Loading summary
Transcript131 lines
- [00:01]
A
Welcome to the Sub Club Podcast, a show dedicated to the best practices for building and growing app businesses. We sit down with the entrepreneurs, investors and builders behind the most successful apps in the world to learn from their successes and failures. Sub Club is brought to you by RevenueCat. Thousands of the world's best apps trust RevenueCat to power in app purchases, manage customers, and grow revenue across iOS and Android and the web. You can learn more@revenuecat.com let's get into the show. Hello, I'm your host David Barnard, and with me today, revenuecat CEO Jacob Aiden. On the podcast we discuss how AI is changing, both what apps do and how they're built, the relationship between price and retention, and why react Native apps monetize better than native Hi Jacob.
- [01:01]
B
Hi David.
- [01:01]
A
It's your favorite time of year where we get to go on an audio podcast and talk about charts. So 2025 status subscription apps report. I will call out page numbers during the podcast, so might be good to go ahead and download the report and listen to this in front of the report. I think the most interesting and probably the best place to start is AI.
- [01:22]
B
No, I'm pretty sure that was our shtick last year. So it was kind of like there's something going on in artificial intelligence.
- [01:29]
A
Well, now it has gone on.
- [01:30]
B
Yeah, I'm writing intro for this this afternoon, but I know there's something going on in artificial intelligence. Going to be my tldr.
- [01:37]
A
So looking at the numbers, and these are on pages 143, 189 and 58. You have to kind of pull a few different charts together to look at it. We didn't do a slide kind of comparing directly, but I think the most interesting thing about our AI app breakdown is that the conversion rates actually aren't that much different. AI apps aren't specially placed to drive better conversions, but what they do well is monetized. The revenue per user at the end of a year, at the end of a month is significantly higher on AI than it is the rest of the app industry. This may be a little bit of a rising tide floats all boats kind of situation where people are starting to get a little used to paying $20 a month for something on their little pocket computer, you know, may spill over a little bit and continue to get people comfortable paying for subscriptions.
- [02:30]
B
I mean, I just think they're better apps. Like I it doesn't surprise me that the conversion rate cause like to some degree the number of people who have the like flexible income and willingness to spend, you know, there's not that many marginal people who will buy an app, but you know, one app and not another. It's probably single digit percentages regardless of the content of that app. But if the apps are significantly better and just do something more capital v valuable, people will pay more and they'll stay retained longer. You know, I think this has been two is related but the debate has been where is the value going to accrue in AI? And I think something that's changed my thinking from last year to now is last year I kind of thought, well, B2B tends to be the big winner in a lot of things, right? It's like they're very sticky. You have APIs, it's whatever. I thought the consumer would be important, but I didn't really realize. And it seems to be this complete opposite. Is that the enterprise side to some degree or the API side, the devtools side, is very easily swapped in and out. And it's the consumer layer, it's the app layer, you know, it's the brand that seems to be where the differentiation is and the modes are, which is awesome. That's great for app developers, right? Because that's what you can bring. Everybody has access to cloud 3.7, but like you can bring something unique in terms of like brand and translation and things like that. And that's what's going to drive people to convert and retain more than anything else.
- [03:45]
A
I've been thinking about this a lot and I do think that the differentiation piece is key though, because if you just vibe code another like ChatGPT wrapper, everybody can vibe code. A ChatGPT wrapper?
- [03:57]
B
Yeah. What have you done in that case? Right. You've not, you've not enhanced anything, right?
- [04:01]
A
Yeah. You've not created much value. I think where we're going to see certain apps really take off is differentiation in that value created. So are you doing something like unique and hard that's not able to just be vibe coded? You know, do you have some like technological differentiation? But then secondarily it just kind of goes back to distribution as differentiation. It's, you know, okay, you Vibe coded a ChatGPT app, but why should anybody care? How are you going to get attention for that and then how are you going to stay differentiated and retain those users over time? Like what value are you really driving that nobody else can drive? And that's kind of been true forever, right? It's like there's a million apps on the App Store. Like building the app has never been like the hardest part. It's like getting attention sustainably, building a community, building up a user base. That's where the rubber really meets the road.
- [04:49]
B
There's always been a million apps. Like now we're going to say there's been 10 million apps. I think that's why maybe it may not seem like the entire, the individual experience of an app filler may not change that much. Because even if the economy of app spend is growing, the number of people rushing into the App Store is also growing because the barriers to build apps has gone down and continues to go down. Which I think has been the surprising thing to me is like we're seeing new tools for one shotting simple stuff, which again simple stuff is not probably going to make you any money. But like all complex and interesting things start as simple things, right. And so as we see these tools continue to improve, I think we'll see more competition. But I actually, I'm not convinced that that's going to because a single vertical, like some let's say rock identification apps or I don't pick some tiny like little niche. I think probably what will happen is we'll just see actually more niches. They're not going to see 10 times the number of Rock identification apps. We're going to see 10 times new things akin to a rock identification app that we haven't even thought about yet. Because like the people that build that have not been able to build apps yet and the barriers have been too high. And so this is probably moot at this point in March 2025. But like I still, I think it's a very exciting time to be building apps that are AI first that are doing novel things. And that's always been the case of technology. Like you make money by building novel things that you know nobody else does. And sometimes that's differentiated on the application of technology, sometimes that's on brand or other things. Right. But like people will pay for something that they can't get someplace else. That's not a commodity or community as well.
- [06:13]
A
Like if you can one shot a Strava competitor, which probably going to be a while before you can even if you could. It's like they're so differentiated on community and leaderboards and like what do actually people actually care about. But that's where there's probably opportunities to create this Strava for some niche that's not actually served well by Strava and you can create your own community. Is it going to be a billion dollar company like or multi billion dollar company like Strava? Probably not, but can you make good money building the Strava for a smaller niche?
