How to analyze an app market

Let’s assume you have an idea for an app. Probably the first thing you do is check the App Store and see if anyone already built what you’re thinking of. If not, you will probably look at similar apps in the same space. But what exactly do you look at? Downloads? Ratings & Reviews? Revenue?

Recently I was helping a friend to figure out if his app idea is good enough to test. In this post I am going to attempt to walk you through the process of how we evaluated the market he was getting into.

His idea is a meditation app for the German market. First I would use SensorTower (AppAnnie is a similar tool), to check the top apps in the Health & Fitness category in the US on iOS. When looking at Health & Fitness category, I’ll scroll through the first 10 – 20 apps in paid and free to get an idea of the market. In this category, the free apps make much more money on average becaues they have the subscription business model which generates higher revenues (on average).

Most meditation / mindfulenss apps will be in the Health & Fitness category. I spoke with Apple and they confirmed they’re not planning to create separate categories for physical health (fitness for example) and mental health (mindfulness for example)

To apps in Health & Fitness category in Germany, October 14th.

After looking at the category, I can see a few big brand meditation apps like Headspace and Calm. This category ranking is mostly based on how many downloads you’re currently dating. The rank updates about twice a day so it’s very dynamic. If you get a huge spike in traffic one day, you’ll rank will jump up as well. Same with vice-versa. If somebody stays in the top 10 consistently, that means they’re concisely getting tons of users.

Sidenote: why are we only checking iOS?
Most startups begin only building one app. You have limited resources and have to be very careful how you spend your time and money. Building an app for iOS can be easier because there are only a few iPhones with few screen sizes. There are literarily thousands of variations of Android phones, brands, operating system-versions, screen-sizes, etc. On average, iOS users tend to have more disposable income and spend more money on apps / subscriptions. However, new technologies like Fluter make it easier to deploy to both iOS and Android.

After gaining general understanding of the category, I will look up the rank for specific keywords in Germany. In this case I would look up the German word for meditation, which happens to be the same in Germany as it is in English “meditation”. In the image below, you can see the rank of apps in Germany for the keyword “meditation”.

Interestingly, Headpspace is ranked #1 and Calm is #2. If you look at the general category rank Headspace is not even in top 10. Its’ category rank is about 25 and Calm is #7. This means that Calm is getting more downloads in Germany, however Headspace likely gets more users that type in the specific keyword. I wrote an article about all the variables that affect your keyword rank. You can check it here. The download-conversion on a specific keyword is one of the most important variables so if a lot of people type in “meditation” and download Headspace instead of Calm, Headspace will be higher ranked than Calm. There are other important variables, but this is my hypothesis to explain the rank.

Next I would check some other relevant keywords, maybe “stress”, “anxiety”, etc. to see what other trending keywords are important and what kind of apps are ranking high. In local markets like Germany, you’re likely going to find big global brands like Calm and Headspace AND local-only apps that are in German, made only for Germany. Calm and Headspace are probably not going to translate their apps, just the App Store descriptions.

If you find a local apps, SensorTower will show you their revenue and downloads. I find that this data doesn’t match 100%, but it’s very accurate. Accurate enough to make decisions about your idea. Knowing the data of some of my friends’ apps, I can compare and see that SensorTower is good enough for this purpose. If you look at any big app like Headspace, unfortuantely it is not possible to find out what’s their Germany-only stats. SensorTower will only show you global data.

At this point, you’ll have to make some assumptions to estimate their revenue in Germany. (Also remember that this is only revenue, obviously not profit, and we have no idea how much money they are spending to get this revenue. You can find out if they have raised capital….but that’s about it).

You can make assumptions for Headspace revenue with a simple process:

  1. Find a local German-only meditation app
  2. Check their downloads and revenue numbers
  3. Check their category rank in Germany (for example Health & Fitness)
  4. Compare their rank to the rank of Headspace.
  5. The higher is Headspace’s rank in Germany, the more downloads it is getting comparatively to our local app.
  6. The trick is to know exactly how much more downloads….that’s something you just have to figure out for yourself. Try doing this process in different markets, operating systems, categories and you’ll get a feel for it.

This is how I would look at the current situation. The next thing to figure out is why some apps make certain amount of revenue and if there is room for growth. That requires a deep-dive into those individual companies. That’s for another post, but I would check if they are running Facebook / Instagram ads (by using Facebook’s public ad library), I would see how many employees they have on LinkedIn to estimate how much they’re spending on salaries and if they are focusing on engineering or marketing. I would check if they raised capital, obviously use good ol’ Google to find as much info as possible.

I hope this will help you evaluate your next app market or possible idea. Let me know if you have any suggestions on how to improve this process. I’m always curious to hear about different approaches!

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