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How to Monetize Your On-Demand App: Revenue Models and Strategies

How to Monetize Your On-Demand App: Revenue Models and Strategies
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    10 min
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    May 2, 2024 Last Updated: May 2, 2024


10% of apps in the Apple App Store now demand payment upon download, compared to 77% of paid apps in 2009. In contrast, just 3.1% of mobile apps in the Google Play Store are paid. Due to the huge rise in on-demand app monetization platforms, app developers now need to consider creative ways to monetize their products.

App developers can utilize one of the following app monetization models to make sure their app keeps making money while offering a great user experience. On-demand apps can increase their revenue by utilizing revenue models, which provide organized strategies for marketing their products. These models enable on-demand delivery apps to generate revenue through a variety of channels, including subscription plans, in-app advertising, surge pricing, in-app purchases, upselling, cross-selling, sponsored listings, promotions, and so forth.

Interesting Facts and Statistics About Monetizing On-Demand Apps

In-app purchases and sale money from software sales were the only two revenue streams available when the App Store first launched. But barely five percent of the participants contributed. In-app advertising was created for the same reason. In-app advertisements dominated the on-demand app monetization in the past. To boost the lifetime value (LTV) of their apps, businesses utilize a hybrid monetization approach that combines in-app advertising and in-app purchases (IAP).

on-demand app monetization

In a market where users' attention spans are short, your mobile app monetization techniques should focus on meeting the hierarchical needs of the app as well as the needs of the consumers. Let's examine how the scenario for advertising appears in businesses using the following facts.

  • Just 18% of the on-demand delivery apps in the Amazon App Store need payment; the remaining 82% can be downloaded and installed without cost.
  • The amount spent on mobile advertising increased to USD 327.1 billion in 2022 and is predicted to reach USD 399.6 billion in 2024.
  • In 2022, sponsored advertisements were present in about 37% of apps downloaded worldwide and 26% of US applications made money this way.
  • It is anticipated that revenue models for on-demand apps will earn USD 1.26 trillion in revenue by 2025, growing at a rate of 13.5% between 2021 and 2025.

Also Read: Biggest Mistakes Entrepreneurs Make While Launching On-Demand Apps

Top 6 Strategies to Generate Revenue from On-Demand Apps

Delivery applications may maximize their revenue streams, promote sustainable growth, and provide the most value to users and companies in the cutthroat delivery industry by comprehending the subtleties of each on-demand app monetization model and strategy.

on-demand app monetization platforms

1Commission-Based Model: Differences in the Structure of the Commission:

Certain delivery applications bargain with affiliated companies for set commission rates. These prices could change based on the popularity of the restaurant, its location, and the kind of food it serves. On-demand delivery apps may use a tiered commission structure, in which companies pay varying compensation rates according to variables such as average order value or amount of orders placed. Lower commission rates could be offered to restaurants with higher volume as a perk for collaborating with the on-demand apps.

To optimize revenue potential, applications may provide businesses prepared to pay higher commission rates with possibilities for premium placement or advertising. This could include in-app targeted ads, sponsored banners, or featured listings. The dynamics of the market and the level of competition can affect the commission rate negotiation process. While some apps give flexibility for negotiation based on the unique requirements and preferences of the business, others may have standardized commission rates.

Commission structures must be transparent to cultivate confidence and preserve goodwill with partner companies. To prevent misunderstandings and disagreements, apps should properly state commission rates and any associated fees upfront. To provide an even playing field for all businesses on the platform, commission allocation must be fair. On-demand apps should aim to maximize total value for all stakeholders while striking a balance between the interests of consumers and enterprises.

2Subscription-Based Model:

Users of subscription-based services can take advantage of several advantages, such as priority service, exclusive discounts, free delivery, and access to premium features and content. On-demand delivery apps can use one-time deals, referral bonuses, or subscription bundles with other supplementary services (like meal kits or streaming subscriptions) to entice users to sign up for a subscription. With tiered subscription plans, apps can offer different perks depending on the subscription tier (e.g., silver, gold, platinum) and cater to different user segments and budgets.

on-demand app monetization

Subscription models encourage customers to stick with the app over time by offering recurrent value and promoting customer loyalty and retention. With the help of proactive subscriber assistance, targeted promos, and personalized recommendations, apps can improve retention efforts. Frequent communication with subscribers via email newsletters, in-app alerts, or invitation-only events can help deepen the relationship between the app and its devoted user base of the on-demand app industry.

Revenue models for on-demand apps should constantly improve their subscription options in response to market changes, competition analysis, and user input. Users can select the subscription term that best fits their demands and budget thanks to flexibility in terms of payment, including pay-as-you-go, yearly, and monthly options. Apps can leverage high-demand periods and encourage subscription uptake by introducing limited-time or seasonal deals.

3Delivery Fees:

Delivery costs can be dynamically changed in response to several variables, including order size, distance, urgency of delivery, and demand in real-time. On-demand apps may use dynamic pricing algorithms to determine the best delivery costs by accounting for variables like weather, traffic, and driver availability. To maintain a balance between supply and demand and to encourage drivers to fill orders during moments of high demand, surge pricing systems can be implemented.

Before a consumer places an order, delivery applications should make their price structures transparent and make any additional costs apparent to them. Different user preferences and ordering patterns are accommodated via flexible charge alternatives, such as tiered pricing based on order amount, flat-rate delivery fees, or percentage-based fees. Lowering resistance to delivery fees and promoting higher order values can be achieved by providing free delivery thresholds or by rewarding customers for combining several orders.

Delivery costs ought to be presented as an additional benefit that raises the app's total accessibility and convenience. The customer value proposition is reinforced and the associated fees are justified by highlighting the time and effort saved by using the on-demand delivery apps as well as the excellence and dependability of the delivery experience.

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4Advertising and Sponsorship:

Delivery applications provide businesses with tailored advertising options by utilizing their rich consumer data and vast user base. Sponsored listings, in-app ads, and user-preference-based personalized suggestions are efficient means for businesses to reach the right customers. To meet varied marketing goals and budgets, on-demand app monetization platforms can provide a range of advertising forms, such as sponsored content, display ads, video ads, and native advertising.

Engaging in co-branded marketing campaigns or sponsorships with brands improves brand recognition and trust for the app and its partners. Establishing strategic alliances with regional companies, national brands, or influential figures in the sector can generate win-win situations for cross-promotion and consumer acquisition. These apps have the potential to enhance user engagement and foster brand loyalty by providing sponsorship options for events, promotions, or community initiatives.

Delivery applications give advertisers access to extensive analytics and performance data so they may assess how successful their campaigns are in the on-demand app industry. Advertising campaigns are evaluated for success by marketers using key performance indicators (KPIs) such as impressions, click-through rates (CTR), conversion rates, and return on investment (ROI). Based on these metrics, marketing strategies are optimized.

5Peak Pricing:

Peak pricing systems, sometimes referred to as surge pricing or dynamic pricing, adjust their prices in response to changes in the supply and demand for delivery services. Delivery apps may temporarily raise prices to entice drivers to accept orders and guarantee on-time deliveries during moments of high demand, such as mealtimes or bad weather. To calculate the ideal pricing levels that strike a balance between supply and demand, surge pricing algorithms take into account several criteria, such as driver availability, order volume, and market demand.

revenue models for on-demand apps

When introducing surge pricing, open communication is crucial to preventing negative customer feedback and preserving confidence. Delivery applications should give consumers alternative options, such as arranging deliveries during off-peak hours or selecting less expensive delivery methods, and fully explain the reasons for price hikes. During times of high demand, providing incentives to users in the form of loyalty points, discounts, or promotions can help mitigate the negative effects of surge pricing and use strategies to generate revenue from on-demand apps.

To guarantee efficiency and fairness, surge pricing algorithms should be continuously improved based on feedback and real-time data. Apps can use predictive analytics and machine learning to foresee demand trends and proactively modify prices to steer clear of excess capacity or supply shortages. To achieve the correct balance between optimizing income and preserving customer pleasure during peak periods, it is imperative to create a balance between the necessity of driver incentives and consumer affordability.

6Data Monetization:

On-demand delivery apps gather a plethora of information about user preferences, actions, and transactional trends. This data is analyzed by sophisticated data analytics and machine learning algorithms to uncover important trends and insights that can improve user experience, streamline operations, and guide business choices. User profiles, order histories, delivery routes, payment transactions, and customer comments are a few examples of data sources. All of these are combined and anonymized to maintain data integrity and preserve user privacy.

Users are empowered to make educated decisions about their privacy preferences when data usage rules and consent methods are transparent and provide information about how data is gathered, processed, and shared.

Using user data insights to produce value-added services for companies, advertisers, and other stakeholders is known as data monetization. Revenue models for on-demand apps take from data in several ways, such as by selling market research reports, targeted advertising, subscription-based analytics systems, and consulting services. Delivery apps help businesses create mutual value and generate income by providing actionable data and predictive analytics that help them enhance their marketing efforts, menu offerings, pricing strategies, and operational efficiency.

Best Practices for On-Demand App Monetization Platforms

Reaching a balance when it comes to mobile app monetization might be challenging. Businesses need to realize that monetization involves more than just making money—it also involves offering users an app experience that brings in money. Selecting the best revenue models for on-demand apps and a plan that would yield ongoing results is their largest obstacle. The end users must take an active role to do this. Furthermore, users' retention rates tend to decline over time, which can make it more difficult to find suitable app users.

The following are some recommended practices they ought to follow:

on-demand app monetization

1. Determining the Identity of the User

One of the most crucial elements for businesses looking to monetize their mobile apps in the upcoming years will be determining the identity of the user.The IDFA criteria have been limited by Apple, which has had an impact on attribution, ad-targeting, and segmentation.

