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 its that simple and for most companies I think its 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? 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: Revenue from Initial Purchase = Checkout Page Conversion x AOV x Initial Payment Processing Success - Refund Rate - Fees Revenue from Initial Purchase Now lets look at each of these elements to see who likely wins this. FactorLikely Winner Checkout Page ConversionApp Stores, by a lot. It has a higher degree of trust, saved payment methods, one tap payment (which is huge).AOV of Initial OrderLikely a TieI don’t see any reason these should be differentInitial Payment Processing Success RateApp StoresThey process 10000x the volume that you do, have a higher merchant rating, use multiple gateways, etcRefund RatesLikely a TieThe giant caveat here is that web checkout can be much worse if you’re not managing the experience well. If the user hits material bugs or friction right after they purchase and don’t activate on your product, you’ll see refunds go up.Fees Web, by a lotAssuming you’re using stripe its “2.9% + $0.3” by default.Both apple and google stores charge 30% by default. 15% for the second year of subscriptions and developers in the SMB program with under $1M of revenue. FactorLikely Winner Checkout Page ConversionApp Stores, by a lot. It has a higher degree of trust, saved payment methods, one tap payment (which is huge).AOV of Initial OrderLikely a TieI don’t see any reason these should be differentInitial Payment Processing Success RateApp StoresThey process 10000x the volume that you do, have a higher merchant rating, use multiple gateways, etcRefund RatesLikely a TieThe giant caveat here is that web checkout can be much worse if you’re not managing the experience well. If the user hits material bugs or friction right after they purchase and don’t activate on your product, you’ll see refunds go up.Fees Web, by a lotAssuming you’re using stripe its “2.9% + $0.3” by default.Both apple and google stores charge 30% by default. 15% for the second year of subscriptions and developers in the SMB program with under $1M of revenue. FactorLikely Winner Checkout Page ConversionApp Stores, by a lot. It has a higher degree of trust, saved payment methods, one tap payment (which is huge).AOV of Initial OrderLikely a TieI don’t see any reason these should be differentInitial Payment Processing Success RateApp StoresThey process 10000x the volume that you do, have a higher merchant rating, use multiple gateways, etcRefund RatesLikely a TieThe giant caveat here is that web checkout can be much worse if you’re not managing the experience well. If the user hits material bugs or friction right after they purchase and don’t activate on your product, you’ll see refunds go up.Fees Web, by a lotAssuming you’re using stripe its “2.9% + $0.3” by default.Both apple and google stores charge 30% by default. 15% for the second year of subscriptions and developers in the SMB program with under $1M of revenue. FactorLikely Winner Factor Factor Factor Likely Winner Likely Winner Likely Winner Checkout Page ConversionApp Stores, by a lot. It has a higher degree of trust, saved payment methods, one tap payment (which is huge). Checkout Page Conversion Checkout Page Conversion Checkout Page Conversion App Stores, by a lot. It has a higher degree of trust, saved payment methods, one tap payment (which is huge). App Stores, by a lot. App Stores, by a lot. App Stores, by a lot. It has a higher degree of trust, saved payment methods, one tap payment (which is huge). It has a higher degree of trust, saved payment methods, one tap payment (which is huge). AOV of Initial OrderLikely a TieI don’t see any reason these should be different AOV of Initial Order AOV of Initial Order AOV of Initial Order Likely a TieI don’t see any reason these should be different Likely a Tie Likely a Tie Likely a Tie I don’t see any reason these should be different I don’t see any reason these should be different Initial Payment Processing Success RateApp StoresThey process 10000x the volume that you do, have a higher merchant rating, use multiple gateways, etc Initial Payment Processing Success Rate Initial Payment Processing Success Rate Initial Payment Processing Success Rate App StoresThey process 10000x the volume that you do, have a higher merchant rating, use multiple gateways, etc App Stores App Stores App Stores They process 10000x the volume that you do, have a higher merchant rating, use multiple gateways, etc They process 10000x the volume that you do, have a higher merchant rating, use multiple gateways, etc Refund RatesLikely a TieThe giant caveat here is that web checkout can be much worse if you’re not managing the experience well. If the user hits material bugs or friction right after they purchase and don’t activate on your product, you’ll see refunds go up. Refund Rates Refund Rates Refund Rates Likely a TieThe giant caveat here is that web checkout can be much worse if you’re not managing the experience well. If the user hits material bugs or friction right after they purchase and don’t activate on your product, you’ll see refunds go up. Likely a Tie Likely a Tie Likely a Tie The giant caveat here is that web checkout can be much worse if you’re not managing the experience well. The giant caveat here is that web checkout can be much worse if you’re not managing the experience well. If the user hits material bugs or friction right after they purchase and don’t activate on your product, you’ll see refunds go up. If the user hits material bugs or friction right after they purchase and don’t activate on your product, you’ll see refunds go up. Fees Web, by a lotAssuming you’re using stripe its “2.9% + $0.3” by default.Both apple and google stores charge 30% by default. 15% for the second year of subscriptions and developers in the SMB program with under $1M of revenue. Fees Fees Fees Web, by a lotAssuming you’re using stripe its “2.9% + $0.3” by default.Both apple and google stores charge 30% by default. 15% for the second year of subscriptions and developers in the SMB program with under $1M of revenue. Web, by a lot Web, by a lot Web, by a lot Assuming you’re using stripe its “2.9% + $0.3” by default. Assuming you’re using stripe its “2.9% + $0.3” by default. Both apple and google stores charge 30% by default. 15% for the second year of subscriptions and developers in the SMB program with under $1M of revenue. Both apple and google stores charge 30% by default. 