On-demand Service App Development: Trends, Monetization, Planning & Costs
In 2021 and beyond, on-demand service app development is just what you need to grow your business. In 2020, apps became a key platform for brands to pivot swiftly and handle ever-evolving market dynamics. In this article, we provide an overview of the on-demand service app market, and share some best practices for building and monetizing applications in the post-COVID era.
Amidst the COVID-19 pandemic, consumer engagement with mobile applications rose sharply. In the first half of 2020, users spent over 1.6 trillion hours via smartphones globally, according to the mobile data and analytics company, App Annie. In the third quarter of 2020, app usage rose to 180 billion hours each month. Food delivery, online education, entertainment, and retail, all on-demand services, are expected to benefit most from the surge in app popularity, according to the App Annie study.
With that in mind, let's take a closer look at the on-demand app market’s value and a few current trends.
On-demand service applications: Market overview
On-demand mobile applications are digital marketplaces designed to enable immediate access to services, products, and information.
According to the Harvard Business Review, U.S. consumers already spend $57.6 billion in the on-demand economy. By 2023, the global on-demand food delivery market alone is expected to hit $161.74 billion. In 2019, the on-demand insurance market was valued at $28.7 billion and is projected to reach $149.2 billion by 2027.
Digital retail has grown in recent years, too. Due to COVID-19 restrictions, this trend accelerated; in 2020, for instance, users spent 20% more time in retail apps. Even if apps are rarely recognised as profit generators, they contribute to revenues. Mobile applications have become a key way for retailers to follow a multi-channel approach to marketing and branding. They help support consumers in new ways and promote business success — a factor that’s particularly important in these times of unpredictability and social distancing.
Here is a list of advantages you and your customers gain from a mobile application:
8 On-demand service industries to thrive in 2021
Grocery and food delivery
This is one of the most popular and profitable niches at the moment. The Business of Apps states that market revenue for on-demand food delivery services has increased 204% in the past five years. The forecast for the next few years is also optimistic due to the introduction of platform-to-customer services in smaller U.S. cities. The pandemic may have propelled the industry forward, but it has also made it even more competitive.
Two unicorns, Uber and Lyft, were founded during a wave of entrepreneurship in the early 2010s as a response to California's dreadful taxicab ecosystem of that time. Not only these two services changed California citizens' life for better forever, but also gained popularity all over the world and brought insane income to the founders.
Once a huge success, on-demand ride-hailing services experienced a crisis of sorts due to COVID-19. During the pandemic, even giants such as Uber and Lyft experienced a 90% decrease in rides. Despite the challenges, on-demand taxi app development is still a promising idea. Statista reports that in 2021, the segment’s revenue is projected to reach $257,080 million. By 2025, it is expected to hit $391,012 million. So, on-demand taxi app development is still a promising idea. The Business of Apps predicts the ride hailing sector to resume its upward trend in 2021, probably even faster than before as people come out of a lockdown and change their transportation behaviours.
Fuel and spares delivery
Mobile fueling companies including Filld, Yoshi, and MyPetrolPump are attracting an increasing number of investors, which indicates that fuel and spares delivery is one of the most promising on-demand app ideas. And the market is not yet crowded as is the case with food delivery apps. Meanwhile, a report published in Businesswire predicted the fuel delivery market would grow to $1.2 billion by 2024.
If you want to discover more about on-demand fuel delivery apps, check out our blog post: Fuel Delivery App Development: Prerequisites, Features, Cost. In this article you will get to know more about the fuel delivery market, its main players, and how to build a smart fuel delivery app.
Travel & tourism
Statista reports that between 2019 and 2020, the online travel agency sector’s revenue hit $432.15 billion. It also mentions that 80% of users in the United States still prefer to use their desktops for travel bookings. Meanwhile, 48% of U.S. smartphone owners actively use applications when planning and researching their trip. Apps are generally smoother, faster, and easier to navigate.
Laundry & dry-cleaning
Verified Market Research states that the global on-demand laundry service market was valued at $30.2 billion in 2019. By 2027, it is projected to hit $343.4 billion worldwide. In the U.S. alone, it’s expected to reach $96,155 million by 2024, indicating plenty of opportunities for newcomers to make their mark in this still-evolving market. In our dedicated article, we explain why it’s worth developing an on-demand laundry app if you have a laundry business or are considering launching one.
According to Reports and Data, the was worth $234.8 million in 2018. By 2026, it is expected to reach $612.5 million. Appointment booking apps facilitate easier communication between doctors and patients, and are likely to become an accepted norm worldwide within a few years. For more information, feel free to check out our article: Doctor Appointment App Development: A Guide for Healthcare Professionals.
U.S. video streaming app revenue reached $24.1 billion in 2020. By 2025, it is expected to hit $42 billion. This is one of the most profitable fields, but it’s competitive — giants such as Netflix, Amazon, and Disney+ will do anything to avoid sharing their piece of the pie.
