It seems everyone I meet has an app idea. As the owner of an app development agency, I’m certainly very glad they do. But, it also means a lot of awkward discussions about the value of app ideas.
I guess it’s human nature to put a big price tags on ideas. After all, we are often exposed to commentary on ideas but rarely on the execution of them.
“Air Bnb is such a good idea. Now they’re worth $38 billion” or “Shazam is such a cool app idea. I hear Apple bought them for $400 million!”
Rarely do you hear someone attribute the astronimical value of an app to the trials and tribulations of the development team. You never hear someone give Uber’s lawyers credit for their $58 billion valuation, even though they were instrumental in Uber’s success.
The idea is always the star.
Maybe it helps keep the dream alive for ordinary folk. “Just come up with the right idea and you’ll be set for life!”
The long hours and hard work successful founders put into executing their ideas aren’t nearly as glamerous as the ideas themselves. We’ve been conditioned to naturaly equate the value of an app with the originality, novetly and practicality of it’s concept and not the effort that went into making it.
I’m not saying app ideas in themselves have no value but I do know the real value is in the execution.
Idea VS Execution
Putting a monetary value on your app idea is difficult. Even the greatest concept can fail if executed poorly. At the same time, a mediocre idea can still be successful if executed exceptionally well.
I think author and founder of CDBaby, Derek Sivers sums it up perfectly when he describes an idea as a multiplier for the execution.
“The most brilliant idea, with no execution, is worth $20. The most brilliant idea takes great execution to be worth $20,000,000. That’s why I don’t want to hear people’s ideas. I’m not interested until I see their execution.” – Derek Sivers
While it may be over-simplified and a little tongue-in-cheek, here’s the chart Sivers uses to evaluate ideas:
For example, if you have a great idea (15x) and weak execution ($1,000), your app would be worth 15x$1,000=$15,000. A great idea with brilliant execution is worth 15x$10,000,000=$150,000,000 according to Derek’s chart.
Whether you agree with Derek’s numbers or not, he makes a very good point.
The real value in an app idea is only realised when the idea is executed.
This also rings true for other industries. A hollywood blockbuster film might gross hundreds of millions of dollars but the average hollywood screenwriter only makes $110,000 for the screenplay. While the script is hugely important, the real value is in the execution. Without it there would be no film after all.
Recipes are another great example. There are thousands of them freely available on the internet. A recipe (the idea for a dish) is virtually worthless. But, a good recipe executed (prepared) by an great chef can set you back $100 a plate.
What is execution?
Execution is defined as “the carrying out of a plan, order, or course of action.”
In the execution of app ideas, it is the combination of a number of tasks and factors including:
Even a great idea, executed well, still needs to happen at the right time. It stills needs to be brilliantly designed and engineered. It needs to be effectively promoted and a bit of good luck never hurts either. Read more about the factors of an app startup’s success here.
So what kind of value can you actually put on a well-executed app?
After a bit of Googling, I found the following estimated values of some popular apps you may have heard of:
- TikTok (ByteDance) – $75 Billion
- My Fitness Pal – $475 Million
- Instagram – $100 Billion
- Deliveroo – $2 Billion
- Duo Lingo – $1.5 Billion
- Calm – $1 Billion
- Flipboard. -$500 Million
These valuations come from a range of pretty reliable sources like BusinessInsider, Crunchbase and others but there is no assurance of their reliability.
The examples above are obviously some of the most successful apps ever made and there are many, many more apps on the App Store and Google Play Store that have never made a cent. Still, its good to know what kind of values are possible when you get the app idea and the execution right.
Can you sell app ideas?
As we’ve established, the idea is only as valuable as the execution, so the concept is of little value by itself. In the right hands though, that app idea could go on to be worth millions or even billions.
Of course, somthing is only worth what someone is willing to pay for it though. So, you never know how much the right person might pay you for the right idea. My advice to anyone with a brilliant app idea though is to focus on achieving brilliant execution. Do the maths. Its worth it.
– By Joe Russell – DreamWalk founder
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