Why does it cost so much to build an app, and who pays?
Part 1 of 2: In the Machine Room of Apps
My mother always asks me if we aren’t soon done with building the app (we have been at it for 10+ years) and wonders how it can take more than 70 people to do it? Recently I shared with a friend how much money Clue has raised (tens of millions of dollars) and she also just looked at me puzzled.
I sometimes wonder too why it takes so long and costs so much to build Clue, so let’s have a look!
Here is part 1, about how the apps you have on your phone come into being, from a money perspective. Part 2 is about how we both spend and make money in a different way than most apps.
We have spent almost a decade and tens of millions of dollars on building Clue, which is now being used by over 12 million people, and we often hear back that our information about female health and insights into your cycle are really helpful.
We also often hear from you, our users, that you want more! More features, more tracking categories, more insights, faster responses to your questions!
Our goal is to build a sustainable company so that we can keep serving all of you and to constantly improve the app as best we can. To do that we need to make money. We need your support.
We can’t go on raising more venture capital without the app showing that eventually it can become a sustainable business. It’s ok to keep raising and spending money, even more than we earn for a while - but we’ve got to earn something, for anybody to want to invest more!
So how do we think about making money? Some of the possible business models we have chosen not to go after, because we don’t like the ethics of them. We want users to understand how we make money, and we don’t want to do it in a way that feels deceitful. We also believe that people’s personal data - in particular their sensitive health data - is a private thing that should never be sold or shared without users fully understanding and agreeing with it. We don’t want your cycle data to help advertisers target you better, or insurance companies to adjust their pricing to your health profiles. We don’t want that because we think you as a user wouldn’t like it!
That means that you as a user have to pay for Clue yourself. It is really that simple. It really does cost a lot to build and maintain and evolve an app, so unless the user’s data is to become the real product, then someone has to pay for the actual product (the app), and that leaves only the user.
The good news is that hopefully you will feel that you get good value for money. The benefit of knowing your cycle and body of course, but also an app that doesn’t sell your data and one that invests into science in real tangible ways. If we can make our own money in a direct and above-board transaction with users, we can also stay independent and remain a progressive voice for female health!
How are apps financed?
Some apps are developed by people who can spend their savings on it, or they figure out a way to make money from the get go. But most apps have to go to venture capitalists to raise money so they can build the app. The essence of venture capital is that someone (a venture capitalist firm who is investing other people's money) invests money into a young company, gets part of the ownership of the startup and then hopes that as the company grows (the pie gets bigger), so does the value of the slice they own. And one day the company will be sold and they get their money back several times. Usually it takes several rounds of such financing to make the company eventually make their own money. Some tech companies like Uber have raised billions of dollars, and though they make a lot of money they spend even more, so they are still not profitable.
Eventually the apps start finding ways to make money, or to monetise as it is called in the tech world. Some apps make their money by users paying to use them, either when they download the app or as a monthly fee. Or apps offer users access to extra features for a price, or they can buy virtual things in the app, like a cool sword in a game or a fancy skin to personalize the experience.
Some apps make money in less visible ways, like selling the data that is collected in the app, such as location data or other valuable personally identifiable information. Users mostly don’t think about that when they use a “free” app. Google products are a good example of services that look free, but where the data which is being created by the user is the valuable thing the user “pays” with. When a platform like Google “knows” a lot about us, it can direct our attention to ads that target us much more effectively (meaning we spend our money on the things the ads make us want to buy).
A lot of apps never figure out their business model (how a company makes money), and eventually these companies and their products disappear and the venture capital that was invested is lost. The founders’ vision is not realized, and everyone who worked hard to make it happen loses their jobs and has to move on.
Changes at Clue
Clue has been fortunate to build an app and write articles that many people have come to rely on as a trusted source of health information. Investors know that when a product fulfils a real and substantial need that enough people have, then eventually there must be a product there that someone will be willing to pay for.
So you might start noticing some changes in the Clue app, including more features put behind the Clue Plus paywall. When you choose to pay for Clue by subscribing to Clue Plus and/or making a donation via the web, then that enables us to continue to build you a trustworthy and safe app - which is a much bigger and more complex thing than you would ever have guessed looking at an app that (hopefully) looks relatively simple.
We are 70+ people at Clue and if we had the money we could easily employ thousands to build all the things that are still needed in female health! But right now we are grateful to even exist, and your support might look small as an individual contribution, but this is how we show the world that we have a right to be, that what we have built is valuable to our users and that it is possible to have a business model that doesn’t rely on selling users’ data. That it is possible for Clue to exist in the world for the benefit of the women and people with cycles who use Clue.
Read Part 2 of 2: In the Machine Room of Apps here.