agency with offices in multiple countries. Furthermore, for the client himself, this project became a full-time commitment, leaving no opportunity to earn income elsewhere.
Unfortunately, the income aspect of the project did not perform as expected. The initial plan was for the tour organizers to pay the client a percentage of the cost of each package sold. However, ensuring their compliance with this commitment proved to be a major challenge. Resolving this primary problem required significant effort, including from the developers involved in the project.
We restructured the website to minimize direct user interactions with tour organizers and ensure accurate tracking of the number of purchased packages. Additionally, continuous development was necessary to accommodate the growing user base and the increasing number of travel organizers. Extensive efforts were needed to optimize the website's performance, enhance its speed, and improve the search system. Moreover, the client consistently generated new ideas to diversify the geography and themes of the tours offered. All of these improvements were successfully implemented, but they did require additional investments.
The final outcome of this story is indeed a happy one. The client managed to sell their business, accomplishing their original intention, albeit with some modifications. It wasn't just a website presenting an idea that was sold, but a fully operational and profitable company. And the business was acquired not by a corporate giant but by regular entrepreneurs.
Business Value vs User Value Balance
Working with a diverse range of clients and being involved in various projects, I couldn't help but draw certain conclusions about how an entrepreneur's priorities impact project evolution, including the development process.
I chose to highlight these two projects as they serve as vivid examples of two distinct approaches:
- Have a clear priority of achieving a specific business goal - selling the website. Consequently, every action taken, including our own, was geared towards creating conditions that would attract the interest of monopolistic companies for acquisition.
- In contrast, place a strong emphasis on developing a service that would provide significant value to its users.
This doesn't mean that we completely neglected making the website useful in the first project. Of course, we worked on it. If the site had lacked users, no one would have bought it. However, this task was secondary, essentially serving as one of the means to accomplish the business objective. And this approach proved effective.
In the second project, we were successful in developing a fantastic tourist service that many users praised. However, we overlooked the interests of potential website buyers, and the sale didn't happen. This situation reinforces the point made in my previous article that projects are more likely to succeed when their owners devote equal attention to their business strategy and user acquisition.
The second project also highlights the impact of misguided priority selection on the development process. It usually leads to significant additional work required for restructuring and optimizing the application, project delays, and increased costs.
This is the observation I wanted to share with you – if the balance between business value and user value is not maintained during application development, it often leads to a complex and intricate project development journey.