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Why crowdsourcing firms see gold in mobile app ideas

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It works for American Idol. It (sort of) worked for Donald Trump. Now a pair of entrepreneurs is turning to the mass market seeking something that may be more elusive than a pop singing sensation or an apprentice CEO: the next big smartphone app.

Marcellus, NY.-based Applits LLC is gearing up to launch the first week of voting in what promises to be a monthly competition among an online community to choose the best of a series of submissions to its website. It is an example of crowdsourcing, a way of tapping into the collective wisdom of the crowd to create new products, services and breakthrough ideas.  Consider Kickstarter, which is perhaps best known for its use of crowdsourcing to help startups develop and fund projects via the Internet. The online T-shirt company Threadless, which allows user-generated design submissions for all its clothing, is another example of how crowdsourcing works in the retail sector. Similarly, Applits is hoping to create mobile apps that better reflect the needs and wants of everyday people by setting up a channel to create a bottom-up style of research and development.

Keith Shields, one of Applits' co-founders, said he and his partner Joshua Tucker were struck by Facebook's acquisition of Instagram earlier this year. This highlighted what he described as the potential overvaluation of app companies with no clear revenue stream. Instead of trying to come up with the next Instagram, however, the duo decided it might make more sense to ask users what they wanted to see on mobile devices.

"Ordinarily in this market, the barriers to entry are huge," he said. "To make a high-end game costs hundreds of thousands of dollars, and there are lots of hours required to code. But, there are still a lot of ideas out there that could be developed or have simply been underdeveloped."

Crowdsourcing has been picking up steam in the mobile app space ever since last year, when Nokia introduced its IdeasProject portal at the annual South by Southwest conference. Like Applits, IdeasProject offers ongoing challenges and encourages anyone to submit contributions, though it is obviously centered around Nokia's own devices. While Applits hasn't published any of the ideas it has gathered so far, some of the concepts on IdeasProject include requests for additional features and functions--like being able to use your finger as a stylus--rather than full-blown apps.

Applits

Applits (above) collects ideas from users and awards users who submit winning ideas.

Just weeks before Applits launched, Sellanapp, an organization in Amsterdam, began offering resources not only to develop innovative app ideas but to help finance them through a crowdsourcing approach. So far, Sellanapp claims to have 262 investors in 151 cities and about €400,000 to help execute on ideas it receives. It's now looking for developers who can take on social, location-based or other kinds of app work. "We're starting with 10 developers but from there we want to grow to developers in every timezone, any culture and language and any expertise," said Milan van den Bovenkamp, Sellanapp's chief creative officer.

Then there's Idea Apps Inc. in San Antonio, which has been asking for submissions through its website for the last three and a half years. Rudy W. De La Garza, the firm's co-founder and CEO, said Idea Apps takes a similar approach to Sellanapp, in that if a submitter can't afford to have his or her idea developed, Idea Apps will help seek funding. The submitter then would get a royalty fee, which would vary depending on the degree of financing required.

"We're not the first in this," he admitted, "but there are so many great ideas out there that might be worth supporting. You've got to bring them to the surface somehow."

Shields said he was aware that other organizations are trying to crowdsource their way into the app market, but he believes Applits is offering a process that's less complex and ultimately more social than what's been attempted before.

SellAnApp

Sellanapp is an app crowdsourcing company based in the Netherlands. 

"There are lots of sites where you can submit an idea for a dollar or something, but It's not up to the end user whatsoever (what gets developed)," he said. "We're putting a whole community feel in there so that, for the first time, you can actually say exactly what you want to see in the marketplace."

Voting began July 24 and whoever submitted the winning idea will get a prize of $1,500. They will also award small $10-$20 prizes for those who offer insightful comments and critiques. A flat fee is a lot better than waiting for years to see whether you'll get any money from the small percentage other venture organizations offer to those who try to get app ideas off the ground, Shields said.

It's worth pointing out, however, that submitting ideas to Applits and similar organizations means that, token prizes aside, innovators have to be comfortable more or less walking away from something that could become the next Angry Birds. In its terms of service agreement, Applits even ensures it will have a stake in ideas the company and its community passes on. "If an Accepted Mobile Application Idea is not selected by Applits for development, the Accepted Mobile Application Idea Submitter will re-acquire ownership from Applits of all Intellectual Property Rights in the commercialized version of the Accepted Mobile Application Idea, in return for paying Applits 10 percent of all revenues generated from such Intellectual Property Rights in perpetuity," it reads.

Consider these points before you agree to take on a crowd-generated app proposal.

There's also a question of how much developers will make through such ventures. Some, like Idea Apps, do all the development work themselves. van den Bovenkamp said that while Sellanapp is actively seeking developers, the revenue model will vary by project. "The producer (the person with the original app idea) will choose if he will share revenue with the developer--that will be extracted from his personal share," he said. "Within our model, the developers already gets paid for his development, and the developer chooses how much he will get because it's in an auction."

An even bigger question mark is whether developers will be eager to work with app crowdsourcers, especially since their model suggests developers and programmers have had too much of the decision-making power until now. Dan Ferguson, vice-president of creative services and co-founder of Block Dot in Dallas, said crowdsourcing has its merits but wondered if it might be better to solicit ideas from experts than from the average people online.

"If you have good content going out that people can understand, you'll get good content back. You've got to make sure that whoever seeks the ideas is getting the right information (about what they want) up front," he said. "I think there are probably more opportunities through people with specialties instead of going out to the general public. You want to target the people with specialized skills."

In other words, crowdsourcing mobile apps may work out, but it could depend on whom makes up the crowd.