• by Mark Walsh  @markfwal, July 6, 2011

All the venture and IPO money flooding into the mobile app space begs the question: Can an app be a standalone business? The investors who poured $50 million into Flipboard, the startup behind the popular social magazine app of the same name, clearly think so.

The same goes for those that put $42 million into "Angry Birds" creator Rovio in March, along with the investors who bankrolled the much-hyped "Color" photo-sharing app to the tune of $40 million the same month. In the latter case, maybe they should've waited just a bit to see if the iPhone app would actually attract any significant number of users and earn more than a two-star rating in the App Store.

To this list, add The Daily, News Corp.'s iPad-only newspaper, which by most accounts hasn't seen a stampede of subscribers since its launch last February. Keep in mind, it cost $30 million to set up and costs $500,000 a week to run (or so Rupert Murdoch indicated at the unveiling).

Looking at these well-funded but nascent projects, it's far from clear whether any one app can stand as a profitable business in its own right. There are still a lot of questions about how best to monetize apps. Flipboard hasn't even started to try making money from its app, often described as an "elegant" solution for reading tablet magazines.

Charging a subscription fee, like The Daily does, cuts way down on the number of potential users. But relying solely on advertising isn't likely to generate enough revenue to make the app self-sustaining.

Now, investors might argue they're not investing in any one app but the human talent behind it. The understanding is that if they created one popular app, they can create more. That's how the hit-driven entertainment business works after all, right?

True, but what about a utility app like Flipboard? Is that $50 million it landed supposed to buy a pipeline of clever, well-executed utility apps? Not likely. The investment is focused on extending Flipboard beyond the iPad to other mobile platforms and figuring out how to monetize it as a business in its own right.

Rovio is perhaps the best example so far of a company trying to build a hit app into a crossplatform franchise spanning mobile, TV and movies. But will "Angry Birds" maintain its appeal over time? Eventually, Rovio will be under pressure to produce more hit games.

Even social games powerhouse Zynga, with a raft of hit titles under its belt, can't guarantee it will be able to duplicate its online success in the mobile sphere. In its $1 billion IPO filing last week, the company noted its growth prospects will dim if it can't create successful games for mobile platforms. The risks for a single mobile app, however popular, to prosper as a business on its own are that much greater.