Creating an app today is a bit like setting sail in a sea of endless possibilities, but with one big question looming over the horizon: Is there an audience out there waiting for you? You might have the next great app idea—one that can shake up the App Store, transform productivity, or bring some entirely new value to users. But before you pour time, effort, and resources into development, there’s a critical step to tackle: understanding the size of your potential market. This is where the metrics TAM (Total Addressable Market), SAM (Serviceable Available Market), and SOM (Serviceable Obtainable Market) come into play. Together, they help map out not only your app’s potential reach but the realistic slice you can capture.

Each of these metrics guides you closer to the ground truth about your app’s growth potential.  For any app developer, understanding these market-sizing metrics is like setting a strategic course, making sure you don’t just launch, but navigate wisely toward sustainable growth.

TAM, SAM, SOM: What Does These Acronyms Mean?

Generally, one comes across three metrics that are the most common or preferred metrics applied when measuring the potential of any app in a market: TAM, SAM, and SOM. Learning them is important in making relevant decisions. Here is what these terms mean.

• TAM (Total Addressable Market): Represents the total revenue potential or quantity of users that theoretically exists when no limitation or competitive existence exists within your potential markets. Essentially the entirety of the market if those capable of utilizing your application also chose to.
  
  
• SAM (Serviceable Available Market): This is a further defined subset of TAM, which refers to that portion of the market your app can realistically reach out to, based on location, platform, and other user demographics.
  
  
• SOM (Serviceable Obtainable Market): The actionable, attainable share of SAM that your app probably could attain with the resources you have today, or the competition you face as well as your reach; it's the market slice you could confidently aim for conversion into active users.

 Let's take a very quick example. Imagine creating an app that lets people order custom soft toys.

1. TAM: Everyone in the world would be interested in soft toys, which might number in the billions, encompassing soft toy enthusiasts of all ages and demographics.
   
   
2. SAM: This would limit this further down to users in India with disposable income and interest in custom toys.
   
   
3. SOM: This would then consider the users you could effectively reach through the channels, perhaps targeting soft toy enthusiasts in some of the major cities in India. where your advertising budget can go as far.

Why TAM, SAM, and SOM Matter for Your App

Understanding TAM, SAM, and SOM doesn’t just make your market estimates more accurate—it provides a strategic framework for growth, allowing you to make data-backed decisions and demonstrate your app’s potential effectively.

Guide Your Product Development

An in-depth TAM analysis might have already given you insights about the size and features of your target user base; SAM then refines the focus on the user segment that you can reach feasibly, considering your application's niche and area coverage. This assumption about the TAM might be that interest in customizable features is especially high among a younger audience based in cities. With this knowledge, you will be able to design your product and its feature set to better appeal to the core demographic. 

Investor Appeal

The growth opportunity will be a very critical indicator for investors through market potential. Presenting TAM, SAM, and SOM allows you to tell the scalability of your application. For example, while showing a robust TAM of a few billion dollars with a targeted SAM of millions, you show an investor the potential of your app. More detailed and data-backed projections are even more convincing and, to investors, not only speak to the scale but to the reach of your application. Moreover, if investors feel that you understand your SOM well, they will find it easier to believe in the viability of your growth strategy.

Resource Allocation

Knowing the size and characteristics of your SOM can enormously enhance the way you can allocate resources. Instead of a broad, diffused marketing campaign, you can utilize your SAM and SOM to focus on campaigns in the most promising regions, demographics, or user segments. For instance, if your SOM analysis reveals promising user interest that is concentrated in certain metropolitan areas, you are more likely to achieve higher engagement and growth by focusing your resources there. With advanced insights - like those from Newton - you can tap into specific information about where and how users interact with similar apps, therefore optimizing your marketing spend for maximal reach.

How to calculate TAM, SAM, and SOM

Calculating TAM, SAM, and SOM requires a combination of market research, data analytics, and strategic estimation. Here are three common approaches to get you to the right estimations:

Top-Down Approach
This approach begins with a wide range of industry statistics and then narrows down to your niche. If you are launching a custom Soft toy app, start with the overall toy industry market size, narrow it down to soft toys, and then to those interested in custom or collectible soft toys.

Bottom-Up Approach
A bottom-up approach starts with specific data from your app's early performance metrics or target demographics and scales it to represent the larger market. For example, if you can figure out how much each user costs to acquire and the average revenue per user, you can build a useful SOM based on realistic growth metrics. Although often more time-consuming, this method usually produces better results.

Value Theory
This approach focuses on the value that your app is providing to users, especially in B2B scenarios. Here, you calculate market size based on the tangible value or cost savings your app delivers to its users. If your app improves efficiency or reduces costs for businesses, estimating the market size based on the value delivered can be very effective.

How to Use TAM, SAM, and SOM for Growth

Once you have TAM, SAM, and SOM, these are now your basis for your growth plan, giving you actionable input for each step of the way.

• Set Achievable Acquisitions
  SOM gives you a realistic setting of how to acquire users over defined periods. You don't need to go after everything at once; break down your SOM into achievable points starting with primary cities or target audiences.
  
  
• Sharpen Your Product Roadmap
  Utilize SAM and SOM insights to spot features to build that can have a huge impact on your target market. Consider these as development priority features in case SOM analysis brings out significant demand for customization. Real-time information on user preferences can be highly useful in deciding where to put one's resources, thus giving way to the building of the right feature set to meet their markets' needs.
  
  
• Spend Less on Marketing
  Effectively targeting your SOM helps focus your marketing budget on places and users that make a lot of difference to return the best investment. A focused effort on a defined user group saves marketing spending and may potentially maximize opportunities to acquire users. Tools like Newton might further elevate sophistication about revealing which channels or messages resonate most for user engagement with what one is prioritizing their marketing channels based upon.

By making TAM, SAM, and SOM the bedrock of your strategy, you are well-equipped with a realistic and data-based growth foundation. These metrics are more than just a means to demystify what's next; they can inform your strategic decisions toward being consistent with the prospects for your app and prepare you for sustainable success in an overcrowded market.

Wrapping It Up: TAM, SAM, SOM Are Your New Best Friends

Market sizing with TAM, SAM, and SOM is more than just a numbers game; it’s a foundational strategy that can guide every stage of your app’s journey. From understanding the vast potential of your idea to refining it for real-world market capture, these metrics help you allocate resources wisely, prioritize features, and target your audience effectively. By clearly defining your market potential, you’re better equipped to navigate the competitive landscape, make informed decisions, and keep your team and investors aligned on realistic growth goals.
Whether you’re just launching or scaling up, revisiting TAM, SAM, and SOM ensures that your growth strategy remains grounded in data and focused on achievable milestones. It’s about more than knowing how many users you could reach—it’s about knowing where and how to reach them. By leveraging these insights, you lay the groundwork for a successful, sustainable path forward, helping your app to thrive in a dynamic market.

If you're looking to scale your iOS app to reach more users, connect with us to optimize your app for maximum growth and engagement.