How My Appbackr Experience Failed My Expectations

Appbackr is a marketplace where everyone can crowdinvest in IPhone apps and Android apps. The way it works is that investors prefund future sales of apps. The investor buys the copies at a lower wholesale prices and makes a profit later, when the copies actually sell in the app store. I described the concept in more detail in my article ‘Experimenting with Appbackr – Promising and Trecherous‘. In the 6 month that have passed since that review, my experience turned worse.

There are two major problems with Appbackr

  1. Even when Apps achieved the sales of the copies the investors have pre- purchased, then it still frequently happens that the investors do not get payed on time. The information given in the dashboard (see screenshot) is useless, because the given dates lapse without payment or notice. On March 24th, the payout schedule said I would be paid 53 US$ for sales of the SOS Friends Alert App – the date passed, no payment arrived, no information was given.
    Even worse the interface is no help at all in keeping track – it just pretends the payment arrived (for the SOS Friends Alert app the status is ‘Completed’ saying 57 US$ earned 12 US$ profit, while in reality I did not receive any payments for this app so far. The backrs are left to manually keep track on their own.
  2. Appbackr has no means to enforce agreements with developers. Two concept apps I funded (Boogie Monster and Glass Ceiling) are 6 and 4 months past announced launch date – again no notice, nothing happening. Vy Nguyen, Manager Finance at Appbackr answered my complaints in January saying: ‘appbackr will try its best to enforce the contracts facilitated on its marketplace, but as the actual contract is between the Developer and Buyer, we can only negotiate on your behalf. Similar to other marketplaces, the main communications should be between the Developers and Buyers, with appbackr’s role being to facilitate that communication.
    Our goal in making payment details available in the myappbackr dashboard was to help backrs of multiple apps reconcile their monthly payments from appbackr, track down exactly which payments, if any, have been delayed, and contact the developer directly as necessary. We do have a late payment notification in place, but it is only set to go out to backrs when the payment is delayed for longer than 1 month.’. That sounds pretty weak to me.

Furthermore Appbackr is taking steps in the wrong direction. They removed (without explanation) the statistics tab which I predominately used to screen and select IPhone apps on the marketplace to invest in. Continue reading

Experimenting with Appbackr – Promising and Treacherous

In August I discovered Appbackr. Appbackr is a marketplace where everyone can invest in IPhone apps and Android apps. Crowdfunding for app development? That sounded very interesting and innovative. I read the information supplied and the way it works is that investors prefund future sales of apps. The investor buys the copies at a lower wholesale prices and makes a profit later, when the copies actually sell in the app store. Clearly the risk is the uncertainty as to when the prepurchased copies will sell or if the sales volume will not be high enough at all and the copy will not get sold, which will result in a total loss of that investment.

Funding is done during an open bidding period. The developer lists his app on the marketplace and provides a description and information what the funding will be used for. Provided a minimum reserve is met, the funding will be successful, even if the maximum amount the developer seeks is not reached during bidding period.

Concept versus Live Apps

Appbackr differentiates between ‘Live Apps’ and ‘Concept Apps’.

A ‘Live App’ is already online in the Apple or Android Store and has started selling. For most Apple Apps Appbackr provides sales stats, which allow an educated guess how good the app is selling. The markup investors earn on Live Apps is 27% (once they are sold).

A ‘Concept App’ is an app that is under development or just an idea with a plan. The developer states a date, when he plans to launch in the store. For ‘Concept Apps’ the markup is 54%. The higher margin reflects the added risk for possible developing problems, which could in a worst case scenario lead to the app never making it into a store with zero copies sold.

A major difference between these two kind of apps is that the payout for ‘Live Apps’ is ‘sequential’ whereas the payout for ‘Concept Apps’ is ‘simultaneus’, meaning that those investors, who invested first during the bidding period ,get paid first for sales of Live Apps (you are informed how many copies need to sell before your copies will sell). For the ‘Concept Apps’, each backr will receive a fraction of each sale. That means you only get full payout for ‘Concept Apps’ after the last funded copy has been sold, too.

I had a good start – everything looked promising

After a lot of reading and browsing I did my first purchases/investments in early September. And it looked like I had a lucky start with good picks.


Screenshot of the Appbackr Dashboard for my Apps in status ‘Completed’. I unfolded the details for the AppZilla 2 app and the iScape App. It shows that ‘my’ 100 copies of iScape sold over the course of only 7 days. For the AppZilla 2 app it went even better. It took only 1 day for all ‘my’ 500 copies to sell. Note that Appbackr calculates annualized profit solely on the duration of the sales period. De facto I purchased the copies on Sep., 5th and was paid back $330.60 on Nov., 7th. My money was tied up for roughly two month which translates to a tremendous annualized profit of roughly 160%. Continue reading

Friendsurance – First P2P Insurance Concept Launched

It was only a matter of time, that the p2p concept would be applied zo the insurance sector. Friendsurance does just that. You invite your friends and relatives, and they agree to cover part of the damage. In exchange Friedsurance claims that you can save up to 50-70% of the insurance costs.