5 Prosperous on-demand apps: How do they make money?
Wondering how to best make money with your app? There are several app monetization models:
- Mobile ads – You can make money placing banners, video ads, and interstitials in your application
- In-app purchases – Sell additional features and services.
- Subscriptions – Charge users for access to your content or service
- Commission – You can charge a commission for your service
Here are some examples of how famous brands monetize their apps.
Netflix: Subscription business model
Netflix's main source of revenue comes from its large number of subscribers, each paying from $8.99 to $15.99 per month. With a reported 204 million subscribers worldwide (63.1 million solely in the U.S.), the platform garners millions in revenue each quarter. While 99% of Netflix's total revenue comes from subscriptions, the remaining 1% is generated by DVD sales.
Netflix subscribers, millions. Source: Netflix.com
TaskRabbit: Commission and advertising
TaskRabbit is a peer-to-peer platform with an annual revenue between $100 to $500 million. As with other gig work apps, its revenue consists of commission fee (15% per invoice), trust and support fees (7.5% per invoice), peak pricing, and advertising charges.
DoorDash: Delivery fees, commission, and advertising
This on-demand ordering and food delivery platform has surpassed both Grubhub and UberEats in the U.S. market. In 2020, DoorDash was responsible for 45% of all food delivery orders. In the same year, it reported $2.9 billion in revenue ($461 million of which was profit). The platform relies on delivery fees ($6-8 per order), commission fees from restaurants (20% per order), and advertising.
Udemy: Commission and in-app purchases
Udemy is an online learning marketplace with an estimated annual revenue of $775 million. The platform relies on commission fees of up to 50% of each total course fee. Udemy's B2B product, Udemy for Business, is another source of revenue for the company.
Uber: Commission, in-app purchases, and advertising
Uber is an on-demand ride-hailing app that posted a $11.1 billion revenue in 2020. As with all other Uber-like apps, its revenue is based on a commission fee. Though, the company offers some in-app purchases (premium rides) and in-app advertising.
How to build a successful on-demand app
Your idea doesn't need to be original to be a success. On-demand delivery apps or taxi apps weren't new, though Uber and DoorDash made it work. A prosperous on-demand product stems from a robust business plan and well-considered execution. As MadAppGang have worked on numerous high-profile applications, we understand the process of app development and planning inside out. We also know how hard it is to start planning an app, so we created a checklist of steps for successful on-demand app development:
1. Find your niche and business mode
First, choose your niche according to your competencies and experience. The better you know the industry, the better service you can provide. Then choose your business model from the three standard options: business-to-customer (B2C), business-to-business (B2B), and customer-to-customer (C2C).
2. Identify your audience and the problem that needs solving
Who are your customers, what are their pain points, and how can your service solve their problem?
3. Conduct thorough market research
- Analyse your direct competition
- Check out the on-demand market in general
- Observe lookalike audiences
4. Outline your positioning
- Check if your niche is big enough
- Have a clear business model
- Make a company profile
- Check if your concept is feasible
5. Identify the key app functionalities you need
After researching the target audience, you will have a more explicit picture of the user's expectations. At this stage, you can start planning the features required to meet user needs. The best solution for the initial version of your app is to offer a simple and intuitive user experience with few key features like:
- User-friendly interface
- Authentication and security
- Search and filter
- Essential notifications
- Live order and delivery tracking
- Order history
- Payment options
- In-app chatting for efficient customer support
- Rating and review options
Then, according to your niche and chosen business model, you can add features such as video calls, wish lists, geolocation services, and so on.
6. Find the right mobile app developer
When choosing a mobile app development company, be sure to review firms' portfolios and customer reviews. The app development company should have transparent policies, efficient delivery management, and quality customer support. Contact companies and arrange meetings with each team before making an agreement. During the meetings and negotiations, pay attention to several red flags that we pointed out in our dedicated blog post.
On-demand app development costs
It can be challenging to calculate the cost of on-demand app development as it depends on many factors including the number of features, deadlines, and so on. Price varies from a mere $10,000 to $150,000 and even higher.
Here is a table of average hourly rates for on-demand app development team members:
In the past few years and during the pandemic, customer habits saw a tectonic shift that has brought the on-demand economy to the peak of popularity. Apps become an essential instrument for brands to respond to fast-changing market dynamics and customer requirements as people spend more and more time in mobile apps. Given these changes, the time is ripe to expand your business and build an app for your on-demand service company. Study your niche market, make a plan, and find professionals to help bring your idea to life.
The best way to get a top-notch product, bring it to market faster, and reduce costs is to outsource to a reliable on-demand app development company. MadAppGang is a full-service agency that can help you bring your ideas to fruition. We create clever, intuitive, and full-featured digital products for iOS and Android.