Bootstrapping a $30k profit/month company from our internship earnings (Part 3)

Before diving into how we started generating over a $1000/day in revenues, be sure to sign up for our new podcast. It's called App Teardown, where we'll talk with top app developers and work with new developers to make their products take off. First episode is next week.

As mentioned in our previous post, we were now in full swing with our London Cycle app, and with it, we were truly getting our first taste of providing customer service. 

Lesson #9: Treat angry customers with respect, they could turn into your biggest fans

The immense userbase of London Cycle meant we were bombarded with mails regarding technical queries, praise and at times, something not so sweet from a disgruntled user. Often, these unhappy mails revolved around rather trivial issues, which were usually addressed in our FAQ, but ignored by the sender of the mail. We've explained at length in a separate blog post which basically concludes that rapid, helpful and polite responses to even the most dissatisfied customers can be far more beneficial than one may think. Make it a duty to be patient with the harshest of critics, don't consider it a chore.

Lesson #10: Scan the market, pick your enemy and attack!

Alrighty, so Rishi left off in the last post explaining how we had just finished a lucrative contracting job for a company called Orangebox. The two week project made us just shy of $11,000 and this was without doubt, a very respectable earning. The money meant that we could definitely run this business for another 4 months, no sweat. 

It was now approaching the middle of September (2010), and there was one omnipresent app that kept grabbing our attention - Talking Tom Cat. We had both downloaded it on our devices and found it pretty hilarious. The execution and concept was good, and by adding Facebook and YouTube integration, it had a far more viral reach than the original app it was inspired from: Talking Carl. However, the quality of the character model and animations left a lot to be desired. We felt it was time we go right up against them and show them what FIPLAB quality is all about!

Since Halloween was just around the corner, we opted to take a different tactic from all the cats, birds and puppies that spoke back to you, and decided instead on creating a little monster-like creature that was just as ugly as it was cute. Hoping for a Halloween launch, a talking pumpkin seemed way too cliched, and we unanimously boiled down to creating a gremlin. 

Lesson #11: Spend money where it matters

Many bootstrapped startups get into a habit of trying to save money everywhere, often to their own detriment. Sometimes you've got to spend big in the right areas to get results.

We searched relentlessly for an awesome pre-made 3d model that we could purchase, but honestly speaking, the stuff we came across online just wasn't anywhere near what we had in mind in terms of quality.

To make our app truly great, we felt we needed something custom made with love, so we decided to post on some design forums and also on the London College of Art job board. The job applications started pouring in, several dozen a day, and we had a ton of showreels and portfolios to look through by the end of the week. However, this one designer, Tristan, stood out from the pack. We decided there and then to hire him for the project at a cost of $3,000.

We then went through the lengthy process of sketches, numerous revisions, stressful setbacks, arguments over the phone on things such as the right level of shine on the gremlin's eyes and why it was important to get that 'emotional connection' with the character and the user. It had to be life like.

Just check out the images below to see how the gremlin developed into one of the best looking talking characters on the App Store:

Lesson #12: Never underestimate your competitors and respect what they do right

The competition had a critical feature we knew was key if Talking Gremlin was going to be a success. Social video sharing. From our research, we had found that literally thousands of Talking Tom videos were being shared through YouTube, and other talking apps that did not have this feature were doing no where near as well in terms of sales.

Rishi and our programmer James worked together round the clock to solve the numerous programming challenges we came across, from achieving a smooth and acceptable frame rate to getting the gremlin's mouth movements synced just right with the user's recorded voice. Hardest of all was the recording and ensuring that the outputted video was bug free and within an acceptable file size, so that it could quickly be uploaded to YouTube and Facebook.

We ended up doubling the time we had allocated for this project, but we had a gut feeling this app was gonna be a success. At the risk of sounding incredibly sappy, sometimes you've just gotta use that inner drive to push yourself.

I then spent the next two days tweaking my own voice on a great software called Audacity. All the laughs, cries and effects you hear in Talking Gremlin are all me in my bedroom :)

By 25th October, we had finally finished and polished up our app and were satisfied that it would be the best talking app on the market, although we were a bit too late for Halloween. It had a much better 3d model, lots of great animations and was totally different from any other talking characters out there. Also this time, unlike CopterKid, we really took our beta testers' feedback into consideration, so we definitely knew we were on the right path.