15% for the second year of subscriptions and developers in the SMB program with under $1M of revenue. Verdict: I think the app stores win here. Verdict: 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 did a study where they concluded that single click checkout increased order frequency in e commerce by 43% and items purchased by 37%. study 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 same feature The team at RevCat wrote a great article testing web checkout vs app store. great article They found that the web billing lead to slightly less take home. My suspicion is this is driven by the smoother checkout experience. Revenue Recurring Transactions Now lets look at the recurring side. You can break this into: Revenue From Recurring Transactions = Monthly Price x Active Churn Rate x Passive Churn Rate - Refund Rate - Fees Revenue From Recurring Transactions Factor  Likely Winner  Monthly Price Likely a Tie   I can’t see a reason this will be different.  Active Churn Rate Web, by a lot Your hands are pretty tied within the app stores and I’ve seen this universe of tactics drop churn by 10-30%  Passive Churn Rate App Stores Same rational as the payment processing point above. Whatever gateway you use won’t be able to compete with the app stores volume and dedicated teams.  Refund Rate Likely a tie App stores might have a small advantage here as they have slightly tighter policies but it might not be material.  Fees Web, by a lot As noted above, you pay a lot less of your revenue Factor  Likely Winner  Monthly Price Likely a Tie   I can’t see a reason this will be different.  Active Churn Rate Web, by a lot Your hands are pretty tied within the app stores and I’ve seen this universe of tactics drop churn by 10-30%  Passive Churn Rate App Stores Same rational as the payment processing point above. Whatever gateway you use won’t be able to compete with the app stores volume and dedicated teams.  Refund Rate Likely a tie App stores might have a small advantage here as they have slightly tighter policies but it might not be material.  Fees Web, by a lot As noted above, you pay a lot less of your revenue Factor  Likely Winner  Monthly Price Likely a Tie   I can’t see a reason this will be different.  Active Churn Rate Web, by a lot Your hands are pretty tied within the app stores and I’ve seen this universe of tactics drop churn by 10-30%  Passive Churn Rate App Stores Same rational as the payment processing point above. Whatever gateway you use won’t be able to compete with the app stores volume and dedicated teams.  Refund Rate Likely a tie App stores might have a small advantage here as they have slightly tighter policies but it might not be material.  Fees Web, by a lot As noted above, you pay a lot less of your revenue Factor  Likely Winner Factor Factor Likely Winner Likely Winner Monthly Price Likely a Tie   I can’t see a reason this will be different. Monthly Price Monthly Price Likely a Tie   I can’t see a reason this will be different. Likely a Tie Likely a Tie I can’t see a reason this will be different. Active Churn Rate Web, by a lot Your hands are pretty tied within the app stores and I’ve seen this universe of tactics drop churn by 10-30% Active Churn Rate Active Churn Rate Web, by a lot Your hands are pretty tied within the app stores and I’ve seen this universe of tactics drop churn by 10-30% Web, by a lot Web, by a lot Your hands are pretty tied within the app stores and I’ve seen this universe of tactics drop churn by 10-30% this universe Passive Churn Rate App Stores Same rational as the payment processing point above. Whatever gateway you use won’t be able to compete with the app stores volume and dedicated teams. Passive Churn Rate Passive Churn Rate App Stores Same rational as the payment processing point above. Whatever gateway you use won’t be able to compete with the app stores volume and dedicated teams. App Stores App Stores Same rational as the payment processing point above. Whatever gateway you use won’t be able to compete with the app stores volume and dedicated teams. Refund Rate Likely a tie App stores might have a small advantage here as they have slightly tighter policies but it might not be material. Refund Rate Refund Rate Likely a tie App stores might have a small advantage here as they have slightly tighter policies but it might not be material. Likely a tie Likely a tie App stores might have a small advantage here as they have slightly tighter policies but it might not be material. Fees Web, by a lot As noted above, you pay a lot less of your revenue Fees Fees Web, by a lot As noted above, you pay a lot less of your revenue Web, by a lot Web, by a lot As noted above, you pay a lot less of your revenue Verdict: I think the web wins out here, driven by the bottom of funnel tactics that you can use to win back users. Verdict: Tactics like this matter a lot. Read more here. Read more here What Else Should You Consider? As I’ve written before, your ultimate enemy is the complexity tax. 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 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 back up payment methods if the initial card fails. 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 back up 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 You cancellation tool box 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 get used across desktop and web, so you can actually consolidate this with 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 get them to download and app, then pay. You cancellation tool box 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 get used across desktop and web, so you can actually consolidate this with 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 get them to download and app, then pay. The Hidden Impact: ASO Penalty Its my suspicion that monetizing off of the app stores will reduce your distribution in these app stores. I have no proof, but I think its 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 “whats best for the user” + “whats best for the business”. I was on the team at UberEats that rank the ranking of the homepage, so I can say this from first hand experience. At UberEats, we explicitly say that % fee you pay Uber directly impacts your organic ranking. This would be direct impact. % fee The harder one to determine is 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 its 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 start up, 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

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