- 🧠 How to build a marketplace app
🧠 How to build a marketplace app
Your first SaaS - a marketplace app!
This week, I’ll discuss app marketplaces. I’ll take you through why they exist, validate the opportunity they represent and take a look at how to get your own app to market successfully.
Let’s jump in…
🧠 How to build a marketplace app
Why they exist
According to Statista, the average number of SaaS (Software as a Service) applications a business employs has grown from 8 in 2015 to 130 in 2022. That’s a lot of software and a lot of embedded processes to go with it!
Anyone who has even briefly worked in tech will be acutely aware of this as the number of ‘work management’ platforms grows seemingly every quarter. The majority of work is moved through a development cycle online using a platform like Jira, Monday or Asana.
During the 2000s and 2010s, these platforms did well to build up a large customer base across SMBs and enterprises. In order to protect their IP and bring more of their customer’s work onto the platforms, vendors continued to look for ways to integrate with other commonly used work management tools.
This resulted in just about every work management tool worth its salt launching an ‘app marketplace’ and asking developers from far and wide to build their own integration solutions in return for a cut of revenues.
It helps software vendors to widen their ‘moats’ by making it more difficult for customers to move away from a platform as more of their internal processes become tied to the software. This is often referred to as increasing the ‘switching cost’ or ‘stickiness’ of a product.
This is also however great news for us, as it means we’re free to build an app to integrate just about anything we like! But app marketplaces don’t just serve as hubs for integrations, they also allow developers the opportunity to enhance and provide extra value to the core product they are building into.
SaaS vendors are happy to accommodate developers building these apps as they would rather focus on building upon their core value proposition whilst letting third parties (that’s us!) build out the features that perhaps only a niche segment of their customer base may want or need.
It’s worth mentioning that it’s not just in work management that this market evolution has occurred. Most notably, marketplaces like Shopify’s are rising in popularity as the ‘gig economy’ has taken off post-COVID.
As Atlassian is one of the largest app marketplaces, we’ll focus on that platform for now but in theory, the following validation and considerations would apply to any platform you’d look to build on top of.
To date, Atlassian’s marketplace has over 5300 apps built by over 1700 developers ranging from individuals to Appfire who buy up successful marketplace apps across multiple platforms and who now own over 85 apps and counting.
Since its launch in 2012, total revenues generated by the marketplace have exceeded $3 billion with app developers taking anywhere from 75% to 95% of that. That sort of revenue wouldn’t look out of place if it was listed as its own company on the NASDAQ!
Part of what’s driven this growth is allowing app developers to leverage Atlassian’s existing customer base. Apps are advertised on the marketplace to all customers which can make it easier for high-quality apps to gain those initial few customers and gain traction.
Take a look at one of the most popular apps on the Jira marketplace, Tempo, which for a team of 100 comes to over $400/month on the Cloud version. And that is not uncommon as Atlassian serves some of the largest corporations of any work management platform.
What’s more compelling is that Atlassian has done a fair chunk of the initial work for you to build your marketplace app. They released Forge back in 2020 which is an out-of-the-box development platform for building (amongst other things) marketplace apps.
This will get you hosting, authentication, and access to Jira’s UI kits plus libraries to make it easy to work with data residing in each customer’s Jira account.
Because of this, now is a great time to be building a marketplace app! However, I wouldn’t be doing my due diligence without listing some of the potential issues you could face when building this sort of business.
The first is that marketplaces tend to be crowded places.
If you're going to build an app it better either target a specific underserved niche (keep reading to hear about one particular niche I’m excited about…) or solve a really common problem much better than the competition.
However, this is true of any business - so don’t let it stop you!
The second and perhaps more obvious problem is that by choosing to build on top of one particular platform, you lock yourself in.
Your revenue will be largely decided by how well the vendor itself does in a particular year. This can be a good thing in times of boom, but can also be detrimental if they start to lose market share.
How to get to market
First, pick a marketplace!
Here are the ones I think are best suited to starting individual ventures based on the quality of the tooling provided, the size of the potential revenues and the maturity of the platform as a whole:
The enterprise nature of the customer base makes for a very attractive opportunity and is likely to result in lower churn from smaller businesses that may turn over quickly on other platforms.
The needs of a Shopify merchant touch so many different industries such as inventory and logistics management that there are so many unique problems to solve. Also, your first $1M dollars in revenue is free from commission!
Monday is a growing work management platform challenger to the likes of Atlassian with over 180,000 customers to leverage. The suite of developer tools on offer coaches you on how to best serve the market, and even where to start looking for ideas.
It’s very achievable for a single developer to build a marketplace app provided the tools are up to scratch. You're not going to need to raise any money or build a team to get started - just a laptop!
Finding initial customers could also be straightforward as you already know exactly where and how to reach them - on the marketplace! Most offer paid advertising which you can leverage to wade through the competition.
Generating ideas for apps is going to come down to having a good knowledge of the market. Start reading reviews of apps that have an established user base and see if the developers are keeping up with their customer’s requirements. If not, it might be time for a new entrant…
Also, try to look at apps that enrich the customer’s processes in a unique way and see if the same concepts can be applied to another process or a different segment of a customer’s data.
That’s it for this week!
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Keep on building! ✌️
P.S. Check out the official IdeaHub Reddit community where you can share ideas with other builders.