--- title: "Three App Business Models: Advantages and Disadvantages" locale: "en" language: "en-HK" published: "2016-08-18T13:22:51+08:00" updated: "2026-03-17T23:07:18.932Z" canonical: "https://accordhk.com/blog/three-app-business-models-advantages-and-disadvantages-283" --- # Three App Business Models: Advantages and Disadvantages Apps primarily generate revenue through paid downloads, in-app advertising or in-app item sales. Their potential for sustained income comes with intense competition, substantial development costs and the need for a strong user experience. ## In brief The three main app business models are paid downloads, free downloads supported by advertising, and free downloads with in-app item sales. Apps can generate sustained revenue, but success requires product quality, effective marketing, investment in development and a user experience that encourages engagement. The widespread adoption of smartphones has driven the rapid growth of [apps](). Today, apps bring to mind smartphones, tablets and wearable devices. When apps first emerged, it was a golden age of innovation, and even inexpensive apps often made substantial profits. The environment today is very different, but opportunities for growth remain. By 2017, [the app industry]() was expected to generate US$77 billion in revenue. Although the app industry has changed considerably, its main business models remain unchanged. They fall into three categories: 1. Paid downloads 2. Free downloads, with revenue generated through in-app advertising 3. Free downloads, with profits generated by selling in-app items (primarily mobile games in which winning requires payment) [App business models](): advantages An individual app can generate substantial profits if it finds the right market at the right time. Some apps earn millions of dollars. Apps have considerable potential: many can generate revenue for months or years, requiring updates only when the iPhone or Android operating system is updated, with little work needed at other times. Another advantage is that apps reside on mobile devices, where people now spend most of their time. This creates numerous marketing advantages. For example, many apps use advertising placements in the [Facebook app]() to reach their target audiences. After clicking an advertisement, users can immediately download the advertised app on their phones. Disadvantages of app business models Since apps first appeared, competition in the market has grown increasingly intense. In January 2016 alone, 19,130 gaming apps were added to the iTunes Store. The competition can be described as fierce. This means that, to profit from an app, you need to ensure product quality and have a flawless marketing plan to get it off the ground. App development is relatively expensive. To succeed, you need to spend a substantial amount to hire excellent developers. Apps built by inexpensive developers generally encounter many problems after launch, and resolving those problems can be costly. Even if you hire excellent developers who can build a great app from scratch, you still need to hire other programmers to improve the user experience. Some users rarely open or use an app after downloading it, making this a critical issue. Improving the user experience is essential to increasing user engagement. If your user interface is very poor, users may well choose not to open your app. If you have sufficient funds, compared with [an app’s profit potential](), these initial investments are a drop in the ocean. Before choosing [an app business model](), however, you still need to consider the costs of your startup. http://www.cnsoftnews.com/news/201607/50761.html ## Frequently asked questions ### What are the three main app business models? They are paid downloads, free downloads funded by in-app advertising, and free downloads that generate profits through in-app item sales. The article describes the third model primarily in terms of mobile games where winning requires payment. ### What makes apps attractive as a business? An app that reaches the right market at the right time can earn substantial profits. The article also highlights the potential to generate revenue for months or years and the marketing advantages of reaching users on mobile devices. ### What challenges do app businesses face? The article identifies intense competition and relatively high development costs. It stresses the need for product quality, a strong marketing plan and investment in developers and user experience. ### Why does user experience matter after an app is downloaded? Some users rarely open or use an app after downloading it. Improving the user experience helps increase engagement, while a poor interface may discourage users from opening the app.