The venture whose time had come was Apptopia: an online marketplace where developers can sell their mobile applications, including code, ownership, users and intellectual property.
“We don’t have any competitors today,” says Kay, a Finance major and Law minor who co-founded the company in November 2011.
Prospective buyers can search for apps by category or based on raw financial data such as revenue and downloads. While “Buy it Now” prices are set upfront by the seller, nearly all acquisitions on Apptopia happen through its online negotiation platform. Throughout the process, Apptopia helps both parties with everything from valuation to intellectual property transfer, escrow services to legal guidance.
Kay and co-founder Eli Sapir had the idea for Apptopia as early as 2009. “But we waited until the end of 2011 to take the leap,” he says. “At that point, it was clear the market was more saturated, and ready for a secondary market.”
Analytics support their timing. According to firms such as Statista and Canalys, global revenues from apps grew from $4.2 billion in 2009 to $7.3 billion in 2011. Last year, consumers purchased some 2.9 billion apps; that number is expected to reach 21.7 billion by 2016.
The company’s novel and promising business model attracted $1 million in seed-round financing last summer. Mark Cuban – owner of the Dallas Mavericks and an investor, producer and participant in ABC’s entrepreneurial showcase Shark Tank – jumped in early.
“When he found out what our six-month vision is, he said, “I’ll put in $500,000 right now,’” Kay recounts in an interview with online news platform BostInno. The two knew each other through Kay’s former employer.
Apptopia coffers also include $400,000 from its first supporter, Expansion Venture Capital; angel investors have brought capital up to $1.4 million.
Customers flocking to Apptopia include app development companies looking to expand their offerings, application creators who want to cash out, and Fortune 500 and 1,000 firms keen to move into the mobile space. Single sales of applications range from $500 to $235,000. As of mid-January, Apptopia had brokered about 185 acquisitions, making more than $650,000 for developers.
The staff has grown accordingly, with 13 employees on the ground in three countries besides the United States.
“Half of Apptopia’s key metrics – signups, apps listed, apps sold – are international,” says Kay. “We have people in Ukraine, Finland and Israel. Having resources around the globe allows us to build a stronger connection with our audience and users.”
Deep inventory combined with real, updated and verified data distinguishes Kay’s company from operations such as SellMyApp.com and SellMyAppliation.com. Apptopia also serves customers with a detailed description of the negotiating process and clear explanation of fees. In addition, there is a transfer agent to walk buyers and sellers through the entire procedure.
Kay forged his customer-centric skills during a year in sales and several more running the Marketing Department at Grasshopper.
“I learned how to motivate masses of people, move them from interest to action,” he says of the experience at Grasshopper, which provides virtual phone systems to entrepreneurs and small businesses.
Beyond the Banner
These days, Kay applies his powers of persuasion to inspire big brands to go mobile through Apptopia. The new revenue stream could upend conventional advertising models.
Traditionally, advertising on mobile devices has worked the same as in other venues: Companies purchase banners on apps, based on assumptions that their branding will reach broad demographics.
“But let’s say that Home Depot buys a flashlight app or Reebok buys an app that people can use to track their runs,” says Kay. The acquisition provides an opportunity for the company to integrate its brand message into an app – an activity, in other words – that closely aligns with the company’s core values.
Integrated experiences like this are very powerful, according to Kay. “They convert users at a much higher rate. So advertisers aren’t making assumptions based on demographic information, and they’re not ‘renting’ people’s time. They are providing a useful and relevant tool for their audience.”
Users who like the tool will tap it often. Every time they do, they’ll see the advertiser’s brand.
If Kay’s own success seems as easy as clicking an app, he offers this caution to budding entrepreneurs.
“Starting a company is not a business decision, it’s a life decision. You will see your friends less, and do less of the things you enjoy. But you get the opportunity to create something from scratch that didn’t exist. There are very few feelings as satisfying as that.”