I build iPhone apps and I want to approach many local media outlets who have great content and interactive capabilities on their conventional web sites and bring that to the mobile space through a better mobile web site as well as native apps. (iPhone, Android, WP7) To do this I need to find a way to make the costs appealing to them.
In the last year I have been researching how newspapers have lost nearly all of their revenue due to the loss of classifieds revenue (Ebay, Craigslist) and fewer subscriptions from younger readers who have quickly opted for the free online edition. Since the online editions always compete against any other web site out there they have not differentiated themselves very well. I learned that by creating niche apps they can reach many small audiences who have very specific interests and then with that targeted audience get better revenue from ads. People interested in the arts will use one app, another app can focus on sports while another focuses on entertainment. Each of these smaller pools can start to generate revenue after some initial investment.
To fund this development I could do the typical approach of quoting the project based on an estimate of the amount of time for me to build the app with all of the requested features. If I work at my normal hourly rate of $100/hr and it takes 40 hours to complete it would be quoted at $4000. This may be a discouraging amount to pay for a single mobile app so I am going to give them a second option for revenue sharing for ads which are placed in this app. (For ads I may do AdMob or iAds)
So assume it costs $4000 for the app, what is a reasonable rate for revenue sharing? Here is one approach that I could do.
- Charge $1000 for development
- Revenue share at 75% up to $2000
- Revenue share at 25% after $2000 is reached up to 24 months
- They are expected to promote their app in their publication
- Local businesses could be featured as a sponsor for a fee
This way their initial investment is a more accessible number and I can get revenue through the ad revenue. I understand this is a risk for me since the number of people using the app may be low for a while but over time it may increase. It may also stay at a low number. On the flip side it may become a popular app and it could reach the $2000 point quickly and I would do well at 25%.
The ad sponsor is one area where a good deal of the money could be made since ads do not typically bring in a lot of money. I could have a place available in the app for a featured sponsor who would pay to be shown there for a monthly fee. Once there are enough users the cost for the "featured sponsor" would go up and I would get the 75% or 25% cut.
It is still hard for me to project the level of use this app will get and what sort of revenue these ads could generate.
What do you think? Is 75/25 split at 50% of the total quote reasonable?
