Building a business out of a mobile app isn’t as flashy as it used to be 10 years ago, but there are some great models you can still take advantage of up to this day.
The great thing about today’s app environment is that both you as a founder or business owner and the end-user have more options to choose from, with less of the tech burden.
Low-code technologies like Glide apps can help you build a functional mobile app in just under 3 weeks with the help of a professional development agency like LowCode Agency.
I’ll go through some powerful business models in this article, and how they can help you design an app that’s not only useful for end-users but also profitable for you…
App Business Model #1: Subscription (SaaS)
If you haven’t heard the term yet, Software-as-a-Service (SaaS) is a powerful business model that allows you to sell software (your app) for a recurring fee—either monthly or annually.
The great thing about the SaaS model is that it’s very flexible and can be customized to whatever you want to include as part of your “packages” or “tiers.”
Based on your target audience, the more advanced features can be included as part of certain tiers, whereas in other cases it makes sense to include the whole package in just one monthly tier and increase the price as customers add team members or custom metrics to their plan.
While definitely powerful, the SaaS model is hard to pull off in the sense that it would normally require you to have programming skills. That would have been the case 3-4 years ago.
However, you can now get a mobile app with an integrated SaaS business model without touching a single line of code thanks to strong growth in low-code technologies.
App Business Model #2: White-Label Solutions
A trend that is growing strongly in the mobile app world is businesses wanting to offer fully-branded experiences to customers, partners, and team members.
Businesses have grown tired of the standard interfaces that software providers use, making it valuable for them to get their own customized interface on top of the functionality.
This effect can be achieved in 2 ways:
- Create an “instance” of the mobile app for each new customer manually and help them get all of their branding assets on top of the functionality offered.
- Let customers personalize the branded experience themselves with white-label configurations embedded directly within the app settings.
The reason why I mention the 1st option is that the 2nd one is quite complex to achieve, just like a SaaS model. Unlike the SaaS model however, white-label solutions can be sold on a license basis (i.e. pay per X users with a yearly commitment) which works with the 1st option.
If you do want to let the customer tweak all configurations themselves, you can hire a professional development firm like LowCode Agency to get it done for you.
App Business Model #3: Creators & Community
As part of the “creator economy” boom, a lot of companies are looking to design and build digital content platform capabilities to allow for unique monetization experiences.
The great thing about this business model is that, if you are able to build a strong enough community around the app, people will start flocking to it on autopilot.
And with a commission % revenue model where you take, say, 15% of each transaction; it’s relatively simple to start generating cash flow from creators on the platform.
There are 2 major challenges with this business model:
- You will have to create a mobile app with a two-sided interface, one for creators, and one for end-users who are going to join the creators’ communities.
- The payment processing will require some complex configuration where money is held for a set amount of time to ensure that creators aren’t scamming users.
With every platform where payments are allowed, there’s always going to be the issue of protecting yourself from fraud and “bad” users. This is one of the major challenges of pulling it off, but it’s also a major profit driver if you can provide a safe environment.
App Business Model #4: Gated Features
Gating features behind a paywall is a favorite of many fast-paced online businesses, especially if those features are only needed for a brief period of time before the user churns.
Examples for apps that would benefit the most from this are logo makers, self-made design services, file conversion apps, and other “deliverable-style” software.
Here’s a practical scenario:
- The user needs to create a Gif on their phone
- They are unable to do so with the built-in features
- Because of that – they go and look for an app that can help them achieve their desired outcome (creating a Gif as quickly and easily as possible)
- When looking for an app – they find something for free that gets the job done
- They download it and proceed to follow the steps to make a Gif
- Once they are happy with the results – the app gives them the option to download (or “export”) the Gif – but with a big caveat displayed as 2 options »
- You download for free and get the app logo displayed on top of the Gif as a watermark to spread the word when it inevitably gets shared online
- You pay X once or on a monthly basis to get either 1 or as many downloads as you want free of the app’s logo shown on top of your creation
This is a very typical scenario and, although it can be annoying, some online services are able to pull this off rather effectively. The important thing here is to offer the right price.
If a user does all of that work only to see themselves paywalled with a $34.99 yearly subscription, they’re not going to go for it and they will talk badly about your app.
If a user does all of that work only to see themselves paywalled with a $34.99 yearly subscription, they’re not going to go for it.