- [06:43]
B
There's only one Strava before, there's probably going to be one Strava after. You know what, I wouldn't let that stop you because you can do 10 times more than the Strava team could. I mean, not the specifically, but like what it took to build that level accrual of velocity 10 years ago is much lower now. And so I think the winnings have not dropped down as much because people, yeah, they're willing to spend more for apps that do more. So yeah, it's good times.
- [07:06]
A
The distribution as. As differentiation, I think is going to continue to be super important. It's like, are you doing something so unique that it can get attention on.
- [07:15]
B
Its own, or is that distribution as differentiation or differentiation as distrib distribution? I would say it's differentiation as distribution. Right. Like your differentiation is your distribution. Maybe it means the same thing.
- [07:26]
A
Well, that was kind of where I was going though, is that you can differentiate on distribution. Like we're seeing a lot of apps get really good at TikTok and other channels.
- [07:36]
B
I would say that's distribution is differentiation. I would say argue there's also differentiation as distribution where just your app being so unique and strange, like distribution just kind of takes care of itself because you're the one app that can do the thing. Right.
- [07:46]
A
Ideally you have both though. So you have some like unique lever to get attention for your app and then it does something unique that you can.
- [07:53]
B
Yeah, which I was just thinking about the TikTok example on the hook. Right. It's like if you make an app that is like to dump on chat, GPT rappers again, whatever, you could do that again. It's just like, oh, it's just somebody asking an AI a question. Like that's so 2023. Nobody cares anymore. But if you have something magic and cool that for a community on like TikTok can go viral now, yes, the distribution is like unique there. But making the TikTok is not the hard part necessarily. It's coming up with something that's like a unique value prop that's gonna like create something that like an influencer can talk about or even just goes viral on its own. That's really like thinking about like some sort of, sort of differentiating product feature that will drive growth.
- [08:28]
A
One of the things I do think is different in 2025 though, is that as you were talking about, we're going to have a 10 million apps in the next few years instead of A million. It does seem like there's a whole new crowd of folks who are just watching any app that goes viral, any app that crosses 10k in revenue a month, you know, they're watching sensor tower app figures to watch for the apps that are making any money. And so as soon as you start making any money, like there's going to be a R of clones. And then that gets back to the point is like, are you doing something that is reasonably differentiated? Can you differentiate fast enough or can you gain market share enough fast enough to where they're not really a threat? Or can you continue to get attention for it through paid, through social, through whatever that's going to keep you ahead of the curve when that flood of copycat apps comes?
- [09:16]
B
I mean, I think this is why it's still good to be really good at software. So like, even if you're like vibe coding everything, like if you're really good at product and software, you'll still have an advantage over somebody who has because everybody has the same tools. So whatever differentiating skill set you have or knowledge you have is going to, I still think matter going forward.
- [09:32]
A
Some of that is also just like better understanding those communities. So like if there's a community that you really understand in a unique way.
- [09:40]
B
Literally knowing people, right, like humans, right. Which AI has yet to really do.
- [09:45]
A
Or have a following in the community. You know, we have seen a rise in influencer LED apps where the influencer has a following in a specific area. Like macro factor is a really good example. They're a food logging app. And it's actually, I think a collection of multiple influencers who worked on that app. And so they just have that kind of built in community that they can market to.
- [10:07]
B
I mean you see this in product, like physical products as well. Like everybody's launching with like you know, an influencer co brand thing, right?
- [10:13]
A
As a supplement. Yeah, exactly.
- [10:16]
B
It's like, it's like a, hey, how do we take an undifferentiated commodity essentially and like, you know, create some sort of margin while we attach. Put Mr. Beast's face on it or whatever. He owns all his stuff first party.
- [10:25]
A
But yeah, and then most of those do tap out because you tap out your audience fairly quickly. But then you still then have to like, once you hit that plateau, then you got to figure out like what's that next step? Product differentiation. Distribution differentiation. You got to start paying for ads. You got to start like figuring things out. All right, well I think that's, that's probably enough on AI. The next thing I wanted to talk about was App Store versus Play Store. So we do have some interesting data this year that I think further puts into charts. What we kind of all knew is that iOS just far and away makes way more revenue than Play Store. The interesting thing I saw in our data though is that when you look at the Realized LTV chart, the people who do pay on Android do seem to actually pay relatively similarly. And so it does seem like based on the data we're sharing in the report, that it really is just a bigger problem of there are more payers on iOS than it is. Like the Android users are that price sensitive.
- [11:28]
B
The question is like, do they meet this like whatever ability to spend money on tiny software apps or whatever? And that's like sort of invariant to what kind of phone they have. But if they are, that kind of person is very correlated with what kind of phone they have, which has kind of always been known. I don't know. Anecdotally I feel like I've been seeing more people speaking well about Android and some monetization stuff. I don't know if we have any data to support that, but I've seen more people seeing optimistic. But like all the big apps we know are still investing in Android, the popularity of flutter, react, native, like all these cross platform things, I still think make building for Android easier and potentially worthwhile. But I still think that like you should never invest any incremental effort into building for that platform until you're out of other higher leverage ideas or you think it's like going to create some network effect to have it on both platforms.
- [12:16]
A
I think where folks are starting to find better monetization on Android is diversifying into hybrid monetization. I have some other slides we'll talk about in a minute, but I do wonder if the realized LTV, being similar across iOS and Android and there being more pairs, might actually be an artifact of too many apps just copy and pasting their iOS strategy and that maybe next year we'll see the realized LTV for Android users drop as folks experiment with those lower prices, with adjusting regional pricing and things like that. The people that I'm hearing find more success on Android are doing those kind of experiments. Like I talked to Tammy from Google on one of the minisodes leading up to the release of the report and they've been sharing a lot of data, which is really fascinating. And some of the data they shared was that they see way better monetization on Android. With hybrid monetization, it's like Give people the option to pay for one feature or if you're a content app, like, let them just buy that piece of content.
