How to Build a Premium App Business

On the podcast we talk with Shaun about the power of community, the importance of testing your freemium strategy, and why you might not want to offer a free trial.

Top Takeaways

🎆 Understanding unintuitive power laws is the ticket to explaining — and benefiting from — explosive app growth.

🪝 Deciding what goes behind the paywall is 90% of an app’s success — but developers typically only spend 10% of the time thinking about it.

🆓 Beware the free trial, which could create negative experiences and conversion rates — and might not outperform a freemium model.

🌍 Absorbing the cost of a freemium model comes down to creating an engaged, irreplaceable community, which is more likely to buy and lead to higher conversions.

🫶 Don’t focus on rates and formulae at the expense of what matters: Where users are in their emotional journey and how the app fits into their lives.

About Shaun Steingold

👨‍💻 Founder and managing director of Momentum Labs and CEO of Healthi.

💡 “I love opportunities where you have a business model that fundamentally disrupts an industry. Said another way: You and your business and products have a bigger margin than your competitors. That's been the thesis behind a lot of my career and what I've worked on.”

👋  LinkedIn | Twitter

Links & Resources

‣ Learn more about Momentum Labs

‣ Check out the Healthi app

‣ Look into iNavX, the “Google Maps for the Water”

‣ Connect with Shaun on LinkedIn

Episode Highlights

[1:45] From HP to SVB to apps: App developers have access to a free global scale and distribution network that only a privileged few corporations had in the past — harking back to when Eric Crowley said the App Store was the biggest marketplace in human history. Mobile apps that replace tangible products continually win out thanks to convenience for consumers.

[5:05] Proto-cyborgs: Apps have the power to augment physical activities — from fitness to physical hobbies — in a world where we still haven’t yet reached “peak app.”

[6:57] Gaining momentum: ****Shaun realized that the App Store ranking moat meant buying was better than building. Riding the first wave of app-buying firms, Momentum Labs chose top apps at rank three or lower where growth potential is exponential compared to those with the top spot.

[10:13] Buffett wisdom: “Great businesses for fair prices” seems like a good maxim. But right now, the market seems to be crazy prices for fair businesses because it’s not accounting for the unintuitive: that power laws still prevail, and people need to get wise to them.

[14:53] Featherlight ASO: Momentum has a very light hand on the tiller when it comes to ASO — they frontload most of the work and then (almost) don’t touch it. Performance consistency and longevity matter more.

[19:00] Never take our freemium: The initial backlash against subscription models needs to give way to understanding that software is a living, breathing thing. Freemium is about trying before you buy, and hooking with additional features — working out what these features are is 90% of an app’s strategy for success.

[23:51] Trialing the free trial: Shaun’s never used free trials with his apps, because he’s found that they can create negative engagement — reflected in lower conversion rates.

[28:34] Boundless, joyful experience: The key to not having a free trial is the freemium strategy. Freemium models done well entice without moments of pause or negative experiences — ultimately encouraging users to upgrade for more features and additional value.

[35:32] Community values: The best business asset — for app lifecycles and moats — is community. Building engagement improves conversion. The strategy for Healthi highlights how additional value generates revenue and helps grow apps to full potential.

[39:38] It’s a kind of magic: It’s easy to get caught up in rates and formulae at the expense of what really matters, which is how a product fits into someone’s life and emotional journey.