Article 3 of 10
How App Valuation Works
Valuing a subscription-based mobile app is not a simple formula — it requires analysis of the app's revenue history, traffic sources, subscriber retention curves, and market position. That said, the industry operates within well-understood frameworks.
Valuing a subscription-based mobile app is not a simple formula — it requires analysis of the app's revenue history, traffic sources, subscriber retention curves, and market position. That said, the industry operates within well-understood frameworks.
The Revenue Multiplier Model
The standard valuation range for subscription apps is 10–24 months of net revenue. Where an app falls within this range depends on several quality signals:
| Factor | Lower Multiplier (10–14x) | Higher Multiplier (18–24x) |
|---|---|---|
| Last marketing activity | Active paid acquisition in recent months | No paid marketing for 12+ months |
| Traffic source | Primarily paid (Facebook, Google Ads) | Primarily organic (ASO, word of mouth) |
| App Store history | Recently published, few reviews | Multi-year track record, established ratings |
| Account transfers | Multiple migrations between accounts | Never transferred, original developer account |
| Category | Saturated / gray-area niches | Evergreen categories (utilities, health, education) |
| Revenue stability | Volatile or declining sharply | Stable or gradually declining "tail" |
Forecast-Based Valuation
Experienced acquirers don't just multiply the last month's revenue. They build a forecast model that projects future cash flows based on historical cohort behavior. Here's the general approach:
- Collect 6–12 months of historical MRR data, broken down by subscription cohort (monthly, annual, trial conversions).
- Model the decay curve — how fast are subscribers churning? Is the rate accelerating, stable, or slowing?
- Project forward 24–36 months, summing expected net revenue from existing subscribers.
- Subtract ongoing costs (servers, developer account, minimal maintenance).
- The resulting number represents the fair value of the app's "subscription tail."
Apps that were recently running paid marketing campaigns require extra caution. Paid acquisition inflates current MRR with subscribers who may churn faster than organic users. The valuation must account for the expected drop-off once marketing stops.
Frequently asked questions
What multiplier range is common for subscription apps?
Many deals fall in a 10–24 month net-revenue range, with stronger apps earning higher multiples.
Why is forecast-based valuation better than a simple multiple?
It accounts for subscriber decay, cohort behavior, and ongoing costs, giving a more realistic estimate of future cash flow.
What usually pushes an app toward premium valuation?
Long organic history, stable revenue, clean account records, and low operational risk usually support higher multiples.