Improve your retention rates, but don't do this for the 85/15 split
Jacob Eiting is CEO of RevenueCat, a platform for managing cross-platform in-app purchases, products and subscribers, as well as for analyzing in-app purchase data.
Since Apple opened subscriptions monetization for more apps in 2016 – and lured developers with an 85/15 breakdown of revenue from customers who have subscribed for more than a year – subscriptions monetization and retention has grown like the Holy Grail for app developers felt. So much so that Google quickly followed suit, which appeared to be an example of healthy competition for developers in the duopoly for mobile operating systems.
But how does this breakdown work for most apps? It turns out that the 85/15 split that Apple likes to mention every time developers complain about the App Store Rev release doesn't have a significant impact on most developers. Because migrate.
No matter how great an app is, subscribers will churn. Sometimes it's because a credit card expires or some other billing issue. And sometimes it's more of a pause and the user comes back after a few months. However, the bulk of the churn comes from subscribers who, for whatever reason, decide that the app is just not worth paying for it anymore. If a subscriber churns before the one-year limit, the developer never sees that 85% split. And even if the user signs in again, Apple and Google will reset the clock if a subscription has expired for more than 60 days. Pretty handy … for Apple and Google.
Top mobile apps like Netflix and Spotify report low-single-digit churn rates, but they're the outliers. According to our data, the mean churn rate for subscription apps is around 13% for monthly subscriptions and around 50% for annual subscriptions. Monthly subscription churn is usually a bit higher for the first few months and then decreases. However, with an average churn of 13%, only 20% of subscribers cross that magical 85/15 threshold.
In practice, with all the hype surrounding the 85/15 split, very few developers will see a significant increase in sales: