You can now save the 30% app store fee and let your users pay you directly.
This seems like a no-brainer. 30% more profit for a simple change? That’s just free profit, right?
I don’t think it’s that simple, and for most companies, I think it’s a mistake.
To break this problem down, you need to figure out:
- Which is better at the initial transaction?
- Which is better at recurring transactions?
- What else should we consider?
What we (always) care about on this site is which of these will make you more money?
Revenue: Initial Transaction
You can break the initial transaction into these elements:
Now lets look at each of these elements to see who likely wins this.
Verdict: I think the app stores win here.
For the web-based payments to win, you need a really good checkout page.
Even then, I think you won’t be able to overcome the power of single-click checkout.
Cornell conducted a study where they concluded that single click checkout increased order frequency in e commerce by 43% and items purchased by 37%.
This is different than session conversion level, but these numbers are huge. There is a reason that Amazon does it by default, and that Stripe is building the same feature.
The team at RevCat wrote a great article testing web checkout vs app store.
They found that the web billing led to slightly less take-home. My suspicion is that this is driven by the smoother checkout experience.
Revenue Recurring Transactions
Now lets look at the recurring side. You can break this into:
Verdict: I think the web wins out here, driven by the bottom-of-funnel tactics that you can use to win back users.
Tactics like this matter a lot. Read more here.
What Else Should You Consider?
As I’ve written before, your ultimate enemy is the complexity tax.
You need to protect your ability to ship code quickly and drive results in the long term.
Arguments to Stick with App Stores
Apple/Anroid app stores give you a lot of out-of-the-box functionality that you’d need to recreate (i.e., pay engineers to recreate).
- High converting, trusted checkout page - and one that you don’t have to spend any engineering capacity to maintain.
- Multi-currency support - both within the UX and on the payment processing side
- Multi-language support - across the same surfaces
- Tax calculations - across all countries
- Discount code support - so you can run promos
- Saved payment methods - this allows both single click checkout, which is huge, and backup payment methods if the initial card fails.
This is a lot of functionality that you’ll have to build or pay another vendor to manage.
Arguments to Switch to Web Billing
-
Your cancellation toolbox is stronger outside of the app store
- If you build this yourself, you have a lot more options. I’ve seen the “correct” deployment of these options lower churn 10-30%
-
You run a product that gets used across desktop and web, so you can actually consolidate this over time.
-
You acquire most of your users via paid ads, so you can get users to pay a step higher in your funnel, therefore increasing conversion and ROAS.
- Before this, you’d need to get them to download an app, then pay.
The Hidden Impact: ASO Penalty
I suspect that monetizing off the app stores will reduce your distribution in these app stores. I have no proof, but I think it’s going to happen either directly or indirectly.
Firstly, all of the marketplaces use ranking algorithms to determine what you see. Ebay, UberEats, DoorDash, FB marketplace, app stores, etc
All of these look at some combination of “what’s best for the user” + “what’s best for the business”.
I was on the team at UberEats that ranked the homepage, so I can say this from firsthand experience.
At UberEats, we explicitly say that % fee you pay Uber directly impacts your organic ranking. This would be direct impact.
The harder one to determine is the indirect impact.
All ranking algorithms are fed by signals from the product, and the algorithm basically determine their weight of importance.
Apple would almost certainly take “payment retention” as a sign of quality and use that to boost the ranking of apps that retain well, as they are seen as good for the user.
If you monetize off the app, Apple can’t get that signal, and this is effectively held against you.
How material is this? I don’t know. But I think it’s there.
So What Do You Do With This Information?
As with most advice, you should care less about what is best overall and care more about what’s best for you.
For the average startup, I don’t think the complexity is worth it. You have a limited amount of time and focus.
Once that 30% is millions of dollars, and you can pay additional people to handle that complexity for you, then it can be worth it.
Good luck out there,
Dan