If you want investors to fund your business idea, you should consider one of the app business models that commonly get funded. When you don’t you risk building an app that isn’t focused on bringing in revenue and instead becomes a hobby. You can avoid this fate choosing an app business model that has a proven track record and that investors can instantly “get”.
App Business Models
- E-commerce / Marketplace
- Audience-Based / Advertisement
- Software as a service
- Micro Transactions
- Pay to Download
E-commerce / Marketplace
Think Uber, GrubHub, Airbnb or any app that sells real world goods. Mobile commerce disrupts the status quo by providing users with a faster and streamlined experience than its real world counterpart. Hailing a cab in New York City was a frustrating experience until Uber came around and disrupted the taxi industry. Now, customers can hail a cab anytime, anywhere with a few taps.
Advertisements
Ads are the most common way to make money. Ads, however, require a big audience. Instagram, Facebook, and Snapchat are all ad based apps. They capitalize on their broad audience through advertising and selling usage data to advertisers. If you chose this app business model, you have to build an audience quickly. Snapchat had explosive growth, in less than a year they had 1 million monthly active users. Not only do you have to build an audience, but you also have to keep them coming back for more. You’ll need to create something that your audience will use on a daily basis.
Software As A Service
The SAAS business model gives customers the opportunity to hire cloud-based software to perform a job. This job can be managing a customers sale’s pipeline like SalesForce. Salesforce is a paid subscription service. Customers get access to sales management tools that bolster productivity. SAAS companies give customers the opportunity to do more with less. Their customers reward them with subscription fees on an annual or monthly basis. If you want to build a SAAS product, focus on making your customer’s life easy.
MicroTransactions
This model consists of building an app where customers pay for virtual goods. The top grossing games such as Angry Birds and Candy Crush on the Google Play Store and the Apple App Store are free to play but are rich with micro transactions. Designing an experience that converts free users into paid users is tricky, but once achieved, can have billion dollar results.
Pay To Download
Last but not least, the pay to play business model require an upfront investment from your customer before they experience your application. Apps like this usually have a clear and focused value proposition. This value proposition incites action from potential customers converting them to customers.
Those are the top business models that get funded. If you have an app idea and you need help conceptualizing or developing it, we can help. We’ll help you determine which business model is correct for you and your target audience.
