August 2022 Summaries

Navigating the intricacies of in-app purchase accounting is crucial for developers, as the timeline for receiving payments can extend to 68 days or more due to processes like transaction bundling, tax withholding, and currency conversion. In a recent webinar, the complexities of app store payments were discussed, highlighting key differences between Apple and Google's approaches. Google follows a straightforward method with payments typically occurring mid-month, while Apple uses a unique fiscal calendar with varying month lengths and a more opaque process. Apple's system bundles transactions to reduce processing fees and handles taxes globally, but its reporting can complicate accrual accounting due to delays in accurate financial data. Developers rely on daily sales, financial, and payment reports from Apple, though these do not provide real-time insights. Third-party platforms like RevenueCat and Appfigures help bridge this gap by offering estimated and actual revenue insights, allowing developers to make informed business decisions despite the challenges of delayed and complex payment systems. Understanding these financial processes is essential for app developers to make strategic decisions and maintain the financial health of their businesses.

Lisa Kennelly, Chief Marketing Officer of Fishbrain, emphasizes the importance of differentiating roles such as product designers and marketers, highlighting the need for a dedicated marketing team with expertise in brand guardianship and strategy. She discusses the challenges of marketing an app with no initial revenue and the shift in focus from simply claiming market share to exploring different monetization models, such as subscriptions and community support, in response to evolving app store dynamics and user expectations. Kennelly underscores the significance of branding in customer acquisition and the potential of overlooked niches, like fishing, for monetization. She advocates for investing in design resources to strengthen marketing efforts and stresses the importance of understanding user personas and community engagement for app growth. With the decline of traditional tracking methods like IDFA, she suggests diversifying marketing strategies to include awareness activities and social commerce while maintaining high standards and collaboration across teams. Kennelly also highlights the challenges of aligning user experience with revenue models and the value of direct customer interactions to enhance marketing strategies and expand app reach.

After transitioning from NGINX to Envoy, a significant increase in HTTP 400 errors was detected, primarily affecting POST endpoints, due to requests missing payloads. The Core Infrastructure Team investigated by capturing network traffic and discovered that the client was closing connections prematurely, preventing the payload from being sent, which resulted in 400 errors. Unlike NGINX, which buffers requests before sending them to the backend, Envoy streams requests, leading to the issue. The solution involved activating Envoy's buffer filter option, allowing it to wait for the entire request before forwarding it to the backend, effectively resolving the errors. This investigation not only addressed the immediate problem but also highlighted a potential issue with clients sending incomplete requests, prompting further investigation to ensure reliable service. The process underscored the team's commitment to reliability and the value of deep technical investigations.

An analysis of over 10,000 subscription apps on iOS and Android reveals that monthly subscriptions tend to have a higher first renewal rate compared to annual subscriptions, with a median renewal rate of 56% for monthly and 27% for annual subscriptions. However, this does not imply that monthly subscriptions are superior, as understanding customer responses and lifetime value is crucial. Companies often report high blended renewal rates, which can be misleading due to their inclusion of older cohorts with lower churn rates. Focusing on the first renewal rate offers better insights into the impact of marketing and onboarding efforts on new-user retention. To address churn effectively, understanding the reasons behind non-renewals, such as pricing, app performance, or onboarding issues, is essential, and tools like cancellation surveys can provide valuable feedback. Calculating customer lifetime value and expected revenue requires comparing retention rates of different subscription durations over equivalent periods. RevenueCat provides tools and charts to help monitor and enhance renewal rates.

A recurring question among developers concerns whether Apple retains its commission after a user receives a refund for an in-app purchase. According to Apple's Paid Applications Agreement, Apple reserves the right to keep its commission even after a refund has been issued. This policy has sparked widespread discussion on various online platforms, as it suggests developers might incur losses if Apple retains its 30% commission on refunded purchases. However, after examining detailed payment reports, it appears that Apple deducts the post-commission price when issuing refunds, indicating that developers are not losing money in these transactions. The inclusion of the right to retain commission in Apple's terms may be intended for cases involving fraud or exceptional circumstances. Despite the policy, there are no confirmed cases of Apple exercising this right, suggesting that developers operating legally and professionally have little to worry about regarding commission retention on refunds.

Apple Search Ads (ASA) is a platform that allows developers to promote their apps on the App Store through targeted sponsored search results, effectively reaching potential users at the moment of intent. It offers two levels: Basic and Advanced, with Basic being more automated and limited to a $10,000 monthly budget per app, while Advanced provides full control over campaign customization and access to a "Custom Reports" tool. Although ASA provides valuable attribution data through Apple's iAd and AdServices frameworks, its reporting tools are limited in terms of insight and visualization, lacking the ability to track customer cohorts over time or tie metrics to specific users. RevenueCat, an app monetization platform, enhances ASA data utility by integrating with Apple's AdServices framework, allowing developers to visualize subscription lifecycles and make informed decisions about their ASA spending through its analytics tool, RevenueCat Charts.

Apple's shift from the iAd framework to the AdServices framework, coinciding with iOS 14.3, marks a significant change in how app developers access attribution data for Apple Search Ads. While iAd offered detailed attribution information contingent on user consent via App Tracking Transparency (ATT), it was limited to iOS and posed privacy concerns due to its potential for third-party tracking. In contrast, AdServices, available on iOS 14.3+ and macOS 11.1+, prioritizes user privacy by providing limited attribution data without requiring ATT consent, making it accessible for all users, including those using children's apps. AdServices supplies a token to fetch attribution data through its REST API, which, although less comprehensive than iAd, ensures developers receive consistent attribution data regardless of user consent. RevenueCat's integration with AdServices allows developers to track Apple Search Ads campaigns effectively, offering insights into customer acquisition and ad performance while adapting to the evolving privacy standards.

Understanding investor perspectives is crucial for app developers, whether their projects are personal or aimed at profitability. Eric Crowley, a partner at GP Bullhound, emphasizes the importance of metrics like Lifetime Value (LTV) and Customer Acquisition Cost (CAC) in the Consumer Subscription Software (CSS) space, as outlined in the GP Bullhound Consumer Subscription Software Report. The report, intended for bankers and investors, provides insights into CSS trends and investment opportunities, but it also serves as a valuable resource for developers. The changing landscape due to Google and Apple's App Tracking Transparency policies poses challenges, pushing developers to focus on organic growth strategies rather than relying heavily on paid advertising. Crowley highlights the importance of understanding user cohorts, distinguishing between "tourists" and "locals," and tailoring marketing strategies to engage highly loyal users. It's essential for founders to effectively articulate their company's value through storytelling that connects metrics to user behavior, ensuring investors see the potential in their business.

In the context of subscription-based app businesses, renewal rates are a crucial metric indicating the long-term value provided to customers and the lifetime value (LTV) expected from them. An analysis of 10,000+ iOS and Android subscription apps revealed that the median first renewal rate for monthly subscriptions is 56%, with rates improving over time, suggesting that retaining customers after the first month increases their likelihood of continued renewal. To enhance renewal rates, businesses should evaluate their pricing and offerings, engage with customers to understand their needs, and analyze customer data to identify high-risk segments. Proactive strategies such as offering discounts or personalized messages can mitigate churn, while tools like RevenueCat offer insights through pre-built charts and integrations with platforms like OneSignal, Braze, and Iterable. Additionally, testing different subscription durations and feature packages can help determine the most effective strategies, taking into account factors such as customer affinity and market conditions.