- [13:17]
B
Yeah, more monetizing that. Like if you have one single price point, basically everybody who doesn't hit that price point is thrown away. They generate zero versus, like have some price discrimination, some products on the way down so that like you can monetize. And if that area under that curve is big enough, it could be substantial. I think also one thing we don't capture in our data is like ads monetization, which, you know, if you have a lot of people who don't have a lower proclivity to pay, like advertising or monetizing those eyeballs is a good way to do it, but which we don't necessarily have data on, but that might be, you know, I certainly heard of and seen more cases of that is like to improve your like total LTV is like to be running ads, which is like essentially what you're saying. It's like a hybrid monetization, but not just IAP hybrid, but like adding other things to generate revenue.
- [14:00]
A
Unfortunately, On Android, the CPMs are really low as well. But I was talking to Demetria again, another minisode that we did leading up to this report, and one of the things he shared was that because ad rates are so low in some of these developing nations and on Android specifically, that by adjusting their price significantly lower and maybe even lower than you would expect in some of these regions, they're actually seeing good return on ad spend because ads are so cheap. It's cheap on both sides. So you can afford to drop your price on Android and. Or in some of these developing nations. So the example he gave was Brazil. And it's like the way they finally cracked ad spend in Brazil was just by dramatically dropping their prices in Brazil because the ads are so cheap that they could afford to monetize.
- [14:46]
B
It's a good lesson in just like how much optimization that work there is in these kind of businesses. Right. If you want to keep driving. And I think it's somewhat unique in that sense in terms of like different industries that there are so many consumers in so many different locales. And it goes to show too, like, it's not one single variable. Right. It's like, okay, you gotta think of the whole ecosystem. It's not just the like, conversion part, it's the acquisition part. You want to be testing those things jointly if you possibly can.
- [15:09]
A
Yeah, super interesting stuff. I did promise to share page numbers, so that's like pages 113 116. Hopefully the page numbers will say the same.
- [15:18]
B
Going to I was going to ask if that's the case. We'll just say ish in that area. Yeah. If we end up adding or removing a page might shift one by one in the 110s.ish.
- [15:28]
A
The next section that I found super interesting was the hybrid versus native and this is on page 125. Ish is that react Native performs really well.
- [15:41]
B
Can't stop it. Well not the first hybrid framework but you know, maybe the first biggest one or whatever. But yeah, still very popular.
- [15:50]
A
I'm going to do a podcast with the the founder of Expo not too long from now. I almost did it as a minisode. I thought it'd be fun to actually do a full episode on it. But Expo works with React Native. It's kind of a you can explain it better a clci kind of. Yeah.
- [16:03]
B
So yeah Expo just like it makes React hosting and deploying React Native apps much much easier.
- [16:09]
A
So I thought it was super interesting because all of us snooty indie developers are like native or GT customers don't care.
- [16:18]
B
They can't tell like you're a connoisseur of apps David. But like I do think for we'll use Flighty as an example. I think if you're like heading into a crowded market and you product is differentiation and distribution, having it being finely crafted and perfectly tuned is your product then like I probably wouldn't use React Native but like if that's not what your differentiation is like it's a great option and they're going to have a moment. I think they already are Expo included which is like most of these like models are really good at speaking in JavaScript and TypeScript for building these things. I just played with a service yesterday where it like one shot. I have been working on this like stargazing side project for the longest time and I never got anywhere cause I'm my brain scattered and it's just never never came together.
- [17:00]
A
You're CEO of a company, you don't have time to be running Zach projects.
- [17:05]
B
No I, I, I have the time. I don't have the talent is the problem. I don't know how to write Swift anymore but yeah it almost one shot it like pretty dang close. Like it had some other stuff but like got like a lot of it and did it with React Native because yeah I guess the models see a lot of React as well so they, they're good at it. But anyway the thing that React Native and we're talking about, you know, Flutter as well. Like, there's those of these, but what they've always been good at is like, the person that doesn't necessarily know how to write Swift, Swift compiled language. Like, you got to have a Mac, which, like most people do, but, like, not everybody. And like, it's not, you know, there's a lot of advantages to like, the person who's not like a Mac or iOS person maybe don't seem all that important. And so I think the AI tools are going to continue to drive these things and give a second wind. Like, for the longest time, Flutter was gaining on React Native. I think, like, also Google's kind of maybe pulled back on their investments on Flutter. They also have Cotton Multi Platform, which we didn't break out in the report, but that's gaining Steam as well, which is just like, as a meta, meta, meta. We're still investing in tooling for apps, which is great. I guess it's my job to jump up and be like, the mobile's not over, but, like, it's clearly not. Because, like, we're still investing in multiple different ways to do things. And React Native is advancing and Flutter is being worked on every day. And I, I mean, Flutter people are obsessed too. Like, God bless them. But, like, people who use Flutter are really fanatic about it. But yeah, it's good. And I used to like you, David. I used to, I think, be a little more snooty about it, but now I'm like, hey, like, if your differentiation is not the things that Native is better at, which it's like, you know, sit and finish down to the pixel, there's a lot of advantages to doing these. And like, I think it's worth considering because you can always, like, if it does come to a point where you need a native rewrite and you're at scale, you can afford to do that. It's. It's usually not the end of the world.
- [18:45]
A
I was talking to a friend recently who's like, super, super bullish on building apps with AI. One of the things he told me that actually makes a ton of sense once you think about it, is that one of the benefits of using React or Flutter, but specifically React with something like cursor, is that it can actually run the app and like, screenshot it and iterate on the UI and test.
- [19:07]
B
For bugs without having to run the simulator. And like, all this CR app, that's the thing I was using yesterday, it's like in a browser and like to run a native iOS app in a probably impossible like that would just be like really, really difficult. But yeah, it just works basically with some shimming and things like that. So yeah, it's kind of interesting. It's like these technologies, you know, Expo's been around a long time. Expo's been around since at least 2016 is when I first like started using it and you know, just chugging along and then suddenly a general purpose technology appears in their, their whole like landscape changes, which is really cool.
- [19:37]
A
Take away from this section, I think we've already had quite a few. But if you are just getting like building a new app and trying to explore new avenues and React is a great place to build right now because makes it way easier. And then as we show in the report, it doesn't mean you're going to monetize more poorly. So if your differentiation is community, if your differentiation is distribution, like you have some unique angle, you're serving a niche and you want to be on both platforms especially. But even if you just want to be on iOS like it's probably a really good place to start today.
- [20:11]
B
It can reduce time to market and like iteration time depending on what talent you have on your team as well. Like if you don't have the skill set, if you're not a swift developer, but you can do JavaScript, like do it this way, it'll be worth it, it'll be worth the trade offs.
- [20:22]
A
All right, now onto some bad news. Page 70 ish in the report is we did look at retention this year compared to last year and last year we compared to 2023, 23 and 3 to 2022. And what we looked at is year one retention compared to 2024 compared to 2021. And it's trending downward and it was trending downward in our last report and I think it was even trending downward from our very first report. I think that's just to be expected. More apps, more people spending money, there's.
- [20:55]
B
More competition every year. Right? Like it gets. And the numbers aren't like drastic. You know, it's still in the 40s or 30s to 40s through that period. But like yeah, it makes sense. Like we talked a bunch about the barriers to building apps is going down. People are becoming more discerning with what apps they choose. And it doesn't mean you can' build good long retaining cohorts because there are people who still fall in love with your app. It just probably there's some folks along the margins who are going to get stolen away by more Competitors and more options and things like that. So yeah, things get harder over time.
- [21:24]
A
I think this is also maybe an artifact of the fact that more people are spending more money on apps as well. And so when you have so many more people willing to pay, so many more apps launching and people getting better at monetization, if you're driving more of those incremental users who don't have as high of intent and you're monetizing them better, then you are probably going to churn more of those users. And so as the techniques for monetizing have improved, I think that's maybe part of it as well. It's like apps are monetizing better than ever, which is then kind of converting better than ever, which then leads to higher churn.
- [22:03]
B
Yeah, there's always anytime you push on one part of the funnel, you're gonna. It's gonna pop out in another part.
- [22:07]
A
Yeah, exactly. The heavier you push, you know, onboarding and really optimizing that early funnel, you should expect a drop off in the late funnel in renewals. And I think our data just shows that. So the next one is monthly revenue one year after launch. So this is page 63 ish. I thought this was really interesting. You know, we at revenuecat are kind of an index of the entire app industry, all the way from ChatGPT being a customer down to like, like my side projects. The headline here is that just 5% of apps are making over 9,000amonth a year after launch, or around 9,000amonth.
- [22:47]
B
Let me rephrase that, David. Five percent of apps are making $9,000 a month or more. I think it's, it could be looked at either way, but yeah, that's true.
- [22:54]
A
But you know, as we hit 10 million apps, like what is that going to look like?
- [22:58]
B
Yeah, how's that going to change? But it means like 10x right? By the way, 1 to 10 million. I don't know if that number's right, but it's going to go up. Like it's going to increase. One out of 20 apps makes enough within its first year to sustain at least one person, which is pretty cool. I mean, you know, that's a lottery ticket. Like would you go buy a lottery ticket if you knew, like 1 in 20 chance this would become like a sustaining annuity? Like, you know, like that's pretty dang good. I'd probably buy a lot of those. I mean, obviously they're expensive to build an app and try it. We've always known this. It's like fairly cheap to like make a basic. And, and like, I wish we could like survey customers when they fill out their app, like, are you serious about this? They take off the people who are just building stuff for fun. They kind of like, see and then like, like. But the fun thing about this industry is that there's not really a solid line between those things. Right? Like, things start off as side projects and they bubble and they get big and like most of the times they don't. And that's what kind of makes this fun. A fun company to work at or like industry to work in. But yeah, I mean, I don't know. Do you read that, David? And it feels demoralizing a little bit or.
- [23:55]
A
Well, you're right that it's both demoralizing and encouraging. If you're building a brand new app and you're not funded, you don't have a ton of money to spend on acquisition and kind of getting that early funnel going. You should recognize this. It's still just hard, like for all the like tweets about how easy it is to build an app and make it go viral on TikTok, it's hard.
- [24:15]
B
It'S easier to write a thread about it, that's for sure.
- [24:18]
A
Yeah, exactly.
- [24:19]
B
But yeah, I get, I guess it's the same version of my last question. I'd love to know like relative the inputs though, like, how much did those people actually try besides like building the app? Did they actually go market? Did they actually like try to build like a little bit of a growth loop or have some sort of sense of how to grow it? And like how many of these were apps that like ever in a million years could do that? Right? Like, oh, I made a, you know, tracking app for people who knit sweaters for dogs. I don't know which maybe is a big market, but like there are sometimes apps that are so niche, it's like they'll never make money not because they're bad apps, just because like the market is not there. Because yeah, it would be interesting to qualify it a bit more. But yeah, there's money to be made.
- [24:50]
A
And then as the effort goes down too, I mean for folks who've got a job, you know, making 500 bucks a month, that's like a car payment, you know, that's a nice side hustle.