But if you give them either the option to download 1 Gif for $1.99 or subscribe for as little as $3.99/mo, they might well consider your offer. It sits within “impulse-buy” range.
Of course, this is a business model that requires volume to work. That’s why the first option is to add a logo as a watermark so that more people get to know about the app quickly.
App Business Model #5: In-App Purchases
This is the standard in mobile apps; you download one for free, whether that be a game, a productivity app, or a business solution, and you pay directly from within the interface.
For business purposes, this isn’t as powerful as something like a game since it doesn’t guarantee recurring revenue, although you can create in-app subscriptions as well.
In-app purchases work well for:
- eCommerce apps selling directly to an end-user
- Consumer mobile apps selling digital goods
- Productized service apps like Fiverr
If you want to sell to other businesses with this model in mind, you’re either looking to create an eCommerce shop that sells products in bulk or offer “productized” services.
A productized service is a service limited in scope by a predefined “package” that you offer for $X either as a one-time fee or on a recurring basis. It’s not super easy to pull off because you need to be able to personalize while staying broad enough to fit a specific target audience.
App Business Model #6: Paid Apps
Paying for an app upfront is definitely old school but it may still work if you’re looking to sell support licenses the way software providers have done for decades.
Nothing wrong with that, it just won’t have the same effect on the market as selling access to a set of tools for a lower price and retain the customer for years instead of a one-time purchase and then you don’t really know what they are doing with your product anymore.
Paying for an app upfront works well when:
- You only offer a yearly option with support and new updates not included if the customer doesn’t renew their purchase, making their version usable but obsolete.
- Your app plugs into another platform or system as a sort of “plugin,” meaning that customers can quickly buy and test it without much of the risk.
- The target market is large enough, allowing you to niche down in a specific offering that will always be available upfront and that is easy to pay for.
We don’t recommend paid apps if you’re looking to sell a business process like inventory management or customer relationship management.
SaaS is best for those.
App Business Model #7: In-App Advertising
Ads are also one of the more traditional ways to monetize an app but they don’t fit well with what customers expect from a modern mobile app today. Lazily spreading ads throughout your app in hopes that someone will click on them and generate you a tiny bit of money is not worth it.
Mobile ads work well for:
- Media apps
- Reading experiences
- Certain platforms
You don’t want to plaster a community app with ads; it’s the exact opposite experience of what a creator would want for their members. Instead, you should focus on creating rich media experiences that are augmented with relevant ads as part of the content itself.
App Business Model #8: Sponsorships
Sponsorships are a good business model if you’re building a media experience and can work on a certain creator platform type of apps. They’re certainly not the most straightforward to design or build as they require a network of deep-pocketed companies ready to pay for a mention.
I’m putting both this and affiliate marketing at the bottom of the list because—while interesting—they are quite hard to pull off and require a lot of time building a personal or business network without any guarantee that you’ll make a profit one day. Not easy!
App Business Model #9: Affiliate Marketing
It’s not typical to have mobile apps making heavy use of affiliate marketing practices; this is more popular in the blogging scene as the medium makes it easy to share information related to certain products and services. However, some apps like publishing apps may well have integrated browsing experiences which can turn affiliate links into direct purchases.
What Business Model Will You Choose for Your App?
Depending on whether you are selling to other businesses or to consumers, I’ve highlighted some of the most interesting business models to consider when building a mobile app.
My personal recommendation is to focus on business solutions as they are a lot less competitive than consumer ones and require less volume to become profitable.
LowCode Agency helps with the tricky technical parts to implement in your app so that you can focus on the business model, grow the company, and make the profits.
To get your own business app running, we offer development packages for as low as $2500 depending on the complexity of implementation.
Originally published Jun 28 2021
Frequently asked questions
Depending on your target audience, some examples of business models are using monthly subscriptions to give access to the entire experience (or parts of it), gating features behind paywalls—such as additional user seats—or using in-app purchases and advertising.
To design a business model that’s profitable for your app, you need to consider your target audiences’ needs and wants closely. Selling to a business user will not be the same as selling to a consumer—they are more likely to want peace of mind and return on investment.
Jesus is the founder of Low Code Agency: a low-code development agency that allows small business owners to get their mobile and web apps done fast and cost-effectively while maintaining quality.