Bending Spoons' Secret to $10 Billion: Revitalizing Forgotten Apps

Bending Spoons' Unique Business Strategy: Acquiring and Revitalizing Consumer Apps

Bending Spoons, an Italian company, has carved out a unique niche in the tech industry by acquiring and revitalizing consumer apps that have fallen off the radar. Unlike Silicon Valley's focus on investing in AI apps with the hope of hitting a unicorn, Bending Spoons targets apps with millions of users but weak operations and poor monetization. Their strategy revolves around acquiring these apps cheaply, stripping out inefficiencies, centralizing operations, and aggressively monetizing them.

Why this matters

Bending Spoons' approach stands in stark contrast to the typical Silicon Valley model. Instead of chasing the next big thing with potentially massive losses, they focus on acquiring apps that already have a user base and revenue. This strategy has allowed them to build a $10 billion business, making around a billion in profits annually. Their acquisitions include notable apps like Evernote, WeTransfer, Splice, and more recently, Vimeo.

Main discussion

The Acquisition Process

Bending Spoons’ strategy begins with a straightforward acquisition process. They identify apps that have millions of users but are no longer trendy or widely used. These apps may still have strong brand recognition and a loyal user base but lack effective monetization strategies. Bending Spoons steps in with a low yet fair cash offer, often closing the deal in as little as two weeks. This quick and efficient process benefits sellers who might otherwise struggle to find buyers for assets with weak operations and poor monetization.

Streamlining Operations

Once an app is acquired, Bending Spoons doesn’t hesitate to cut costs. This includes laying off unproductive staff, canceling leases, and simplifying product lines. The goal is to strip out inefficiencies and reduce overhead costs. This then expands EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) before even starting to focus on growth. For example, the recent acquisition of Vimeo included a restructuring cost of €80 million, highlighting the company’s commitment to streamlining operations.

Centralizing Operations

Bending Spoons has developed a sophisticated operating system for running consumer apps at scale. Every app they acquire gets integrated into this centralized system, which includes engineering, marketing, data, payments, and more. This integration allows each new app to add revenue without needing a full new team. The centralized operations model ensures that every app benefits from shared resources and expertise. This leads to more efficient operations and higher profitability.

Aggressive Monetization

One of the key strategies Bending Spoons employs is aggressive monetization. They convert one-time purchases into subscriptions, raise prices, and focus on upselling and retention. This approach has led to a 96% net revenue retention rate across their portfolio. Customers are more likely to stick with the apps, and Bending Spoons can continue to generate revenue from them over time. This strategy has helped them achieve adjusted EBITDA margins of around 50% with high leverage.

Multiple Arbitrage

Bending Spoons has effectively created a machine that buys $1 of profit for $3 to $5 and transforms it into $13 of enterprise value. They acquire assets at roughly 3-5 times adjusted EBITDA and are valued around 13 times EBITDA. This multiple arbitrage has allowed them to generate significant value. For instance, their acquisition of Airtable for $1.285 billion is a testament to their ability to identify valuable assets and maximize their potential.

Practical tips

For Potential Acquirers

1. Identify Undervalued Assets: Look for apps with a loyal user base and strong brand recognition but weak operations and poor monetization.
2. Quick and Fair Offers: Make low yet fair cash offers to close deals quickly. This provides certainty to sellers and allows for swift integration.
3. Cost Cutting: Streamline operations by cutting unproductive headcount, shutting down unnecessary offices, and simplifying product lines.
4. Centralized Operations: Develop a centralized operating system for running apps at scale. This includes engineering, marketing, data, payments, and more.
5. Aggressive Monetization: Convert one-time purchases into subscriptions, raise prices, and focus on upselling and retention.

For App Founders

1. Prepare for Integration: If your app is acquired, be prepared for significant changes in operations and monetization strategies.
2. Focus on User Retention: High user retention rates are crucial for maintaining value post-acquisition.
3. Streamline Operations: Ensure your app is operationally efficient to attract potential buyers.

Important takeaways

Bending Spoons’ success is a testament to their strategic approach to acquiring and revitalizing consumer apps. By focusing on undervalued assets, streamlining operations, centralizing resources, and aggressively monetizing, they have created a highly profitable business model. Their strategy serves as a valuable case study for anyone interested in the tech acquisition landscape, highlighting the importance of efficient operations and strategic monetization.

Conclusion

Bending Spoons’ journey from a small acquisition in 2013 to a $10 billion company today is a remarkable story of strategic acquisitions and operational efficiency. Their approach to acquiring and revitalizing consumer apps offers a unique perspective on how to build a successful business in the tech industry. By focusing on undervalued assets and maximizing their potential, Bending Spoons has created a model that others can learn from and adapt.