- [25:01]
B
Yeah, I had like a Windows app that made a thousand dollars a month for years. It was like the best thing, very low maintenance. And so yeah, even, even absent of it becoming a full time thing, it's like, it's a worthwhile investment for a lot of creators and makers and stuff like this. So.
- [25:14]
A
But you were saying earlier, like the longer we've worked at revenuecat, like I'm closing in on six years. You're at like eight years. I was telling somebody yesterday I was looking back at some of my earliest office hours. So when I joined in 2019, one of the first things I did was like to set up an open Thursday where anybody could book time on my calendar. And it is crazy to look some of those early office hours calls and like those apps are huge now. Like I talked to Monarch Money now they're a funded company and everything like that. But I talked to them like in October of 2019 and they're like a 100 person company now doing really well. I mean, you know, they caught a break, right?
- [25:49]
B
And I think the commonality is they tried like they took it this probably like a real highly selective thing there to somebody who takes an office hours with revenue cat maybe more so than like their necessary idea or particular tactics. But they were just putting the energy in. I would have expected more customers to die. Not physically, but like they've proven a lot of longevity, right? I mean even if they're not hyper growers and like they're not on their way to become the next Strava or whatever then yet they grow. Like, you know, you figure out a little bit year over year and then depending on if you raise, you know, that's where we get can get gummed up is if you raise money or not. But if you're building an app that you care about, that you're passionate about, that you think is solving a problem or whatever, whatever motivates you. These businesses can be pretty sticky and durable and yeah, you might not be as set up to return a venture investor 100x their money, but just don't take their money and like you're good.
- [26:36]
A
I know. I feel like I've been talking to more and more indies who are like, ah, I'm like so close to quitting my day job. And then, you know, we've had multiple people on the podcast where things started off as a side project and then year over year, you know, just that compounding growth.
- [26:48]
B
I mean Slopes is maybe a good example. They're not a customer but like their company continues to grow and scale and started off kind of as a little project, one person project. Emmanuel at Card Pointers, who we've featured a lot in our somer. Marketing itself is kind of a one, one man show with some help but like, like Continues to like do a lot with a little and grow and grow. You know, they all have in common that they've built something great. Of course.
- [27:09]
A
All right, the next section to cover is monetization banks. I thought this was another really interesting slide. Page 44 ish. It just shows that lots of apps are starting to finally experiment with hybrid monetization. So we kind of break down subscriptions only versus subscriptions with consumables, subscriptions plus lifetime and then subscription consumables and lifetime. And that last one's fairly minimal. And we've had a ton of talks. I'm still pretty bearish on lifetime. Like I was going to bring this up in the last slide is that the magic of subscriptions is that if you do build something valuable, you are creating an annuity. It's like if people are using it day in, day out, they could be using it for a decade. And that's what an app like slopes and some of these other apps that have built year over year over year. Part of that build is delivering value and then people continuing to pay year after year so you're not having to reacquire your users all over again like we did back in the paid up front days. And so lifetime, we could have a whole nother talk on. I don't think for most apps it's a great choice except for maybe early on where you know, you do just kind of pull some revenue forward. But you know, we're seeing more and more apps mixing consumables as well in our data. Gaming, of course is the largest category that is experimenting with subscriptions plus consumables. No surprise. But you see it across all categories now. I mean from business and education to social and lifestyle, photo and video.
- [28:37]
B
13%. I think that's maybe could be related to credits. Like that's probably driving that as well. A lot more apps are selling AI credits or like photo credits to like cover their costs on the back end.
- [28:48]
A
And that's actually a great example too of where I think consumables make a ton of sense for AI is that you know your to have a small number of users who are going to create outsized costs.
- [29:00]
B
Yeah. And like trying to fully estimate what you need to charge and your subscription might be not worth the effort. Right. Versus like just tracking and giving away for people to buy more credits. It's a little more work but like it's totally doable. I've again anecdotally heard more and more of this like people because I think we are in Some ways we're late stage subscriptions, right? Like, kind of people know the basic tricks. It's like you get trials and do an annual if you can, and then you get this, the web stuff set up and then you get the like retention campaigns and like, so people are pushing into like, okay, what's the next like incremental thing we can add? And there's a lot of apps out there that the way they're structured, there's opportunities to charge on some sort of consumable basis. It's a good way to, you know, make sure your people who want to spend more can. It's kind of annoying to build like a consumables like in credits tracking and currencies or whatever, but we're working on some tooling and some APIs to make it much, much easier to like have consumable and then track a ledger of currencies and things like that that I think actually will potentially allow people to again experiment because it's like it might work, it might not. It's a big build out. So if we can let you try it for like, you know, an order of magnitude cheaper, I think more people can probably find some gains there.
- [30:08]
A
Yeah, really just makes a ton of sense. What I have been seeing in some of these AI apps is that you pay a subscription and you get a certain number of credits and if you run out of credits, you can buy more credits. And that's like a super kind of natural thing. The one thing I will say, I saw one app that was doing this and it was getting, getting slammed in the reviews because the subscription was actually fairly expensive, but it included so few credits that people felt kind of rug pulled. It was like, wait, I can only like create three images and now I gotta start paying for credits. You still have to like deliver that value and it has to be kind of a fair exchange for people. So if you're charging 20 bucks a month, it's like people gotta feel like they're getting their $20 of value before you can charge those consumables on top.
- [30:54]
B
And you use that money because you know, the people who don't use as calls, you have to use their unused credits to pay for other people's. Right. And you have to kind of understand that risk and you take some risk there. But yeah, I, I expect this to get more. I think we're not, I think we're early days on this in a lot of apps. So.
