Today we are starting a new series at appssemble where we are going to talk about various types of applications, how do their business work, who are their target customers, and last but not least, what does it take to build a great app.
The first domain we’ve tackled is food delivery apps, as they are really popular especially now and every few months there seems to be a new app that tries to solve this problem.
Food ordering apps solve a big problem in today’s world, it helps the users get the food they want without wasting time going out to a restaurant, cooking it themselves or leaving the comfort of their home or office. The ability to have a digital menu from various restaurants near you and be able to choose a dish from this large variety makes food ordering apps very popular, especially with the people who work office jobs.
According to this paper (Why do people use food delivery apps (FDA)? A uses and gratification theory perspective) published in November 2019, men tend to use those kinds of apps more often than women (63% men and 37% women), in addition to this, over 85% of the users are aged between 19–30 years old, come from Middle-class families, pursue or completed a graduated or master’s degree and use the app a few times a month (with the vast majority using the app multiple times/week).
Food delivery apps make money from multiple sources, the most common ones are the following, ordered by the percentage:
percentage of the order — paid by the restaurant when an order is placed from the app, the vast majority of the income comes from this revenue stream
delivery fees — some companies have their fleet of delivery or they are collaborating with some company which handles the delivery, most of the times, the users pay more than the actual delivery it would cost, so that results in another stream of revenue
in-app ads — some apps display ads from the restaurants that have various promotions and want to advertise on the app
selling the data regarding user behavior to other companies — knowing what type of user order more, from what restaurants, which dishes, and in what location, it valuable information for advertising companies
service fees — a large number of apps practice a service fee that is used to make the product better (marketing, development, customer support)
To make this kind of app popular, you would either have to be in a geographical zone where there aren’t such apps, and you find an increase in the target demographics (young, educated people that come from the middle class), usual cities with big universities. Or spend a lot of money on advertising.
Most of those apps spend a huge budget on advertising (millions of dollars) to acquire new users, sometimes the big companies such as DoorDash or FoodPanda also buy other small companies in the same business to take away their market share.