3 Years, 6 Months, and $0 MRR

July 27, 2014

You work, time passes, and what does it all mean?

That's what you ask yourself when you do something for a time with negligible positive results. That's not a complaint. It's simply an observation.

We have been running Retro Mocha since November 2010 and our main source of income and success is an app built in December 2010. When we say success, we don't mean quit your day job money, we mean a small initial spike that faded to $100 a month depending on which way the wind blows in the various app stores. To be clear, Retro Mocha is a side business/experiment we run. We have normal day jobs.

Our goal for a long time has been to build some kind of successful SAAS app. It hasn't worked for us. Apparently we are both remarkably bad at this whole software business thing.

So what happened?

We started Retro Mocha at the end of 2010 while working together full-time in the same university department. Our jobs were grant funded and grant money was slowly running out, so we thought starting our own "app company" might be a way to make some money. We wanted to answer the question "Can you make money as an app business?"

The name doesn't mean much. We thought it sounded cool. We still think it sounds cool. (Though, it might work better as a name for a coffee company.)

Both of us are good software developers, but neither of us had much mobile app experience, so we started building apps with Corona and Appcelerator Titanium. Brian did games and Shawn did little utility apps. Our intuition was that cross-platform would help us make more money, so we built everything for iOS and Android.

The early results…

The early results were promising. We started making hundreds of dollars in sales for some goofy ideas we had. Brian's "best" idea was an app called Dubs that let you see different rims for your car. It didn't have a huge selection of rims, but it did have one really cool feature - you could see the rims spin right on your phone! It made a few dollars here and there.

We also tried other ideas like Shake Camera, an app that let you shake your phone to take selfies by, you guessed it, shaking your phone. We were way ahead of the curve on this one – the word selfie hadn't been invented yet. With it we offered paid and free version. The paid version sold a few copies. The free version saw some decent downloads number (more than 10k downloads in all) but it made us no money.

Shawn had the idea to build an app to view paint swatches on your phone. He called it… wait for it… Paint Colors and it actually did pretty decent. Not mind blowing, but decent. It started making a few dollars a day. Shawn made an Android version and an iPad version. The iPhone and iPad versions have both sold steadily ever since and have kept our bank account from being completely empty! (Google Play is a complete dud for us. We've made almost no money there.)

All in total by early 2011 we had 5-10 different apps that we had thrown out there of varying quality (which is to say, poor and terrible to just acceptable). With the holiday and new year boom, there was an early upsurge in money, but that $500 or so spike in January or February 2011 dropped back down to like $100 pretty quick. The app stores are a fickle mistress indeed.

Hey let's waste some time!

Throughout 2011 we spent time building an app called The Diet that was a daily weight tracker. We wanted a better mobile weight tracker, but we were too lazy to build it and built a web version instead. It was built using the Play! framework in Java, which was fun to build with, but we never got any sales.

Sidenote: subscription consumer apps are a siren song that is best muted before you ever get started. We keep trying it and it keeps failing. Pay up front or have something free w/ads. Everything else ends in sadness.

The Diet didn't really work as a product. On the plus side it did help Brian lose about 40 pounds that year.

App stores aren't a business.

The majority of dev time in 2011 was devoted to The Diet and the reason was we could see that spraying and praying on the various app stores is a terrible business to be in. Even by then, the app store success stories were fewer and farther between. Spam was getting worse and it is harder and harder every day to make it by selling $1 apps.

In fact, we learned even then that a $1 or $2 app is a terrible business to be in because it's like selling candy bars that last forever. Candy bar companies only exist because the lifetime value of each customer is probably hundreds of dollars. You can't profitably acquire customers that are only worth $1 total lifetime.

Yes, Apple send you "free" customers, but they aren't free at all. You can spend hundreds of hours of your time for those free customers and what happens when Apple or Google doesn't like you anymore?

We saw that reality and knew that a SAAS app was the only way forward as a software business.

Just add app stores!

However, late in 2011 Amazon came out with the Kindle Fire and Barnes & Noble had the NOOK tablet. Both had their own app stores. Seeing that the Kindle Fire was basically the Blackberry Playbook, but at a reasonable price, we thought it could be a hit. Since we already had android apps, we published them on NOOK and Amazon App Store.

That little experiment turned out to be one of the best things we ever did. Since there was almost no competition on either store, Paint Colors (our cash cow) did well. All of a sudden we were making an extra $100 - 300 a month!

We knew what this meant. We could see the opportunity. If we just drop junk on those app stores we'd be rich!

2012 was going to be the best year ever!!!!

There was just one problem. Neither of us wanted to do the slog of churning out a bunch of junk apps. Yes, we knew the math. If you have 1 app making $100 a month, write 100 and you're making $10,000 a month right?

We've seen other developers do that on the app stores, but it is not something that ever felt good to us. So, instead of having a license to print money we kept noodling on other ideas.

Memes, utility apps, and a lost year

Since we never fully got on board with the junk app thing, we didn't maximize the money we could have made on Amazon App Store and NOOK store. Brian built a goofy twitter powered meme generator called ReMeme and Shawn built super niche utility apps like Wallpaper Colors and such.

Nothing really came of those experiments, no matter if we poured a lot or a little bit of time into them. They just weren't ideas that got a lot of traction.

However, that didn't stop us from over investing in those projects. Yep, we crushed those projects and for what they were, they were always a bit better than they deserved to be.

So, there went a good chunk of 2012 and probably some of 2013.

Our fascination with email and weight tracking

2013 was the year of innovation at Retro Mocha. We created a cool open source project called Obvious, we invented a very cool product we called Weight Tracker. It was the easiest way to track your weight in the world. You simply send an email to us, and our program tracks the weight you input as the subject line. Clearly innovation is the answer to making money right?