- [31:10]
A
All right, the next section I wanted to cover is time to trial. And so this is page 13 ish. Very early in the report. You know, we've kind of talked about this a lot over the last few years, and I don't think we compared last year to this year. Maybe we didn't even share this data in last year's report. But it does seem like more and more apps are. Are pushing to start that free trial very early, putting that paywall in the onboarding. And so what we see across all of the absent revenue cat is over 80% of trial starts happen that first day they open the app, which is just crazy. And you would hope, too, that the whole idea with freemium, like, get people using the product and then eventually they're going to convert.
- [31:49]
B
Yeah, you get the last 20% on every day after that. But yeah, so such is the nature. You get one shot shot. People are going to make their buying decision, trialing decision, and just like, that's where the most people are. But I think most people have. They have how they think the world works, and then there's how the world works. And like, this is a good example of that. Certainly this is the only conversion point you should be thinking about as you start your monetization, you know, and that's why, like, even people just not, like, not having the paywall in the onboarding is like such an l, such a known goal. Right? It's like, like. And everybody's like, well, I don't want to. It's like, no, I think this is an opinion. I don't hear as much anymore. I think everybody's kind of gotten it.
- [32:27]
A
And I think our numbers show that.
- [32:29]
B
Yeah, yeah, yeah, but that's why you just gotta show it. You know, people might not convert. It's fine, but, like, you gotta put it up there. Cause, like, it might be your only chance.
- [32:36]
A
And if you're not convinced yet to put your paywall in onboarding, go look at this chart and look at just how. I mean, it's hard to communicate on an audio podcast just how dramatic this chart looks. 80% of all trial starts happen in that first day. The chart's just crazy. Similar to that, the next page I want to look at is page 92, the cancellation timeline. And this is the first time we've shared this in the report. And another one was kind of unexpected to me. Just how much of Churn happens immediately, like, as soon as that. That first charge hits their bank account. The month one churn shopping is the highest, and it's over 40%. So maybe just to explain this a little better, the way we kind of created. This stat is for an annual plan. When does somebody go turn off auto renew and ultimately turn so people can turn it on and off, back and forth, and we don't track that. When do they turn it off the last time? So, like, when is the kind of like, final churn decision? And when you look at this chart, it's like most of that churn decision, most of that turning off auto renew happens the first month. I always expected. And we had pulled those numbers internally. And I think Eric Crowley from GP Bullhound, he actually shared a version of this chart in his report last fall. I expected the last month to be like a huge spike. And it is a spike. But people are turning off auto renew that first month and then it kind of like slows down where like, yes, every month people are checking the App Store, turning it off, off. It's a relatively small spike. Most of the categories that we broke out, it's just around 10%, maybe 10.
- [34:17]
B
12%, some below 10%, 27% or something like that of customers will cancel in that first month. The next most common month is the last month, which kind of makes sense. It's two. And like, there are distinct events. But by far it's that first month. Right. Which I guess, you know, makes sense.
- [34:32]
A
But I always thought it's like, that's when Apple sends the email. Like, that's when the next charge is going to come.
- [34:37]
B
I think a lot of consumers are just. And I do this, like, if it's an app, I know I'm probably. I don't tend to build a lifelong relationship with, I'll buy it and I'll just go ahead and cancel right away just so that I. I know, yes, I know I shouldn't be doing this to all the conversion rates out there. But it depends on the app. Right.
- [34:52]
A
I think people see the charge in their bank account. That's what's really driving this. Because once you've actually paid and it hits the bank account, that's when you're like, oh, yeah, like maybe I don't want to pay next year. Versus the reminder that it's coming up. Like, you've kind of already made that decision. All right, the next section I wanted to cover is Google Churn surveys. This is really interesting. So again, a new chart that we've never shared before, page 89 ish.
- [35:19]
B
It's super fascinating when you churn on Google Play. I don't know exactly if it comes up in app or if it's like something that's sent by email. There's a survey they send and then developers can access that data. You know, this is something we overlooked for a while. But in the past year we've started collecting and surfacing that data. So that's why it's in the report for the first time this year. Year.
- [35:37]
A
Yeah. And so as you would expect, the two biggest ones are cost related. So like just don't want to pay. And then not enough usage.
- [35:45]
B
Which is almost the same answer. Right. It's like the value equation does not balance out. You know, it's not worth it. It's basically. You could combine this too and technical.
- [35:53]
A
Issues, found a better app. Other it's all pretty small.
- [35:57]
B
The competitive argument maybe isn't all that valid. This is like sub 10% of people are switching to a competitor and maybe who knows like how people are answering this. But like most people are just, they're not falling in love with another app, they're falling out of love with your app. Right. Or maybe their need has passed, which is probably a big chunk of it. Right. Like it's worth. Right. Thinking about that in terms of like if you want to build something really big, you want to build an app that people kind of need all the time or like continuously forever versus like even fitness or whatever. It's like people have an interest in a specific thing for a minute and then they kind of get off of it. The more you can can build towards something that can become a lifelong habit and a lifelong practice. Like you're gonna just have better numbers. But still if people aren't using it, they're not gonna keep paying. So.
- [36:39]
A
Yeah. And if they're not finding enough value and I'll mix this in, we can maybe talk about both of these simultaneously. Cause I think they're highly related. Is that on page 71 we shared a breakdown of retained subscribers after year one by price point. And this chart is super fascinating to me and super relevant I think to this, this price being a barrier is that lower priced apps have way better retention than higher priced apps. And it just makes sense. I think I actually made a mistake in my weather app. I was trying to kind of push the boundary a little bit and charge $40 a year for a weather app where most weather apps are more in the like 20 to $25 range. And my turn's not terrible. I think I'm going to end up around 40% this year of retained subscribers. So 60% churn, which is, it's above median. Like it's fine. But I think I would have done way Better both on conversion and retention with the lower price point.
