It still feels weird to say “after” the pandemic but most restrictions on most parts of the world are certainly over and we seemingly have newer challenges to face right now. While the possibility of a global recession is still getting weighed, heavy inflation is already an everyday reality which clearly brings a new macroeconomic situation with it. 

Our consuming behavior has really changed during the pandemic and some digital services and tech companies broke all imaginable records in sales and grew exponentially in a really short period of time. However, unfortunately, 2023 brought a hard turn and tech layoffs are a sobering reality even at the biggest tech giants like Google or Amazon. On the one hand, the main reason is cost cutting, and budgeting restraints preparing for the worst-case scenario but on the other hand, it is a clear result of readjusting after the demand has gone back to the previous “normal”. It is easy to see how interest in online meeting platforms like Zoom has skyrocketed and why Eric Yuan, the CEO of Zoom announced now to slash roughly 15% of the company’s workforce (1,300 positions) explaining that “the world transitions to life post-pandemic” and “uncertainty of the global economy” made this decision necessary after the company tripled its staff at the outset of the pandemic. 


App spendings and revenue models


So, what does this have to do with in-app purchases? The easy answer is that with less disposable income and much more opportunities to go outside and leave our displays indoors, people are naturally less expected to commit to a long-term app subscription so we might need to find alternative ways to fuel our app revenue growth goals. 


To put things into perspective:

Revenue mix:


in-app purchase mobile game


Between 2014 and 2017 it seemed that subscriptions are clearly the way moving forward as Google Play’s app subscription revenues grew tenfold. Based on reports from Data.ai, in 2020 79% of Google Play’s and 94% of the iOS App Store’s top U.S. non-gaming app revenues came from subscriptions which are also well aligned with studies from other sources like SensorTower, confirming that app users have increasingly become subscribers. 

As a strong contrast to this, most mobile app subscriptions are hardly on the “essentials” list. Prices for mobile app subscriptions have gone up substantially, prices for iOS app subscriptions grew by 33% for annual plans and 40% for monthly ones between 2021 and 2022 alone (based on numbers from Adapty, the well-known in-app purchase management and analytics solution).


Types of in-app purchases


Subscription models are great as they bring in so-called “recurring” revenue, a mostly steady income flow that you can build your business on every month. However, when compared to a company-wide mission-critical desktop or cloud software tool, a mobile app is much more difficult to justify for people to jump in and commit to a long-term subscription plan. 

An in-app purchase, or IAP for short, enables developers to sell content or other functionalities within the app to its users after they have downloaded and installed the app. Once an in-app purchase is made, the user generally retains access to whatever they have purchased for as long as they keep using the app, independently of the type of account they have. As opposed to that, in the case of in-app subscriptions subscribed users have access to premium content and functionalities only for the duration of their subscription (i.e. for as long as they keep paying their monthly or annual fees) and if they stop paying, they lose access to all premium features.



Consumable purchases

Consumables generally refer to products that can be bought multiple times. Mainly used in mobile games where users pay to gain access to special features or privileges that can be utilized in the game. For example, when building a new city in a game, you can buy a piece of road or building that you use once, and place it on the map to move ahead in the game or gain some other advantage. Once these consumables are spent or used users need to buy more of them. 


Non-consumable purchase

Non-consumable refers to a purchase that only happens once. These are one-time purchases that are made to gain access to special features, content, or functionalities. These are permanent and cannot be exhausted or used up. This can be a special beauty filter that can be applied to all of your photos or to stick with the game example, unlocking a special level or quest in the game can be a non-consumable as you won’t need to unlock it again.


Subscriptions

Subscriptions can be either auto-renewable or non-renewable. As their name suggests, auto-renewable subscriptions renew automatically unless they are manually canceled. Non-renewable subscriptions on the other hand have an expiration date and have to be manually renewed once they expire. An example could be unlocking access to a digital magazine for one month.


Implementing, technicalities, and cuts (optional read)


Nowadays, implementing in-app purchases is a well-documented and fairly straightforward process with the necessary toolkits provided by the corresponding stores. Covering the happy path certainly is but there are some exceptions that need a bit more testing and attention, like refunds, users with multiple devices, age restrictions.. etc. 


For iOS


app store in-app purchase


For Android

On Android devices, in-app purchases are managed using Google Play’s in-app billing which is really similar to Apple’s system.


Without going any deeper into the nitty gritty I think you can already see that all the necessary tools are already there and it is clear how the big app store platforms want you to use them. Even free trials and introductory offers are easily configurable. However, what happens if you feel a 30% cut is a bit too painful and you want to direct customers to your own purchasing platform?

In-app purchase rules make it clear that you cannot accept other forms of payment for any digital products or services inside your app. You also can’t promote or refer users to other payment methods from within your app. For example, you cannot accept credit cards or PayPal when IAP is considered to be the most appropriate payment mechanism. 

However, there is a special exception for purchasing digital products outside your app but still using them in the app. For example, you can purchase physical books on the publisher’s website using an associated “login” and using the same “login” in the app you can access the books in a digital form. Apps operating this way are not allowed to mention or link to the external purchasing platform so you have to communicate this in an alternative way like with an email campaign.


There are some further restrictions:


Best practices and tips


Going back to our main topic, it seems that even the biggest names in the tech industry are experimenting with new monetization options. For example, Meta has announced that Instagram and Facebook users will now be able to pay for a blue tick verification. This subscription would give paying users a blue badge, increased visibility of their posts, protection from impersonators, and easier access to customer service. It is also worth mentioning how they announced it as it was through a new Broadcast channel, a feature that is specifically targeted at creators and their audiences.

Whether you would be willing to pay monthly for social media or not I leave it up to you (but if you think about it, you are already paying with your data). However, this shows that adding experimentation to your app growth mix is a necessary thing after the pandemic, and trying out different offerings, introducing one-off products, or testing new pricing models can help keep your conversion healthy as the market changes.


instagram in-app purchase


Similarly, investing in gathering zero-party data to better personalize your app, like your paywall to try targeted offers is a key move.


Obviously, in-app purchases are not for every type of app and mobile games, entertainment, lifestyle, service, messaging, and social media apps are the most common types where it is easy to recommend them as a default option but the Canecom team is here to help you in finding the best fit. 


Even if you just want to have a chat about the latest trends, feel free to drop us a line.

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