Understand and avoid higher App Store Fees

After you complete a mobile app development process, the app needs a channel through which users can consume it. . Therefore, as the mobile app development process is completed the app store is where many businesses operate. Whether you hire iOS developers or hire Android app developers you need to create an app that has minimum barriers

The low barriers result in bringing more customers to the app. App stores act as a platform to reach a set of targeted audiences. Many stores like Apple allow even hybrid apps to be launched and connect with the audiences. Appstore creates so many opportunities and delivers value as well as creates a level playing field for app founders. 

There are different versions of the app store available in the market. Whether it be the Apple app store for iOS apps or the Google App store for android versions. These platforms have a set of restrictions for accepting payment methods or simply promoting the service within the application. 

The applications are categorized as free, paid, and free with in-app purchases. When you create a developer account with the App Store, it charges a fee annually of $99. In addition, the store cuts a base percentage that varies depending on the apps. For example, if you try to sell an app priced at $0.99, you actually share about $69.3 to the app store.

How Do App Store Charges Work?

Apple receives a percentage of the profits an app makes through in-app purchases. These are usually small value transactions that happen within digital apps.

The payments are usually less than $10 and involve the sale of in-game digital content. With such payments, Apple gets 30% of the revenue. For regular subscription-based payments though, Apple’s cut can reduce to 15%. Apple initially decreased the percentage for subscription apps to appeal to the likes of Netflix and Spotify SDK. In 2018, Netflix earned $853 million through the App Store, of which $127 million went to Apple.

These were getting a significant amount of Netflix’s profits. Later, Netflix decided to discontinue iTunes as a method of payment in 2019 and saved the 30% fees. So how does this work?

Businesses whose apps do not have in-app purchases are not charged by Apple. For example, the Amazon app is solely an interface to display product information. The products you are purchasing on Amazon are no in-app purchases.

Amazon directly bills you using the details you provided. Apple or your iTunes account is in no way affiliated with your purchase. Companies that bill you directly are not charged any fees by Apple. Despite the fee per transaction being waived off, of course, you still have to pay an annual $99 developer account fee.

How To Save Yourself From Apple App Store Transaction Fees?

Apple can only tax payments made through the iOS app. The easiest way to avoid fees is not to offer subscription services through the app. This is exactly what Netflix has done since 2019. It redirects users from the app to the company’s website. Users are required to sign up and pay for the service through the site before logging in to the app. Netflix is not the only developer that has attempted to cut Apple off. Spotify, Valve, and the Financial Times have been trying to do the same.

But is the strategy as effective as it seems? Of course not, otherwise everybody would just be doing the same.

Apple offers alternative strategies for developers who wish to handle in-app purchases differently. One option is using external payment systems outside of the App Store ecosystem, provided the apps do not directly integrate with Apple’s payment methods.

Another approach involves offering subscriptions or services that aren’t tied to digital content, which might fall under different guidelines. Developers can also explore hybrid models where certain features or content can be accessed outside of the App Store’s payment framework while complying with Apple’s policies and guidelines. These strategies enable developers to maintain flexibility in monetization while navigating Apple’s ecosystem.

You just can’t do away with the Apple App Store Transaction fees method. Apple has guidelines laid out that define whether you can opt-out of in-app purchases or not. If you just use alternate methods for a Netflix-like app, the app may get rejected. So make sure that you abide by Apple guidelines and choose the right payment method. The guidelines can be read here

Not offering subscription services in-app can have an impact on your App Store Optimization (ASO). Say an app is marketed as a subscription service, but users are unable to purchase it directly- This can lead to dissatisfaction among the users. Users may abandon the sales process which in turn could lower your sales.

So Should You Continue To Pay Apple’s Fees?

You can’t avoid Apple’s App Store transaction fees, as they have strict guidelines on in-app purchases. However, in late 2021, Apple launched the App Store Small Business Program, cutting fees for developers earning up to $1 million annually from 30% to 15%. This move supports smaller developers, fostering innovation and growth by allowing them to reinvest more in their apps and bolstering the app ecosystem’s diversity and vitality.

Letting Apple have 30% of your profits might not be so bad. They are not taking the money for no reason. There are numerous benefits that developers enjoy by letting Apple host their apps. In addition to the high traffic that the App Store brings to your app, it also brings in credibility and a seamless payment experience.

Apple is not the only company that levies taxes on developers. Since most app stores get their income from in-app purchase fees, they take their share before passing it on.

The industry standard for the app store’s share is around 30%. In that context, Apple’s tax is not too high. Of course, there are stores that pay a higher share to the developer, but the advantage may not be that direct as it seems. Higher percentages do not necessarily translate to more money for the developer.

Getting the most out of a sale is great, but more important is to get more sales. Most of the stores that pay more do not have high traffic. With the App Store, your app can generate better traffic than most other resources. Higher traffic translates to more sales, and more sales mean more money.