- [37:31]
B
But you might not have made more money. So like you have to think that through. Right? Like ratios don't matter necessarily. You gotta like think of what it's scaling against. It might be a worthy trade off.
- [37:38]
A
But for a weather app, I just can't help but think. And for tons of apps it's like when it's like, oh, it's only 20 bucks and yeah, I'm still kind of using it here and there. It's like it's a way different decision if it's 20 bucks versus 40 versus 60 versus 100. It's like when a $20 thing is going to hit your bank account, it's.
- [37:54]
B
Like, yeah, I mean this is just a view on elastic demand curves, right? Like the higher price something is like fewer people are going to buy it. But like you got to play around with that price curve. So yeah, I'm not sure. I mean, I think you're probably right. Certainly like your renewal rate would go up and your conversion rate would go up. But like if you have the price, would both of those more than double? Definitely not your conversion rate probably. Or your renewal rate probably wouldn't more than double.
- [38:15]
A
Not more than double. Right. Conversion rate would have to go up and then renewal rate goes up again. It's like, what kind of business are you trying to build? And last year my thought was I'm going to ramp up some ad spend. And so having the higher price point is going to make the ad spend easier to make work. But then as those users start churning this year, it's like, did I really make the right choice? And so combining those two charts that a lot of people not enough usage combined with cost related is that people are making financially rational decisions. How much value is your app really delivering in their life? And this is where you as an app developer have to be realistic and kind of like weigh all of these things is like, how much value am I really delivering? How much are they willing to pay for that value? And it's not always like a great a B test either. Right? And you have to wait a whole year to understand Trun.
- [39:03]
B
Have you run one, David? Have you experimented with a different price?
- [39:06]
A
Yeah, I've done different price experimentation. I mean, here's the hard thing though. Unless you're like a really big app and you've got your user acquisition dialed in, it's like a lot of my traffic last year was from press. And so that cohort's gonna perform really differently than the average cohort and then I knew that that cohort would perform really differently than if I did start ramping up ad spend. And so, you know, as much as we talk about AB testing and like finding the right price through data, it's like that's not always a great way unless you kind of already have the rest of the picture pretty dialed in where you have a consistent cohort of people coming from a consistent like ad spend or a consistent source of attention. And I didn't have that. And so, so again, like when you're early, it probably is just better to price it lower and then like let those retentive cohorts build up even if you're not price maximizing until you build it to the point where you're really delivering a ton of value.
- [39:59]
B
That's true. Like if you were trying to build like a base of happy paying subscribers, it's maybe it's not a bad idea to let more people in early. Especially if the cost of service them is low. There's some benefit there.
- [40:08]
A
It definitely worth looking at this, I mean definitely worth looking at all the charts. But go look at this chart, page 71. It's pretty dramatic looking at just how much better lower priced apps retain. And correlation is not causation. And you could have a high price app that retains incredibly well because you're delivering a ton of value. But if on average you think about that cost equation and the whole like subscription fatigue thing, I mean, I could talk an hour about my theories on that. Consumers just don't want to pay for anything.
- [40:37]
B
98% of your customers don't.
- [40:39]
A
Yeah, nobody wants to pay. So I think a lot of consumer subscription fatigue and the kind of the meta around that is just like the reality of consumers, like nobody wants to pay for anything. People complain about the price of gas, but the higher, the more value per dollar you're able to deliver to your customers, the better that looks and feels to them. Like if you're delivering consumer surplus, they feel like it's a good deal. You're more likely to tell their friends. They're more likely to stay subscribed.
- [41:07]
B
Yeah, yeah, yeah, that NPS Net promoter score will go up, right? Because they'll just be like they want it. You want to tell your friends about a good deal. Right.
- [41:13]
A
If you're like really pushing the price to the limit it and you've got this really expensive app relative to value you're delivering. And this is where like different categories, like I brought up ladder a bunch, I did a minisode with Greg, the CEO, my wife uses it and it's 30 bucks a month. It's one of the more expensive apps generally, but it's a really good app. My wife hates technology. She hates apps. It's like she's like the exact opposite of me. She complains all the time about tech failing her. And, like, you couldn't pry Ladder from her cold, dead hands. It's the only, like, fitness thing she's ever actually enjoyed. And so, like, they're delivering a ton of value. They have incredible retention and a really high price. So it's not that you can't charge, it's just that you just need to really figure out where you sit on that curve and if you're not delivering enough value. And in my niche, it's like a billion weather apps out there, and a bunch of them are free. And there's one right in the Apple Weather app is free to anybody on an iPhone phone. And so the relative, like, value I'm able to deliver probably isn't as high as something like Ladder that's able to deliver this really differentiated experience in a category where people are willing to spend more. So I think you got to kind of take all of those into account. But looking at these two different charts, it should help people maybe rethink where they land on that curve and, like, making sure they are landing on the right spot on that curve. And then relatedly, the last slide I have to talk about today is 81 active renewal rates. This is a fascinating. I kind of argued with our data scientist, Rick, who kind of headed up the report these last couple of years. The way we calculate this is that has a user interacted with the app within the time frame of the renewal. So this skews a little bit because if you're on a weekly subscription, did you use it that week? If you're on a monthly subscription, did you use it that month? If you're on an annual subscription, did you use it that year? So this does kind of skew the numbers a little bit, but it is fascinating to see weekly subscriptions. Like, so few people who renew actually used it within that week.
