What would happen if you treated apps as products — as though they were books, CDs or toys — instead of businesses, and built a company to publish them; like a record company does for music, or a publisher does for books?
You’d end with something that looks very much like AppVillage, a new virtual incubator for apps, founded by Steve Fanale and Patick Visser. As Fanale explains, the company will collect ideas for apps from people who don’t have the knowledge or time to actually build them, and pull together virtual teams to build and market each app.
“AppVillage has a virtual development environment where people can build and manage these projects,” says Fanale. “We take on the responsibility of managing the project and marketing the app.”
Once the app is published, everyone involved in the project; from the person who came up with the idea, through to the iPhone developer and project manager, earns royalties from the sales, rather than taking an income or equity.
AppVillage has received more than 150 ideas — on everything from iPhone games to fashion apps. Fanale says around 30 of these are worth progressing to the next stage. AppVillage has just recruited one project manager, and is hunting for another. It will gradually build teams or ‘villages’ which will deliver the apps.
“We can’t ask a developer to do it all on sweat equity, so we will be recruiting for some positions. Other than that, we’ll seek out people to join a village — we have people already in North America, Russia and Europe.”
Rewarding contributors with royalties has some significant advantages for AppVillage: it removes the need for complicated payroll structures, motivates staff to sell the apps, and allows the company to avoid the tax issues associated with handing over equity. Fanale says the apps will be released by AppVillage, removing the legal paperwork required to set up individual companies. The administration of royalties is much simpler — if income comes in, you pay a percentage to each individual in the ‘village’.
AppVillage received some initial seed funding from Matt Griffin, CEO of deepend, a digital agency based in Sydney. The investment was worth around $250,000, and included a mix of cash and in-kind support, like IT and desk space at the deepend offices in Surry Hills. Now Fanale is currently trying to raise another $1 million — this will cover setup costs and allow AppVillage to employee several project management and development staff. The remainder will go towards building and marketing the various apps which will be built.
There is a big difference between a web-based tech startup and an app product, says Fanale. The challenge with an app is turning it into a commercially viable business. AppVillage will aim to release between 15-20 apps next year, possibly even more. Fanale is looking at apps with a 12 month lifecycle. Any apps that show strong traction will be spun out into standalone businesses — at that point AppVillage would look to incubators like Foundry or Pollenizer for assistance.
Some of the most successful app developers have expanded into other products; possibly the best example of this is Angry Birds. As the Guardian reported in October, the game has been downloaded over one billion times; yet the brand has been extended into a franchise of other games, an animation series, a Star Wars collaboration, and even a debit card for kids.
“Angry Birds produced a top-selling app, but the business is really licensing the brand. They’ve got fluffy toys, t-shirts — that’s where most of the money is made,” says Fanale. He thinks we’ll see more apps that bridge online and offline, like Griffin’s remote control helicopter which can be flown using an iPhone. Another recent example is Tiggly, the iPad app allowing toddlers to interact with the device using physical shapes. Tiggly is trying to raise $50,000 on Kickstarter to help fund production.
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