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Subscription app developers might be better off charging more

Subscription apps are becoming increasingly popular among developers.

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Counterintuitively, subscription app developers are likely to find greater success by charging users more for their apps than less, according to a new report from Liftoff.

The app marketing firm analyzed data gathered between June 2016 and June 2017, and categorized app subscriptions into low-cost monthly subscriptions ($0.99 to $7), medium-cost monthly subscriptions ($7 to $20), and high-cost monthly subscriptions ($20 to $50). The findings suggest that lower-priced subscription apps don’t necessarily draw in users more than high-cost ones do.

Subscription apps are becoming increasingly popular among developers, in part because they are a more stable revenue generator. Rather than having to rely on the purchasing behavior of app users for things like in-app purchases, subscriptions comes in on a regular basis. Moreover, for iOS developers, Apple has increased the revenue cut for subscription app developers from 70/30 to 85/15. It’s worth noting that while Google announced it would also make these changes, it’s unclear whether the revenue cut has changed.

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Developers need to take into consideration things like the cost benefit of charging more or less for an app, the type of app, and their target platform:

  • Overall, the Goldilocks principle holds well for the subscription app model.
  • The app's function is a key factor in consumers' willingness to spend.
  • iOS users are more expensive to acquire than Android users.

App developers long considered the "pay once and play" model — in which users pay up front an app and aren't prompted to make in-app purchases — the best way to generate revenue. But as more "free-to-download" apps entered the market, users increasingly opted for these experiences. These apps offer microtransactions for in-app goods and services, and in-app ads.

As the app ecosystem expands further, it will become increasingly challenging for developers to compete in a crowded market. Overall, global gross app revenue will double to reach $102 billion by 2020, according to recent projections by App Annie. As a result, app monetization strategies need to shift at least as quickly as consumer trends and preferences in order for developers to capture a piece of this growing market.

Laurie Beaver, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on app monetization that:

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