Apptopia gives app developers an exit strategy

The mobile app boom has attracted legions of developers hoping to make it rich like Instagram or OMGPOP. But the reality is that turning an app into a profitable business is still a long-shot proposition. But at least now developers can get something back for the investment by selling their apps on a new marketplace called Apptopia.
The market, which opened online last week after launching an offline beta in January, allows a developer to sell an entire app including the source code, IP, customer list, data and revenue.  The seller also signs a non-compete agreement with the buyer. The service has just about 120 apps listed for sale but ten times that number have been uploaded since it opened as developers weigh the option of selling their apps to other developers or companies. Developers put their apps up for auction, which can take about a month to complete, while Apptopia takes a 15 percent cut of the sale price.
Co-founder Jonathan Kay said the service, which has more than 500 users, is just getting going and has only brokered the sale of two apps, including graBLOX, an Android (s goog) puzzle game that that sold for $10,000. But Apptopia, based in Cambridge, MA, provides a needed service for the fast-growing mobile app market, he said, matching app makers with mediocre-performing apps on one side with other developers and companies looking to build off existing apps on the other side. Many apps are solid, he said, but fail to gain wider traction because the developers don’t have the business acumen to monetize or expand distribution. Or they just get tired of maintaining an app and want to move on.
For buyers, the marketplace provides a way to scoop up an app that may just need a new business model or better management. For companies that are looking at creating their own similar branded app, buying and customizing an app from Apptopia can be significantly cheaper than funding their own product. And for non-technical tinkerers who have wanted to get into the mobile app world, Apptopia may be an easy way to start building an app using an existing product.
“Everyone launches an app and hopes they will be rich, but most of them will not,” said Kay. “They may get good traction, but because they didn’t strike gold, they lose interest or move on to next idea.”
Clearly, this is not a place where you sell break-out hits like Instagram. But it’s not a graveyard either, Kay said. He’s looking to broker sales of apps that range from $1,000 to $150,000. These are apps that might have been hot items once but have since fallen from the spotlight. He won’t say exactly how Apptopia helps price out the apps, but factors include app store rank and estimated future revenue. Potential buyers will get a full look at the app’s performance data to help decide how much they want to bid. The service is free for now but will charge a $50 listing fee to sellers starting next month.
A buyer can’t expect to keep all of the existing users on iOS, though Kay said that in general about 60-70 percent of the overall users can be expected to say with the app through its sale. It’s harder on iOS (s aapl) because the new owners needs to prompt existing users to re-download the app after it’s been transferred. The buyer of Android apps should be able to transfer all the existing users. So far, there are slightly more iOS apps than Android apps on the marketplace.
This is still a new idea but it makes sense. Just like there are mobile development services emerging to cater to all kinds of developer needs, there’s going to be a growing desire for app developers to cash out on their middling successes. But with mobile apps continuing to grow in popularity, it also makes sense to cut down on development time by buying a finished product. There have been services that help developers sell source code like Appslit and SmartAppsters but Apptopia presents a way to package everything up for sale, which may be more attractive to some buyers.
Apptopia, which has raised around half a million dollars from ExpansionVC, still needs to do some work to make sure it does not become known as a flea market for junk apps. But its emergence is just another sign that the mobile app economy is maturing. Juniper predicted mobile apps will generate $30 billion by 2014. We hear a lot about the launch of new apps and very little about the ones that don’t make it. Apptopia can be a way for apps to live on and developers to cash out a little, which can help them pursue their next great idea.