Buying a mobile app business in Canada

Buying a mobile app business means judging three things: whether the earnings are repeatable, whether the buyer can actually take control of the accounts they sit in, and what duties come with the user data. A listing may show revenue, downloads and a rating. What decides whether the purchase works may not appear in the summary: how much revenue comes from returning users, how the app is distributed, and who else has a hand on the accounts. This page is for someone evaluating before an offer, and a broker or marketplace that specialises in digital businesses can help test a listing’s claims. The verification that follows a letter of intent is covered in the due diligence guide.

A sound app and a weak one look different

A buyer can look for signs of a sound app: earnings from people who come back, revenue spread across months rather than bunched around a launch, reviews that describe the product rather than the paywall, an update history that shows steady maintenance, and a support inbox that is small and answered. A weak one may have profit built on a spike: a press mention, a viral post or a store feature that has since passed. It may have installs that were bought, reviews that arrive in bursts, revenue tied to one country or one store, and a codebase left on outdated tools. None of these is fatal alone. Together they describe an app whose last year may not repeat, and a buyer can weigh that in what is offered.

What the seller may not volunteer

• How much of last year’s downloads were paid, and what installs looked like in the months when marketing paused.
• Whether one moment, such as a feature in a store or a social post, produced a large share of revenue.
• Any warning, rejected update or suspension from a store, and any policy notice from an ad network.
• How much of the audience arrives because of the founder’s own following or an influencer relationship.
• Which third-party services the app depends on, and whether the accounts with them are in the company’s name.

What you must hold yourself

An app moves into a developer account, so the buyer needs one. Ask each store what it requires of the receiving account and how long enrolment takes, because those steps can set the closing timetable. Open the account in the entity that will own the app rather than in your own name, or the next sale meets the same problem that lowers the price today. If the app is aimed at children, the buyer takes on its consent practices along with its revenue, and each store’s own child-safety policies are worth reading, so the review needs more care; the diligence guide lists the checks. Whoever will run the app also needs to be able to maintain it: a buyer can ask whether they could ship an update when a store changes a requirement.

Shares or assets decides what you inherit

Buying the company that holds the developer accounts keeps the listing, subscribers and reviews where they are, but it also keeps everything else the company ever did: past privacy lapses, unsigned contractors, unpaid obligations. Buying the assets can leave most liabilities behind, but each store listing has to be moved to the buyer’s account, vendor contracts need new paper, and the buyer takes only what the agreement lists. The asset sale versus share sale guide covers the general trade-offs. When assets are bought as a business or part of one, the CRA’s Form GST44 is used to elect to not have GST/HST apply to the sale; the CRA says the purchaser files it, and that the election cannot be made if only one or more assets of the business are sold, or if the seller is a registrant and the purchaser is not. The choice also interacts with funding, as the financing guide explains.

Data you cannot simply buy

User data is part of the asset only within limits. PIPEDA section 7.2 lets parties to a business transaction use and disclose personal information without the individual’s knowledge or consent on stated conditions, but it does not apply to a transaction whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. A buyer who mostly wants a user list cannot lean on it. After closing, continued use without the individuals’ knowledge or consent depends, among other conditions, on the information being necessary for carrying on the business or activity that was the object of the transaction, and on one of the parties notifying the individuals that the transaction has been completed and their information disclosed. For an app with Quebec users, the Commission d’accès à l’information says an organization must carry out a privacy impact assessment before communicating personal information outside Quebec, so a buyer whose servers or staff sit elsewhere should ask how that applies to the handover.