Apptopia Hopes to Bring Broker Flair To Mobile App Marketplace

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The vast majority of mobile applications in the marketplace aren’t coming from well-established businesses, but experimental developers. The apps can even accrue a good user following, but those developers don’t exactly have the skills or desire to build a business around their creations.

“It’s laughable how many times I’ve heard, ‘I didn’t get into this to answer support requests,’” says entrepreneur Jonathan Kay.

Kay is the chief operating officer and co-founder of Apptopia, a Cambridge, MA-based startup developing a marketplace that condenses the droves of similar, one-off app projects and puts them in the hands of people looking to turn them into real moneymakers. It looks like the lovechild of eBay and a Web domain brokerage, with hints of a mobile strategy consultancy.

As you can imagine, buying and selling source code for mobile applications is just a bit more complex than auctioning off your used electronics. “I’m spending more time than I’ve ever wanted to with lawyers,” says Kay, who I caught up with this week.

The company is the brainchild of co-founder Eliran Sapir, who jumped on early iPhone trends to create the mobile app GPush, which created push notifications for Gmail on the iPhone. Despite the paid app’s popularity in the iTunes app store, Sapir couldn’t quite figure what business to sell it to for an exit, Kay says. But he kept thinking about the problem, and later toyed with the idea of creating a mobile app brokerage while entrepreneur in residence at Cambridge-based Greatpoint Ventures. Last fall, Sapir connected with the boisterous Kay—a former brand evangelist for local startup the Grasshopper Group—and left the venture firm to work on Apptopia full time.

Apptopia’s first step is to formulate a target price range for app developers to sell at, using market knowledge and algorithms. Developers then must give Apptopia access to their apps that enables the startup to gather accurate, objective data on performance, user base, and other information that will inform prospective buyers.

“Much like in eBay, we provide a professional middle ground where a buyer and a seller can actually negotiate,” Kay says.

Sellers can list their apps to be purchased for a fixed price within that suggested range or set up an auction with a minimum starting point.

Connecting buyer and seller is just part of the challenge, though, says Kay. Apptopia continues to oversee that payment and transition process, and has developed contracts with lawyers outlining the details of the agreement.

“If you put the app up, you legally are bound to send us the source code,” says Kay of the developer responsibilities. Sellers also have to agree not to develop anything closely related to or resembling the application that they just sold.

When a transaction occurs, Apptopia charges the buyer’s credit card and holds that money in an escrow account. The seller must provide the code within two days, which Apptopia keeps in a secure, cloud-based location. Apptopia then manages the process of informing the Apple iTunes store or Android marketplace of the transaction and getting the necessary approval. Once that’s confirmed, the seller gets his money, the buyer gets his code, and Apptopia takes its 10 percent broker’s fee.

Apptopia has raised $115,000 from New York firm Expansion VC, and Kay and co-founder Sapir are bootstrapping the rest. The Apptopia marketplace is set to launch sometime in February, but the company is already accruing a group of buyers and sellers. (App developers can get in touch via a form on the home page, and Kay says he will help guide interested buyers through the current inventory.) The company has already brokered the sale of one mobile app for $15,000, and expects apps will sell for between $1,500 and $75,000, Kay says.

So who would be interested in this new marketplace, other than developers who don’t want much involvement beyond building an app? Buyers include business-minded people who don’t have any developing skills but have the product marketing knowhow that could help an app grow, says Kay. Apptopia is even building partnerships that connect these buyers with other companies looking to help mobile apps make more money through means like ads or affiliate marketing, to give the brokered apps life beyond the initial Apptopia transaction.

Even Fortune 500 companies have expressed interest, says Kay. They’re looking for a way to build out their mobile strategy, and can select and purchase an app on Apptopia that fits with their brand or product. For example, he says, a company like Energizer Battery could ultimately shift some of its TV advertising spend to buying a crop of flashlight apps via Apptopia and labeling them with its brand and logos. Brands could ultimately amass a portfolio of related apps, selecting the ones with the best code and user interface, and hire a short-term consultant to combine them into one comprehensive system, Kay says. Apptopia plans to create a division that caters specifically to these big company clients, he says.

And how will Apptopia keep hackjob apps from flooding its marketplace the way they have the iTunes app store (the reason a search for “flashlight” yields more than 150 results)? To help ensure it is attracting only serious sellers to its platform, the company plans to charge a listing fee of at least $50. “It’s not as much to make money, but to keep bullshit out of the market,” Kay says.

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