BoostPlay – Cash Flow Hunting Report

By Press on April 13, 2016 in Passive Income Journey
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I was recently in talk with the owner of BoostPlay app.   To those who are not familiar with BoostPlay, it is the like4like equivalent for SoundCloud.  Here is my cash flow hunting analysis before going in for the negotiation:

Pros:

  1. It’s been on the app store for 3 years.  These days, there are a lot of scammer out there faking revenue.  One of the warning sign is the App’s age.  When you see an app that were just launched and immediately having stable revenue.  That’s a good sign, it’s a fake.  I will talk about it in a separate post “How to Avoid being Scammed When Acquiring an App?”
  2. It has somewhat stable revenue.
  3. It’s revenue is above $500 a month.
  4. It’s selling at a reasonable 2x multiples.  On the popular buy sell app marketplace, you will see many app owner listing their app at insane multiples from 10 to 15 to infinite (no revenue).  I admit I do it sometime too, just to get a backlink 🙂

Cons:

  1. It is tip toeing around the Sound Cloud TOS (Terms of Service).  One of my investment philosophy is peace of mind.  I want to be able to sleep at night without worrying my money being wipe out overnight.
  2. It is a free app with potentially fake or incentivized reviews.  I noticed there are a lot of short 5 stars reviews and a lot of angry one star reviews.  If you are in the app business, or any business with online review, you probably know that only angry, grumpy and people with bad experience bother to take time out of their regular daily life to write hate review.  From my experience, the hold review system is stupid in nature and I found without a doubt, those people who are “one star review” happy, usually are not the type of customers the business want to keep anyways.  Grumpy people are always grumpy, next time when you have a chance to shop at amazon, click on one of the one star reviews, then click on the user name, you will more than likely find he giving one star review to pretty much everything.  My advice is to avoid doing business with or go anywhere near those people.
  3. Fulfilment problem.  Those one star concern raised a real issue thought, it seems that a lot of user have purchased IAP coins but are not receiving the “Play” it is promised. It means that the BoostPlay community is simply not big enough to support what it promised.
  4. It is using Parse at the backend.  Parse was a popular BAAS (Backend As A Service) backed by Facebook.  If you have any experience dealing with API from Facebook or Google, you will know that their technical direction is like a thunderstorm.  I am sure “Stability” was never a software architecture concerns.  Their API changes so rapidly that unless you are willing to put in the investment to keep up with their every changing API, you are much better of, in terms of ROI, to roll your own.  Parse was just a simple user authentication service, don’t get me wrong, it’s simple but critical.  You have to give it to the Parse marketing team though, boy, did they promote it hard.  No matter how idiotic the whole concept was, many novice developers still fall into their death trap.  Just as what I expected, Facebook pulled the plug on Parse in late 2015, leaving all the business owners hanging.  Well, not exactly, you can now self host your Parse service on Heruko and MongoDB.  The problem is I don’t want to hire a NodeJS developer whenever I need to update the user record, nor do I want to have a tiny piece of code hosting on Heruko either.
  5. The own increased the “Buy it Now” price once I started requesting for more information to do due diligence.
  6. Even though the app show incremental growth, I can’t tell how much of the revenue is real, how much of the IAP are purchased to boost visibility in the Gross Ranking.

At the end, I made an offer around 1.6 to 2 time last year profit multiple, which I think is quite reasonable considering the TOS risk, fulfilment problem and a obsolete backend.  No go, the owner didn’t even reply with a counter offer.  I submitted a official offer again.  Instead of countering, the owner removed the listing instead.  Well, time to go back to the hunt!

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