How Do Mobile Apps Make Money?

28 April 2021

This is a sketch . It might be rough, incomplete or without context.

Here are some of the business models used by app companies to make money via mobile apps. The first five of these come from the book How to Build a Billion Dollar App by George Berkowski, and cover all the models the author has observed in billion-dollar app companies. Of course, there are successful businesses that aren’t billion-dollar businesses, and the rest are other models I’ve seen in practice.

1. Gaming

Revenue comes from any of:

  • Pay per download
  • In-app purchase
  • Subscriptions

Note that Apple and Google take a commission on these revenue streams. Some examples are: Angry Birds; Clash of Clans; Candy Crush Saga.

2. E-commerce / Marketplace

Revenue comes from payments for goods or services via credit card or PayPal.

Some examples are: Uber; Hailo; Square; Amazon; Ebay.

3. Consumer audience / Advertising

Revenue comes from getting a big and sticky as possible, and then either:

  1. Developing an advertising platform.

  2. Getting acquired and monetising via the acquirer’s platform.

Some examples are: Flipboard; Instagram; Snapchat.

A variation of this is audience building, where a company builds an audience on a particular app, typically for free, and uses this app to cross-sell onto a paid platform. An example of this is the so-called free to play games used by gambling businesses.

4. Software as a service (SaaS)

Revenue comes from charging for cloud-based software or services.

Some examples are: WhatsApp; Evernote; Dropbox. Payment for this can either be via App Store channels, or directly via credit card or PayPal.

5. Enterprise

Revenue comes from bigger companies paying for larger software solutions. This is kind of an extension of SaaS.

Some examples are: Workday; FireEye; Splunk.

6. Service access

This is my term, to cover apps that are provided to make it easier for users to engage with some other product or service. Revenue comes from attracting and retaining users by adding value and / or making it as convenient as possible to interact with the product or service.

Examples are: Banking apps; insurance apps.

7. Cost saving

Another one of my terms. Revenue comes from saving money elsewhere by:

  1. Providing users with cheaper ways to access services (cheaper ways for the organisation rather than cheaper ways for the user).

  2. Enabling users to take actions that will save money for the organisation in the future.

Examples are: NHS; Public Health apps.

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