We submitted the app to Apple for approval and to be honest with you, we waited rather anxiously. After one week, we got rejected! Argh! Their reason for rejection? Well, because the gremlin in one particular animation sequence would jump at the user and crack the screen. No cracking of the screen was allowed as Apple felt the user may think that their screen might have actually cracked (even though the animation lasted for a grand total of 2 seconds!). Nowadays, some of the highest ranking chart apps on the App Store have the sole function of faking a crack on your iPhone screen and have clearly been approved to be able to do so. Apple - you fascinate us every time.

Anyway, we quickly got Tristan to redo the animation and changed it from a crack to a magical blast and resubmitted to Apple. Luckily, this time they were satisfied and on 16th November, Talking Gremlin was live!

Lesson #13: Creating a superior app is not enough, have a well thought out marketing plan

We knew that by simply having a great app would not be enough to make Talking Gremlin successful. We had $500 set aside for marketing and we devised a highly targeted strategy to get our app into the hands of people we knew would love it.

We created a Facebook Ads account and made use of their amazing, sniper-like targeting options to display our advert to Talking Tom Cat fan page members. The CPC (cost per click) was really expensive, at around $0.30, but we knew that the conversion rate would be better than anything else.

Also, rather than linking the ad to our iTunes app sales page, we created a Facebook fan page so that not only could we track conversion rates, but also secure a direct channel of communication with these people for the future.

Within just 24 hours since launch, Talking Gremlin shot up the charts. When it reached 26th in Entertainment, we decided to give it that extra little push to get it into the Top 25 'Golden Zone'. We placed ads with AdMob and InMobi, and that combined with our Facebook ads helped us move further up the charts. After breaking into the Top 25, we started to get a lot more organic downloads and from 25th, we jumped into the Top 10 soon after, and eventually became the No.1 free app in several countries (on both iPhone and iPad), not just in the Entertainment section, but for the entire store itself. This was an unbelievable feeling.

At this point, Talking Gremlin was pulling in over 70,000 downloads a day and the ad revenue was amazing. iAds, still being novel, was monetising at an unbelievable $15 CPM and we had other networks such as AdMob and Mobclix as backup, which were achieving around $2 CPM rates.

Just imagine how we felt when we went from earning no more than $100 a day from all our app sales and ads combined, to over $1000/day in revenues on iAds alone for the Gremlin! 

The app had gone viral and Youtube and Facebook videos were being shared across the globe of Fip, our little Gremlin. We were really looking forward to how high our revenues would go during Christmas week, and the failure of CopterKid was now a distant memory. Check out the daily YouTube uploads here:

And then, just like a sudden twist in a movie, the iTunes App Store totally bugged out. The iTunes developer support shuts down for Christmas week and there was nothing anyone could do. The App Store database had rolled back to 5 months ago (i.e. it was showing the apps and rankings as they were back in around July 2010).

Talking Gremlin was the No.1 entertainment app, ranking above Talking Tom, but now, in the span of a few minutes, it had totally disappeared from any of the Top Charts or new lists, and could only be found from a manual, typed out search for it on iTunes. Could we be anymore unlucky? Guess which app was ranking number one in July that year? Yep, the Cat, so right to the top of the charts it went again. All this felt exactly like a scaled up version of precisely what happened with CopterKid.

Lesson #14: Start building up a cross promotion network

If you are serious about building an App Store business, you can't rely on making millions from a rare, one off hit. You need to plan for the long term and reduce the risk with each subsequent app you launch. The best way to do this, and pretty much essential these days to be able to get a good ranking on the App Store, is to implement a cross promotion screen throughout all your apps. This will eventually allow you to direct thousands of downloads to your new apps as soon as they launch.

Visibility is critical to success on the App Store and downloads = visibility. The more sure fire ways you have of generating downloads without having to spend money on marketing, the lower your risk (and cost!) of failure. Here's what ours looks like:

Lesson #15: If something does well, rinse and repeat

Talking Gremlin was a huge success and we knew that the framework we had built could be used again and again for more talking characters. We created Talking Snowball (total cost: $3,000) and Talking Gremlin: Xmas Special ($500) and managed to get these two apps out before Christmas. Despite not appearing on the iTunes charts (due to the bug), we were still able to push through thousands of daily downloads through our cross promotion screen alone.

