What is a mobile app business worth?

A buyer weighing a mobile app business can ask what earnings will keep arriving once the founder steps back, a question the code alone does not answer. The questions to ask are whether people who download the app keep using it, whether they keep paying, and whether the company controls the store accounts through which the money comes in. Two apps with the same monthly revenue can answer those questions differently, for example where one earns from a retained base on subscriptions while the other depends on advertising spend and one good month. The sections below cover what a buyer pays for, what gets discounted, how the earnings are recast and why one app is worth different amounts to different buyers. Any multiple quoted for apps is general market talk, not a valuation of yours.

Retention is read before downloads

Install counts say little on their own, because installs can be bought. A more telling figure is the retention curve: of the people who installed in a given month, how many still open the app weeks and months later, and how many of those pay. A curve that flattens out at a stable group of regular users suggests the app meets a real need. A curve that falls toward zero says revenue depends on acquiring new users for ever. Cohort data by install month can show the difference, and a seller who can produce it from the app’s own analytics, tied to the store reports, gives a buyer something to check. Review volume and organic download velocity can be checked for the same reason: they may show whether users arrive without paid effort.

The monetization mix sets how stable revenue looks

Subscription revenue recurs until the user cancels, and the renewal rate shows how long a subscriber stays worth having. In-app purchases can be lumpier where they are tied to particular features or content, or to a handful of heavy spenders, so a buyer can look at how many users pay and how concentrated the spending is. Advertising rests on rates set by ad networks the owner does not control and on usage volumes that can fall when engagement dips, so a buyer can ask how exposed it is. A blend that holds steady month to month is less exposed than a single stream that swings, and a buyer can ask which stream would still stand if the other two failed.

Risks a buyer can test

• Paid acquisition: if installs stop when marketing stops, the app looks like a marketing operation, and a buyer can ask what earnings look like on organic users alone.
• A developer account registered to the founder personally: the account and the listing are what is being sold, and one tied to a person may be harder to hand over cleanly.
• Platform policy exposure: a feature or payment method that a store could later restrict puts part of the revenue at the store’s discretion.
• Ad-network dependence: a change in a network’s rates or terms moves revenue without any change to the app itself.
• A founder who is the face of the app: where downloads follow the founder’s own audience, that audience may not follow the app to a new owner.

How the earnings get recast

Reported profit can be adjusted before any multiple is applied. A buyer can start from what the stores actually paid out rather than gross sales, and look at refunds and chargebacks. Owner perks and one-off costs can be added back when they can be documented, as the add-backs entry explains. Costs the owner was not bearing can be subtracted: developer or contractor time at a market rate, the owner’s own hours spent on support and updates, and any cloud, analytics or ad-network fees that were being absorbed elsewhere. Marketing can be handled separately, with two figures, one with the current acquisition spend and one without, to show how much of the profit depends on it. Once a price is agreed, the CRA notes that a sales agreement may set a price for each asset and an amount attributed to goodwill, which is a question for an accountant. A formal valuation is the work of a valuation professional, such as a CBV.

Privacy practice is part of the price

How user data was collected limits what a buyer can do with it, so privacy practice can be weighed as a risk. Under PIPEDA, consent is only valid if it is reasonable to expect that an individual to whom the organization’s activities are directed would understand the nature, purpose and consequences of what they are consenting to, which puts the wording of an app’s consent screens and privacy policy under scrutiny. Quebec’s law, as amended by Law 25, adds rules of its own: the Commission d’accès à l’information’s summary says consent must be requested for each purpose, in clear and simple terms, and, when requested in writing, presented separately from other information. An app with Quebec users and a single catch-all consent screen invites questions, and so does a plan to use the data differently from how it was collected, because the original consent may not stretch that far.

Why one app is worth different amounts to different buyers

Different kinds of buyer can weigh the same app differently, so a seller can prepare a different set of answers for each. For a portfolio holding company or roll-up acquirer that already runs publishing accounts, a support desk and acquisition know-how, the question to prepare for is how easily the new app fits into them. For a strategic buyer, it is whether the user base, the audience and the technology underneath fit what that buyer already has. For an individual searcher buying a single app, it is what happens if one platform decision affects everything they own. A seller who knows which kind of buyer is at the table can then have the evidence ready: portability for the first, users and technology for the second, and a plan for the day a store changes a rule for the third.