Nov 12th 2021

App Subscriptions: How Much Can Publishers Earn?

App subscriptions have become a powerful monetization strategy for publishers across all app categories. But how much revenue can they actually generate?

In 2019, the popular dating app Tinder earned over $1 billion in revenue with a monetization strategy that combined in-app advertising with app subscriptions. This approach is not just lucrative, it’s becoming increasingly popular across multiple app categories. A low-tier $5.99 subscription plan can drive annual revenue of over $70 per user. That is, before platforms like Apple and Google take their share.

Subscription monetization is both reliable and effective, but that doesn’t mean there isn’t room for subtlety when designing an effective implementation. When apps ignore the right pricing strategies or overlook promotional best practices, creators miss out on long-term subscribers that can drive sustained revenue. With the right strategy, publishers can overcome these challenges and thrive within their category.

This article explores the benefits of app subscriptions while highlighting best practices to help your app succeed using subscription functionality as provided by the App Store and Google Play.

Jump to a section…

Why implement app subscriptions?
How do Apple and Google handle subscriptions?
App subscription revenue share
What are some best practices for app subscriptions?
Choose the right pricing tier
Choose the right subscription time period
Consider subscription promotions and free trials
Be flexible with payments and refunds
Master your mobile monetization strategy with Vungle

Why implement app subscriptions?

App subscriptions are not the only monetization technique, or even the most common. And yet, subscriptions are one of the most reliable and stable mobile revenue streams. When publishers build enough trust to convince users to make recurring payments, those users are far easier to retain, extending the app’s lifespan.

Subscriptions also make it far easier for businesses to project revenue and plan long-term development goals. One-time purchases are far more uncertain by comparison, making it difficult to model customer lifetime value (LTV) or even return on ad spend (ROAS). The greatest value for both models occurs when you combine them, diversifying monetization efforts and maximizing your revenue.

Finally, it’s looking more and more like app subscriptions can be made effective in almost any category. While they’re most common in video and music streaming apps, publishers use subscriptions for mobile games, exercise platforms, food delivery services, and much more. Any platform that offers premium content can use ongoing memberships to sustain more engagement than apps driven solely by in-app ads or in-app purchases.

How do Apple and Google handle subscriptions?

The App Store and Google Play Store have different subscription infrastructures, but their policies are quite similar. Both support tiered membership plans that offer exclusive content and features. Unfortunately, they also both take a share of revenue generated by subscriptions.

App subscription revenue share

Unlike a direct subscription from a website or other owned media property, app subscription functionality is provided by, and facilitated using, their respective platform infrastructures. While this can provide publishers with access to a larger audience, it’s obviously a trade-off that comes at a cost — Apple and Google take a 30% cut from almost all storefront transactions.

The good news is Apple and Google also benefit from subscriptions, so they incentivize the process for publishers. Once a subscription is over 12 months old, Apple reduce their revenue cut to 15%. In 2020, Apple took the additional step of reducing all commissions to 15% for developers who earn less than $1 million in net revenue per year. And in 2021, Google took a giant leap forward, lowering subscription fees from 30% to 15% in all instances.

What are some best practices for app subscriptions?

Choose the right pricing tier

When offering a subscription through iOS, publishers must choose a fixed price. Unlike Google Play, which allows for custom pricing, the App Store uses pricing tiers to guarantee consistent rates across regions. For example, publishers cannot assign a $10 value subscription fee to the U.S. and China — they choose “Tier 10” which supports $9.99 in the U.S. and ¥68 in China. These price ranges apply globally to all transactions in the App Store, ranging from approximately $0.99 to $999.99 in value.

The ideal price point can vary depending on your app category and how much content a tier offers. Low-tier subscriptions are priced at $6.99, while high-tier subscriptions range from $19.99 to $49.99. The average U.S. smartphone user currently spends $20.78 per month on app subscriptions, although that figure increases to $33.58 when including streaming and on-demand entertainment apps.

Choose the right subscription time period

The App Store and Google Play support subscription periods of varying lengths — weekly, monthly, and annually — so publishers need to decide which option will best suit their target audience. To determine a fair value, consider how much content your subscription offers, how frequently subscribers use the app, and the average session length. For example, a monthly subscription is suitable for a video streaming service or educational platforms, while weekly memberships may be appropriate for casual games.

It’s worth noting that publishers can include multiple subscription choices within a single app. One popular option is offering a standard monthly plan alongside a discounted annual price, encouraging more engaged users to pay more upfront for a subscription plan they’re confident they’ll get value out of.

Consider subscription promotions and free trials

Sometimes the most successful monetization technique is to let users experience a premium service for free. Apple and Google both offer free subscription trials that can help a potential customer see the value of a membership. Research from the University of Technology Sydney also suggests that free trials drive more customers to paid subscriptions than standard freemium models. Video and audio streaming services like Netflix and Spotify utilized this strategy to great effect, driving retention and revenue in the process.

Alternatively, publishers can offer promotional subscriptions that offer premium services at a limited-time discount. Many apps discount subscriptions that return to full price after a trial period. Others offer high-value annual subscriptions that remain active if acquired within a limited time frame.

Be flexible with payments and refunds

When publishers have flexible payment and refund policies, it can go a long way towards retaining subscribers while making them feel appreciated. Don’t be afraid to use Apple and Google’s account management and partial refund tools to better support loyal users. Here are a few examples:

  • Subscription pausing: A declined payment doesn’t mean you’ve lost a subscriber — they may not even realize what’s happened. In these cases, paused subscriptions place a hold on the account instead of canceling it outright, allowing users to reactivate later.
  • Grace periods: If a subscriber cancels their plan immediately after payment, it’s poor customer service to keep the full amount. Alternatively, offering a full refund within a grace period lets them leave on good terms and makes them easier to reacquire when they’re ready.
  • Subscription tier switch: Some subscribers may opt to upgrade or downgrade their tiers midway through a subscription period. In these scenarios, partial refunds can ensure they aren’t paying a premium price for unwanted tiers.

Master your mobile monetization strategy with Vungle

App subscriptions are just one of the ways publishers can ensure they’re monetizing 100% of their user base. When combined with an effective mobile advertising and in-app purchase (IAP) strategy, publishers can be confident that they’re not leaving any potential revenue on the table, and Vungle can help. Our comprehensive mobile monetization platform provides publishers with everything they need to maximize revenue for your mobile app business. To find out more, get in touch with the Vungle team today.

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