Additionally, 52% less money has been made from advertising for developers. Up to 85% of average revenue per user (ARPU) is generated by users without IDFA; this percentage can drop to up to 35% of iOS users.

2. Selecting Several Advertising Partners

Developers ought to think more carefully before selecting an advertising partner or seek out advisory services for app monetization. They typically select one and stick with it, which frequently hurts software sales.

Given the size of the mobile app market, various SDKs should produce varying levels of income. While certain SDKs might yield higher income, others would yield higher CTRs. In this situation, testing with other pug-in SDKs might be a wise course of action. They should also investigate every market niche and each target group to identify SDKs that will enable on-demand delivery apps to generate more income.

3. Enhance in-app purchasing options

While the app is still in development, developers and marketers should think about implementing their in-app payment strategy. It will save resources later on and assist them in creating the roadmap the app needs to be monetized. A well-written text can greatly increase engagement by providing your brand a distinct moniker.

Introducing in-app bundle deals for several things at a discounted cost is an additional approach. Finally, by implementing push notifications, in-app messaging, and emails, you may advance users down the funnel by employing automated tools for on-demand app monetization.

4. Track Important Metrics to Make Your Strategy Better

Maintaining constant monitoring of critical data is important to enhancing your app approach.

  • Among them are:
    Retention rate: The secret to on-demand app monetization platforms is retention; the more devoted your users are, the more likely it is that they will interact with your apps and make in-app purchases.
  • The average revenue per user, or ARPU, is a crucial indicator of how much a user can typically pay you for using your service.
  • App stickiness: This term describes how much people will interact with your application.
  • Lifetime value (LTV): This measures how valuable a user is to you after they stop using the app. It's a crucial indicator that aids in understanding the maximum amount of money that marketers can spend on advertising.
  • Funnel conversion rate: The quality of users moving down the funnel from the moment they see an advertisement to the moment they complete a transaction is determined by this rate.

The best method to determine what will function for revenue models for on-demand apps is to conduct extensive study. A lot of prospective developers lack the internal resources necessary to dedicate to the kind of market research and testing needed to create the best on-demand app monetization plan.

Let's Build an App Worth Paying For!

The majority of developers think about creating revenue sources early on. Multiple revenue streams can be seamlessly integrated into your app's functionality and design without requiring you to take any unnecessary steps back. You won't have to stop working on the project or issue big upgrades that could break the current user experience. However, there are always strategies to generate revenue from on-demand apps if you amass a sizable and committed user base.

on-demand app monetization platforms

You need to realize that this is a very lucrative on-demand app industry now that you are aware of the top delivery app monetization strategies. It not only facilitates revenue generation but also expands the online market for goods and services.

Consequently, on-demand delivery software is essential to the expansion of your company. Quickworks is a top on-demand delivery app development company serving startups, small companies, and large corporations in a variety of sectors. Our knowledge and pre-made apps will enable you to enter the market swiftly. Our professionals enable decision-makers to turn their on-demand delivery apps into profitable businesses.

We offer advice on whether you should use subscription-based monetization, freemium business models, or in-app advertising. A balanced strategy is ensured by concentrating on user happiness and revenue optimization, which enables companies to prosper in the ever-changing on-demand app monetization platforms market.

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Get in touch with us right now to start growing your business and increase ROI.

Frequently Asked Questions(FAQs)

There are several monetization strategies for on-demand apps, including:

  • Charging users per transaction or service rendered.
  • Implementing subscription-based models where users pay a recurring fee for access to premium features or services.
  • Offering freemium models, where basic features are free but advanced features require payment.
  • Integrating advertisements or sponsored content into the app.
  • Partnering with businesses for commissions or referral fees.
  • Selling user data or insights (while ensuring compliance with privacy regulations).

Subscription-based models involve users paying a recurring fee at regular intervals (monthly, annually, etc.) to access the app’s services or features. These models often offer tiered pricing plans with varying levels of benefits, enticing users to upgrade to higher tiers for more value.

The best monetization model depends on various factors, including your app’s target audience, industry, competition, and unique value proposition. It’s essential to conduct market research and analyze user preferences to determine which model aligns best with your app’s goals and user base.

Continuously analyze user behavior and feedback to iterate and improve your monetization strategies. Regularly update your app with new features or services to provide ongoing value to users and encourage retention. Personalize user experiences and offers based on data analytics to increase user engagement and conversion rates.

Surge pricing, also known as dynamic pricing, involves adjusting prices based on demand or other factors such as time of day, location, or availability of resources. While surge pricing can maximize revenue during peak demand periods, it’s essential to implement it judiciously to avoid alienating customers.

  • Prioritize user experience by ensuring that monetization strategies enhance rather than detract from the app’s usability and value proposition.
  • Offer a seamless and intuitive payment process to minimize friction and maximize conversions.
  • Provide clear value propositions for premium features or subscriptions to justify their cost to users.
  • Regularly solicit feedback from users and iterate on monetization strategies based on their preferences and pain points.
  • Maintain transparency and honesty in pricing and monetization practices to build trust with users.

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