Purchasing an existing mobile app or game can be a strategic move to quickly enter a market or expand your digital portfolio. However, it’s essential to evaluate several critical metrics before making a purchase. This guide will help you understand the key factors to consider to ensure you make an informed and profitable decision.

Understanding Your Goals and Requirements

Before diving into the metrics, it’s important to clarify your own goals and requirements. This will help you evaluate potential acquisitions more effectively.

Define Your Objectives

Why are you interested in buying an existing app or game? Are you looking to expand your portfolio, generate revenue, acquire new users, or enhance your brand? Clear objectives will guide your evaluation process and ensure the app or game aligns with your strategic goals.

Determine Your Budget

Establish a realistic budget for the acquisition. Consider not just the purchase price but also any additional costs such as marketing, updates, and maintenance. Understanding your financial constraints will help you shortlist suitable options.

Evaluating Financial Performance

The financial performance of an app or game is a crucial metric to consider. It gives you an idea of its profitability and potential return on investment.

Revenue Streams

Analyze the app’s or game’s revenue streams. Is the income primarily from in-app purchases, ads, or subscriptions? Understanding the sources of revenue will help you assess its sustainability and growth potential.

Profit Margins

Evaluate the profit margins by subtracting the operational costs from the total revenue. High profit margins indicate efficient operations and a potentially lucrative acquisition. Be wary of apps with high revenues but low profit margins due to excessive costs.

Analyzing User Metrics

User metrics provide insights into the app’s or game’s popularity, engagement, and growth potential. These are essential for assessing its long-term viability.

Active Users

Look at the number of active users, both daily (DAU) and monthly (MAU). A high number of active users indicates strong user engagement and retention. Compare these figures over time to assess growth trends.

User Retention Rate

The user retention rate measures how well the app or game keeps users engaged over time. High retention rates suggest that users find value and satisfaction, which is critical for long-term success.

User Acquisition Cost (UAC)

Calculate the cost of acquiring each new user. A lower UAC indicates efficient marketing and user acquisition strategies. Compare this with the lifetime value (LTV) of users to assess the overall profitability of the app or game.

Reviewing Technical Aspects

Technical metrics are crucial for understanding the app’s or game’s performance, scalability, and future maintenance requirements.

Code Quality

Assess the quality of the codebase. Poorly written code can lead to bugs, crashes, and high maintenance costs. If you’re not technically inclined, consider hiring a developer to review the code.

Performance Metrics

Analyze performance metrics such as load times, crash rates, and user ratings regarding performance. A high-performing app or game provides a better user experience and is more likely to succeed in the long run.

Technology Stack

Evaluate the technology stack used in the app or game. Ensure that it’s built using modern, scalable technologies. Outdated technology can lead to increased maintenance costs and challenges in future updates.

Assessing Market Position and Competitiveness

Understanding the market position and competitiveness of the app or game will help you gauge its potential for future growth and profitability.

Market Share and Competitors

Analyze the app’s or game’s market share and identify its main competitors. A strong market position with a unique value proposition can indicate a good investment opportunity. However, be cautious if the market is saturated with similar products.

User Reviews and Feedback

Read user reviews and feedback on app stores and other platforms. Positive reviews indicate user satisfaction, while negative reviews can highlight areas for improvement. Consider how addressing these issues could enhance the app’s or game’s value.

Download and Installation Rates

Check the download and installation rates over time. High and consistent download rates indicate strong user interest and effective marketing strategies. Look for any patterns or trends in these metrics to understand the app’s or game’s growth trajectory.

Legal and Compliance Factors

Legal and compliance considerations are essential to ensure a smooth acquisition and avoid future legal issues.

Intellectual Property Rights

Ensure that the app or game comes with clear and transferable intellectual property rights. This includes trademarks, copyrights, and patents. Verify that there are no ongoing legal disputes or infringements.

Compliance with Regulations

Check that the app or game complies with relevant regulations and industry standards. This includes data privacy laws (like GDPR or CCPA) and app store guidelines. Non-compliance can lead to legal issues and financial penalties.

Non-Disclosure Agreements (NDAs) and Contracts

Ensure that all necessary NDAs and contracts are in place. These documents protect your interests and ensure a smooth transition of ownership. They should cover terms of the sale, transfer of intellectual property, and any ongoing support agreements.

Finalizing Your Decision

After thorough research and evaluation, it’s time to finalize your decision.

Shortlisting and Conducting Due Diligence

Shortlist the apps or games that meet your criteria and conduct detailed due diligence. This involves verifying all the information provided, assessing any potential risks, and understanding the reasons behind the sale.

Negotiating Terms and Closing the Deal

Based on your due diligence, negotiate the terms of the acquisition. Ensure that the terms are favorable and protect your interests. Once both parties agree, close the deal and proceed with the transfer of ownership.

Conclusion

Buying an existing mobile app or game can be a strategic move to accelerate your entry into the market or expand your digital portfolio. By thoroughly evaluating financial performance, user metrics, technical aspects, market position, and legal considerations, you can make an informed decision. This will ensure that your acquisition is successful and set up for long-term growth and profitability.

FAQs

1. How can I verify the revenue figures provided by the seller? Request access to financial records and use third-party analytics tools to verify the revenue figures.

2. What should I do if the code quality of the app or game is poor? Consider the cost and feasibility of refactoring or rewriting the code. If the potential is high, it might still be worth the investment.

3. How important are user reviews and ratings in the decision-making process? User reviews and ratings provide valuable insights into user satisfaction and areas for improvement. They are crucial for assessing the app’s or game’s potential.

4. Can I change the app or game after purchasing it? Yes, but ensure you have the necessary rights and resources to make changes. Consider the impact on existing users and market position.

5. How do I ensure the app or game complies with data privacy laws? Review the app’s or game’s data handling practices and consult with legal experts to ensure compliance with relevant laws and regulations.