Here's What Investor Fraud Looks Like IRL
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News broke earlier this week that event discovery app IRL (which stands for In Real Life) is shutting down immediately after its own board discovered most of its users are fake.
A founder faking a few users to show off isn't really all that important, right?
Well, this time it wasn't a few...
From the outside, IRL looked like a model company. A popular product, a large team of 100+, and a charismatic founder that compares building the app to competing in the olympics.
Oh, and let's not forget over $200M raised and a valuation of over a billion dollars.
But, the app didn't really have any users!
According to our download estimates, IRL was "downloaded" 26 million times, which aligns with every article I've seen about this mentioning 20M active users. That download to active user ratio, on its own, should have been a red flag to investors...
Looking at the downloads for IRL something's odd. The growth is too fast, the jumps are too high, and the peaks don't align with any real event.
This isn't an easy one to spot though. I say this after having looked at thousands of apps and their growth, and even to me this wasn't super obvious at first. But! There's another way to look at this that could indicate fraud more clearly - ratings.
Real downloads usually translate into ratings on both the App Store and Google Play. There's no magic number for how many, but 26M downloads should yield more than 60K ratings.
For context, Twitter had 11M downloads and 430K new ratings in the last month. Pandora had 736K new downloads and 58K new ratings in the last 30 days, and the list goes on.
Want to take it a step further? Look at reviews and compare the positive reviews to the negative. In the case of IRL, the positive reviews are all very generic and the negative ones are from the few users that were real.
Analysts who aren't doing these very easy tasks before investing are just asking for trouble. I hope IRL's board gives whatever money they still have in their bank account back to the investors.
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All figures included in this report are estimated. Unless specified otherwise, estimated revenue is always net, meaning it's the amount the developer earned after Apple and Google took their fee.