When building an app marketplace, companies often have more than one goal. In this section, we'll describe some of the most common goals:
Expanding product functionality
Meeting industry expectations
As more and more apps are created, an app marketplace can significantly expand the functionality of your core product, and as a result, the users and experiences it can support.
Apps can enable integration, connecting your product to third-party software and systems, and/or introduce new standalone functionality.
In either case, new product functionality can in turn benefit your business in two different ways.
It's safe to say that offering greater functionality, especially when users can choose what features they do and don't want, leads to a richer user experience.
Of course, the better the user experience, the more likely users are to hang around – thus improving both customer retention and lifetime value.
Amazingly, Salesforce reports that 86% of their customers have installed an app, demonstrating the value of apps to end users:
Aside from improving the user experience for existing customers, offering greater functionality also makes your product more attractive to a wider audience of potential customers. This should ultimately lead to more customers and higher revenues.
An app marketplace can be a powerful asset for revenue generation, both indirect and direct.
Indirectly, app marketplaces can drive additional revenue by increasing customer retention and lifetime value, as well as by adding new users, as outlined in the previous section.
"We know the lifetime value of any customer that uses one or more third party apps increases by a very significant amount."
Alex Barnett Director of Developer and Partner Platforms at Intuit
Directly, app marketplaces can drive revenue through several different models. Perhaps the most popular revenue generation model for app marketplaces is revenue sharing, whereby the platform owner receives a commission on all paid app sales.
Other models include developer membership, where third-party developers pay a fee to list apps on the marketplace, and sponsored apps, where third-party developers pay to promote apps on the marketplace.
Case Study: Shopify
A great example of successful marketplace monetization is the Shopify App Store. In 2020, they paid $233.7M to partners through revenue sharing (and generated corresponding revenue for themselves), with earnings continuing to grow year-on-year:
In some industries, app marketplaces are slowly becoming an expectation. If this is the case, launching your own marketplace may be an important way to keep up with competitors and continue meeting customer needs.
Example: Point of Sale Industry
Last but not least, in some industries, an app marketplace may be an effective way to differentiate yourself from the competition. Ultimately, this may be the difference over which a user chooses you instead of a competitor.
In an industry of high regulation (and somewhat lagging user experiences), Citibank has been one of the first US banks to develop an app marketplace with partner-facing APIs, ultimately enabling a more connected banking experience for customers.