Both apps generated tens of thousands of dollars in their first month. What a great ROI! Since then, we continued to make more talking apps such as Talking Monkey, Dragon and Turtle.

However, since advertising CPM rates were on the decline, we decided to further diversify our revenue streams and the launch of the Mac App Store earlier this year presented the perfect opportunity to capitalise upon a completely new gold rush.

We are now one of the top developers on the Mac App Store and at one point, occupied the Top 2 store-wide rankings for over a month. Our two flagship products are FaceTab and MailTab - both of which have hundreds of thousands of downloads.

In the next part of our bootstrapping series, we'll explain how we entered and dominated the Mac App Store through a very rapid and focused development approach. This helped us to diversify away from relying on ad networks whilst continuing to grow our revenues to over $1000/day.

Follow us on Twitter so you don't miss it!

Btw, we're launching a podcast called App Teardown. From the feedback we've received in our bootstrapping series (Part 4 coming out soon!), we teamed up with our friend Colin to produce a show where we will teardown top apps to find out what makes them tick, bring on guest developers to help them improve their products, and generally just give the inside line on how to make money on the App Store.

Click here to signup for emails on new episodes. No spam, just tidbits of money making gold.

Part 4 is now out, read it here!

- Anirudh, Co-founder, FIPLAB Ltd

19 responses
@Antonio - You're most welcome, it's actually been a lot of fun writing these whilst sifting through all our screenshots, images and whatnot!
Great posts! What would you say is the ratio of revenue from ad-supported vs. paid apps?
@Rico - We've now got it to a point that it is pretty much 50/50
That's what I'd call perfect risk diversification :)
How about revenue from Mac Apps vs. iPhone apps?
fix the last sentence "(Part 3 coming out soon!)," part4 :D
@Daniele - already done : )

@Rico - We don't have too many paid iPhone apps, so a majority of our app revenue is from the Mac Store, whereas all ad revenue is from the iPhone store.

a question....currently how the revenue are splitted?

like 50% Mac Appstore, 50% AppStore?

Kinda. More like 50% ad revenue, 50% paid apps (most of which are Mac apps).
I'm curious. When you say 'our programmer James' - is this a freelance developer you are working with?

Do the two of you write any code?

@James - James was working for us exclusively back then. He now works at Mozilla as a web developer, but still does the occasional bit of work for us.

We don't code.

Hey guys!
I love your articles, they are inspiring and one can learn a lot. I have been thinking of entering mobile apps & games business for a long time...but it always ended on "what am I thinking? I don't even know how to code, I'm not a designer...why anybody should do this work for me if he/she can do it on his/her own?". Your example shows that it is possible to success without this particular skills.
I see myself doing exactly the same staff you do: ideas, marketing, finances, product development. I hope you'll be posting more and more :) And please, can you write a little about outsourcing code? Where should I look for good programmers and how I can avoid the biggest fear of outsourcing - stealing an idea? Do you use some special agreements to avoid this risk?
Thanks!
@Marcin - thanks for your comment.

We don't outsource in the typical way (such as posting on some freelance website). If you go down this route, 99% of the time you'll get screwed.

The best way to find a programmer is to go to the places they hang out, like HN, Stackoverflow, indie dev blogs etc. Then do a small project with the person you find and if all goes smoothly, make sure you get them on a fixed term contract for a few months. If after those few months you guys are still working well together, then hire them!

It's not easy to find a good programmer, you got to put a lot of time into it. Perhaps even attend some iOS dev meet ups in your town.

Thanks for quick reply!
I was thinking about learning iOS on my own, now there are some platforms like Corona SDK which make it way easier to create own apps. But I suppose I won't have any chances when it comes to competing with serial programmmers...
Can you advice me how I should start? What route should I take?
And can you tell me what was the total cost of Talking Gremlin? I still can't believe you pull 1000$/day out of this app, superb!
Reply please?:)
@Marcin read The Big Nerd Ranch Programming Guides. They have the best training materials and teach weeklong courses.

I'm a developer who started iPhone programming two years ago. Http://www.PaulSolt.com

-Paul Solt

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