- [43:19]
B
But weeks are also very short, right? So like, versus the monthly, it's more in the like, 60s, 50s, 40 to 60% of people use it. That's kind of natural though, right? It's like they probably stopped using it. I'm actually surprised it's that high because that's usually, for me, the signal to unsubscribe from something is like, did I even use it this Month, like no. Okay. Like I should probably unsubscribe. So it's kind of surprising me that almost happens half of it on monthlies. Like they actually did use it in that month, but they still decided to not keep it going.
- [43:46]
A
It does go to the. To the fact that you will have a certain number of users who aren't actively using your app who are going to renew. And again, if you're $20 a year and they're only using it a few times a year, like, maybe that's a fair exchange of value. But if you're $30 a month, like ladder, and you go a couple of months without using it, that hits a little harder. So it is really interesting to look at these numbers on how activ are in that renewal cycle.
- [44:15]
B
On the annual side, it's almost a hundred percent of people use it in that period. But prior it's a whole year. But there are a few. So there's a couple people who like get charged. Didn't even use it for the whole damn year before. That's pretty rough.
- [44:25]
A
Every year I feel like there's like 10 different charts. It's like next year we're going to do this a little different because it would be interesting.
- [44:31]
B
400 page. So report. Why not? You know, we can dream big.
- [44:35]
A
Yes. Like 250 this year. For those who haven't cracked the PDF yet.
- [44:39]
B
Oh, I assume everybody listening has looked at every single page, so.
- [44:42]
A
So I would hope so at this point. But it would be fun to kind of break this down with a little more granularity, to kind of understand the usage patterns of those renewal cohorts. Like a year is a long time. Kind of like you said, like, have they used it within that entire year? Yes. But then like how much are they using it when.
- [45:01]
B
Like how. What's the recency? Right.
- [45:03]
A
Yeah, I think that'd be really interesting for next year.
- [45:05]
B
This is probably some interesting ways to cut this. That would maybe illuminate a bit more the usage trend before a cancellation. Yeah, you could do a heat map of like usage up to. For canceled users or something like this. I don't know. I can catch something out. Something tough to approved.
- [45:17]
A
Well, those were my. I didn't even count. I probably should have numbered these. It's top 10 ish.
- [45:21]
B
Yeah, top 10 ish on pages one 14 ish through. You know, it's more about the gist than it is about the accuracy, which is kind of true for this report period. It's like there's a lot in there. It's dare I say dense, but it's an honest report. The numbers are real. We spent a lot of time on them, we stand behind them. And yeah, I think, like, don't read any one data point and go change your whole strategy. But like, take it, read it, give you guys some basis, some things to try, some new ideas for 2025. And it's always helpful to look at peers. And I think we have like the only data set like this in the world and I'm glad we can share it with everybody so.
- [45:58]
A
Well, I think it's a great place to wrap up. I mean, we could probably talk another 20 minutes on like, how to use the report and how not to use the report.
- [46:05]
B
We're talking about AI again.
- [46:06]
A
No, we've covered this on other podcasts. A great podcast to listen to in conjunction with this one is the most recent Phil Carter episode where we talked about his subscription value loop calculator. So in that episode we did do a much deeper dive on how to use benchmarks, when to use benchmarks, when not to use benchmarks, and all the ideas and theory behind that. And it was a good summary. You gave like the 60 second summary, like, don't change your base business on one number in this data subscription apps report. And that's true, but there's also a ton more nuance around, like what decision should you make based on this data and how do you look at that data? And yeah, we could go a whole another hour, but we've already done that. So go back and listen to the subscription value loop calculator episode with Phil Carter back in December of 2024 as kind of an adjunct to this report. But that's about all I had to talk about about.
- [46:58]
B
Is this our third one, David? Third Sosa podcast?
- [47:01]
A
Third, yeah. Third report. Third podcast.
- [47:04]
B
Yeah, it's better every year.
- [47:05]
A
Super fun, 250 pages. Something only a management consultant could love.
- [47:11]
B
I think anybody who works in Apple love this report, David. You can take that to the bank.
- [47:15]
A
I wasn't quite as involved this year as I had been in years past because I was really focusing on the podcast Minisodes, which, if you haven't listened to those, I did 12 short, really dense. We've been releasing one episode a day leading up to the report, and I personally edited each one to make them as dense as possible. As much kind of time to value as possible. But yeah, reading through the port this year, I got to read through it almost like a user or like somebody else in the industry versus like working on the Numbers day in, day out for the last three months. It was a fun read.
- [47:45]
B
As fun as a book of charts can be. Candlesticks are back. I thought that was a nice touch. You know this is like Inside Rag or Inside Sosa with David and Jacob. Yeah, we just talk Inside Baseball about it all day, but yeah, we're proud of it.
- [47:57]
A
I think you'll find some insight. So definitely worth. And we've got more contributors than both before we actually shared some data from Apps Flyer and Paddle kind of partners who shared some data. We break down AI apps. So yeah, there's a lot in there and you're probably not going to read it. Very few people in the world will will sit there and read page by page, all 100, 250 pages.
- [48:17]
B
Keep a copy on your desk, under your pillow at the kitchen table. Four or five copies scattered throughout the house, in the restroom, just kind of everywhere, I think.
- [48:26]
A
Yeah, print it out. Just kill some trees. Yay.
- [48:28]
B
You're gonna need a thousand pages so you get four co copies. So well if you do double sided, depends on kind of printer you have.
- [48:34]
A
But anyways, it was really fun chatting through this with you Jacob and looking forward to next year. And go download the report if you haven't already with all these this fun.
- [48:43]
B
Chat for an hour of listening Revenuecat.com report. Right, of course.
- [48:47]
A
And the links in the show notes, all those things.
- [48:50]
B
Okay, cool.
- [48:51]
A
See you next year. Thanks so much for listening. If you haven't minute, please leave a review in your favorite podcast player. You can also stop by chat.subclub.com to join our private community.