At the moment Friendsurance offers general liability insurance, household contents insurance, legal expenses insurance and and cycle insurance.

How does this p2p insurance work?

Each of the invited friends will have to contribute 20 EUR in case an insured damage occurs. The remainder of the damage amount is covered by a conventional insurance.

Friendsurance says the costs savings are substantial since the concept:

  • prevents fraud
  • prevents misconduct (through social control)
  • eliminates sales costs
  • discourages claims for small damages
  • lowers administration costs

I am sceptical about the concept for two reasons:

  1. I very much doubt that anybody will want to involve friends and family in claims settlement, especially if his neglience caused the damage. It seems awkward for all involved.
  2. Currently there is only one insurance company actively offering lower rates (Friendsurance has set up a way for this concept to wiork via bonus payment even if the insurance company is not actively participating).
    The whole concept looks to me as if a comparison portal for insurance rates has been pimped up with a nice p2p story that helps in PR and marketing – but the main business model is to refer customers to insurance companies.

But I’m willing to be proven wrong and will take another look in a year or 2 to see how Friendsurance develops.

VISA P2P Payments Introduced in US

Today VISA introduced p2p personal payments in the US market. VISA partnered with CashEdge and Fiserv which will incorporate the new service to their platforms Popmoney and Zashpay.

The service allows to make payments directly to the recipients VISA account.

The new VISA person-to-person payment service was launched first with selected partners in Europe in February.

VISA seeks to capture market share for online payments from Paypal.

The Innovation Process at Banks and why Neglecting P2P Lending Is Rational Behaviour For Bank Managers

I finished reading “Innovation and the Future Proof Bank” (available at Amazon.com, Amazon UK and Amazon.de). The author James Gardner publishes the Bankervision blog, which I am a long time reader of.

Gardner defines categories of incremental, revolutionary and breakthrough innovations and further differentiates between disruptive and sustaining innovation. The book discusses innovation theories and models. Many examples and case studies are given. While the topic is innovation in banks, I felt that much of it applies to innovation in large companies that are incumbents in other industries, too.

An innovation team will evolve through 5 capacity stages: Inventing, Championing, Managing, Futurecasting and Venturing.

Gardner propagates Futurecasting as a method to assess trends from a strategic perspective. By building scenarios the innovator creates descriptive images of possible future impact of trends in combination with the banks approach on it.

Gardner uses p2p lending as an example in many chapters. E.g. in chapter 4.4 he creates analysis possible scenarios in a futurecast on p2p lending.
If you want to understand why so many banks currently ignore p2p lending as a trend the book offers some interesting arguments. However the other example often cited, Paypal, shows what happens, if banks wait too long without reacting.

The book contains a wealth of information, thoughts and examples. Too much to cope with in this short review. I enjoyed reading it and highly recommend this book to anyone interest in fostering innovation, the innovation process and how banks could react to an ever faster changing business environment.
Buy your copy at Amazon.com, Amazon UK or Amazon.de.

Mind-Boogling

Free by Chris Anderson is one of the most thought provoking book, I have read in the last few years. Anderson argues convincingly, why most digital products will end up being priced at zero – free. And he show the reader how this could be turned from the author or musician, that created the content, to an advantage instead of a threat to his profits.

The book gives ample examples. You may have already heard of the electric cars that Better Place wants to roll out. But how can Better Place offer a free car? And still allow the user to benefit from lower operating costs than with a conventional car?
One sector that still has to embrace ‘Free’ seems to be the financial service industry – there is only one mention of Zecco, no other financial service let alone banks is among the examples.

Anderson takes wide strives into history, philosophy and science fiction literature. The topic being pricing models and pricing strategies it will still appeal to a readership beyond economists, since it is interesting and entertaining to read.

Above all I found it inspiring to consider the outcome of further sectors embracing ‘Free’ instead of  viewing ‘Free’ as the enemy.

I recommend the book.

Instead of buying the paper version you can read it for free online (limited July 2009 EDIT: this link works only from US, see below (next page) to read outside US) or download the audio book version free.

Continue reading

How Bad Customer Service can Backfire

In the age of the internet bad customer service can not only scare away the harmed customer – he can retaliate by appealing to the masses and unleashing a viral protest song.

This video was viewed 2.4 million times. I bet United Airlines badly regrets the events by now and wish the could turn back the clock.

While this is completly unrelated to p2p lending similar things could happen, if a lender or a borrower feels he did not receive appropriate service. With Twitter, Youtube and blogs word can be spread fast.