Some people got it and liked it, but nobody bought it.

Seeing that people weren't paying us money for this software, we knew that we needed to make a mobile app instead. So, we spent months building a mobile app. It was beautiful, native, and we loved it. It did one thing and it did it well. It tracked your weight every day.

We put it on iOS, Android, Amazon App Store, NOOK, and even Blackberry. Since it's initial release as an app it's had 4,700 people try it.

However, our initial app concept was to make it a one month free trial with an in-app purchase for a yearly subscription. By January we had over a thousand people using Weight Tracker and nobody bought the subscription. So, we decided to scrap all the work we did to make the in app purchase work and we just made it a 100% free app with a single ad at the top.

Adding ads made the app go from making $0 to making something like $10-20 a month, which basically covers the cost of cheap SSL on Heroku.

We aren't retiring on Weight Tracker anytime soon.

Finally a B2B SAAS app!!!

After yet another product failure, we decided that we have to do a real B2B SAAS app because the economics are better and as a business, if we are ever going to make real money, our customer LTV has to be much higher than our $2 apps and tiny amounts of ad revenue.

As a B2B SAAS app, if you have a average customer monthly revenue of $75 and a 10 month customer lifetime, your average customer lifetime value is $750 for just one customer. If you get 10 business customers, that's like selling 1000 apps on the app store at $1 per sale after Apple's 30% cut. Even better, with recurring revenue services, you get paid every month for the life of a customer, so you don't have to keep looking for new customers to get ongoing revenue.

What do you think is easier, finding 10 business customers once or 1,000 sales every month?

So far neither of us has any idea how to get 1,000 sales a month for a $1 app short of getting featured on one of Apple's top lists, which is the equivalent of winning the lottery at this point as far as I'm concerned.

And thus Answer Customers was born. A real B2B SAAS app. This was going to be it. We could feel it.

If you build it they will come right? …RIGHT?!!!

Answer Customers is an app that solved a problem and fit our ideas for what we needed to have a decent start on cracking the business SAAS app thing. The problem it solved was that it elegantly allowed anyone in an organization to contribute content to a WordPress powered website without needing a user account.

The idea is that answering customer questions on your website drives more traffic and sales and that the places where you answer customer questions is via email or a support tool like Zendesk. Answer Customers let you email content to WordPress or you could transfer Zendesk support tickets into website content.

Based on our past experience, we set the criteria that any app we build should have an app store attached to it, so that we would get a free traffic stream to drive qualified leads and hopefully sales. Answer Customers actually had 2 app stores associated with it - WordPress and Zendesk both have their own take on "app stores". WordPress has a plugin directory, and Zendesk has its own app directory.

That strategy does work. We've got traffic from our integrations with WordPress and Zendesk, but the outcome so far has been crickets. 0 sales.

We are terrible at this.

Another six months of effort to make 0 sales.

A bit of honesty and reality.

So, over three years into this business and by most business metrics it isn't really successful. Depending on the month, app store revenues are in the $100-300 range, mostly from Paint colors. We make $10-50 a month total on ad revenue from AdSense and AdMob ads. Our costs are very low, so we make a bit of profit, but our low revenues mean there just isn't that much money to be made.

To make this into a real business we need monthly recurring revenue. MRR is what they call it. Our goal in one way or another the last couple years was to build a successful software app with recurring revenue, and it just hasn't worked for us.

If we are being completely honest with ourselves, Retro Mocha isn't very great at marketing or selling software to businesses yet. We could use the excuse that we are doing this all part time on nights and weekends, but the problem runs deeper than that.

We aren't willing to do whatever it takes to make money. We have our own ideas on what Retro Mocha as a business looks like, how it runs, what we do, what we believe in, all of that. Sure, we know how to build apps, and we could be a software consulting shop for $150-200 an hour and probably do pretty well for ourselves in terms of money, but that doesn't feel like a business to us. It feels like a high paying job.

At the end of the day we aren't that driven by money, and we aren't really running a business.

It's an experiment

Retro Mocha isn't a business. Yes, it is a Limited Liability Company registered in the state of Nebraska, and by that standard it is a de facto business. However, it's not a business in the same way that McDonald's is a business. We don't have a core product or service or business model that we rinse and repeat to make our money.

A business is really a simple thing. It's just a repeatable, profitable product or service that you continue to repeat until it's no longer profitable to continue doing. Organizations and structures are built around it, but at it's core that's what a business is.

We don't have a business in Retro Mocha, we have an experiment. It's really a very long "what if" scenario. It started as the question of "Can we make money as an app business?", but we realize now that we've answered that question. No we can't.

Also, our products aren't really products. They are experiments. We don't have a business model or marketing plan that we can plug things into. We try stuff and see what works, or more often what doesn't work.

What we realize now is that Retro Mocha is no longer a tiny app factory. It's an experiment in doing experiments.

So what now?

What do you do when you spend three and a half years building an unsuccessful business that you don't want to shut down? If you say pivot, we will reach through the internet and slap you. ;-)

Really, we could keep building unsuccessful things, but that doesn't sound like fun to us. What we've decided to do instead is to treat what we do as open experiments. We will document and share what we learn as we go. That means sharing our experiences, our ideas, our sales numbers, and even our code.

Going forward we will be as open and transparent as we possibly can.

We are now asking ourselves the question, "What happens when instead of building a business, you do experiments and share them with the world?"

We have no idea, but we're ready to find out.

- Brian & Shawn

About The Authors

Shawn Baden and Brian Knapp are the co-founders of Retro Mocha. You can follow Shawn and Brian on Twitter.