Speaker 1: Hey guys, welcome to xCreate Labs. Today, I'm going to be talking to you about app business models. Now, I have two apps here on my screen. I don't know if you can see it or not, but I'm going to describe it. One of them has a non-consumable in-app purchase. $5 gets you extended recording on multicam video recording. The other one aimed at businesses, doctors, professionals, medical professionals. That one is subscription-based. For $10 a month, you get to remove a watermark. I'm actually going to be adding much better features for the subscriptions coming soon. But as you can see, it's a very pathetic thing to pay money for. But on the left, it's in the consumer space. All right, maybe a few professionals out there would be using this camera. So on the face of it, it sounds like to me both features could be an in-app purchase. However, one of them is subscription-based and one of them is an in-app purchase. How are they doing, you ask? Well, I've got some figures right here. It's been three weeks since my last update where I talked about multicam pro and how you can make an app like that using GitHub as a resource for apps. Check it out if you haven't seen it. But in three weeks, it's 9xed its revenue and it's grown its number of sessions, the publicly available ones. I don't do any analytics. I don't like spying on my users whatsoever. I don't like background internet connections where it's not necessary. So the sessions that Apple asked the users, are you okay providing analytic data to Apple, they share that on with me. So it's tripled the amount of sessions. So three times, I guess, more people are using the app, but it's 9xed the in-app purchases. The problem with in-app purchase revenue is that it's unreliable because I guess subscriptions are also unreliable because anyone can cancel at a moment. But once you've bought an in-app purchase, that's it. You can no longer charge them again unless you want to lose your users. With subscription, it's kind of expected that the user knows every single month they need to pay. So my growth for this app, in order for me to make more money, I need to get more users using this app. More users use this app, that means more users are going to purchase the license or the in-app purchase to continue using the advanced feature of the app. So my growth model is more users, more money. That is the in-app purchase model. So the subscription model app has 5x less downloads than the in-app purchase model app, but it has half the amount of sessions. So even though less people download the subscription model app, I guess it's more specialist, more people, on average, use it. And that one has grown 30% in the amount of subscribers in the last 3 weeks. So I've got to say one thing. Both these apps, for me, as a guy who makes no money on the App Store, until 3 weeks ago I guess. So my analysis of these two apps is that they're both doing really well, surprisingly. It's the first time I've ever got some apps that I'm actually making money from. Not much money, it's barely in the triple figures, but it's good. But what I want to discuss with you today is the difference between having a subscription model and an in-app purchase model. For me, I've got to tell you, having a subscription model is the wiser bet because if you can think about your app as a subscription, you have to worry a lot less about marketing and getting your app out there. And it's just more about focusing in on your users and trying to make them as happy as possible. Luckily, my retention is very high. I believe it's like 90%. I'm not losing any subscribers. So the kind of people that are downloading this app, they really want the feature that I'm adding to it. I've got some amazing features coming up. So I'm excited for that. I'm really excited for that because I know that when I work on this app, I've got a recurring revenue at a retention rate of over 90%. That is a really amazing business model to have. Very, very happy with that. On the flip side, with the in-app purchase app, I also love the app. I mean, I made it. I love that feature. But to me, I always get scared that it could just be a fad. So right now, thankfully, I mean, I'm not getting that many downloads in the grand scheme of things. There's like a billion iPhones out there, so it can grow a lot faster. But I feel like at any moment, people can just stop downloading it. If they stop downloading it, that's it. My revenue is cut off. So I'm really reliant on pushing the app out there more and more and more. Maybe I need to update it more and get it more visible. I'm not paying for any advertising, so maybe I need to start figuring out paying advertising. I do know that from the downloads, 10% of them do pay for the in-app purchase. So I can do the math and figure out how much I need to pump in to get adverts, to get people to download, of which hopefully 10% will download. But maybe advertising people, people that you advertise to, they might not be the right kind of people that you should be getting to download the app. So there's a whole world out there that I need to learn and discover. But at the moment, both models seem to be working. What I'd say to you is think about a subscription-based model with a higher retention rate, because at least with that one, you know that there's going to be a recurring revenue going down the slot. And I guess for me, to do different apps, I priced them differently. I did two different business models because they're aimed at different people. With the camera app, that one is mainly aimed for consumers, just regular people, want to get multi-camera recording going. So for that one, I don't see it as a business case. And plus, I looked in the competition. There was a couple of other apps offering similar features, and they're in-app purchases or purchases. So for me, I couldn't really make this subscription model because the value wasn't there for the end user. And I guess potential growth, let's just go with a billion iPhones. Let's just say less than that, but let's go with a billion. If 1% of them use the camera, that means my addressable market is $100 million. That means my potential revenue is $100 million times $5. That's $500 million. $500 million, that's good enough. Half a billion potential, 1% is good enough for me. 1% of that is $5 million, good enough for me. And if I get 1% of that, $500,000, good enough for me. Or is it $500? $50,000, that's still good enough for me. And obviously, if I start getting that much revenue, I can add more features, and I can even turn it into a subscription model if I want because I've got enough user base, depending on the features I add and all this kind of stuff. So I still see it as a valuable market to go after, and I'm just making this app for me myself anyway. So it is still good to go. Don't get too scared of in-app purchases. But in the world of subscriptions, with that app in particular, because it's addressed to a particular market, medical professionals, these are businesses that pay license fees in the thousands. The competition apps, they charge tens of thousands for the service I'm offering. I'm offering some advanced artificial intelligence to really speed up their workflow. So $10 a month is a pittance to these kind of characters. For me, for that app, I'm going to be adding some even more advanced features and increasing the subscription price. The way I've strategized for it is anyone that's already subscribed gets to lock in that grandfather's package. They will keep the price they're paying. That's cool. But new subscribers coming in, they'll pay the increased fee. But for now, that one's a very specialized app. So it's more than the competition, basically, dictates that I am undercharging very much for the features I'm giving these kind of people. So I guess when deciding, I guess I've rambled on a bit, but I guess when deciding which model is right for you, think about the app you're making and think about the competition. If the competition is free, is it worth your time? Do you want to be the kind of app developer that makes money from selling ads? It's up to you. You can do that. That's what I used to do. I used to be an ads developer. I used to rely on advertisement. And I'll tell you something, the incentives of making a good app, if you're an ad-based business model, you're not on the user's side, basically. You're trying to get the user to click the ads. And that is, it makes you focus less on the product. It makes you focus more on taking advantage of the users. So I've done that before. These are my first apps that I've ever made. It's always just put an advert there because I didn't like charging for the user. But in the last 10 years, my mentality has really changed. I really value privacy over advertisement. I don't like giving away personal data. I don't like giving anything to advertisers where I can. So all my apps don't have analytics. I don't want to know how many people are using the app. I don't want to know when you use the app. I don't want to know what you click. I'm smart enough to figure it out. I don't want any analytics. I want it as private as possible for you. So that's my mentality. So I don't like ad-based business models myself because I believe that it isn't at the user's best interest. So if a user wants a good app, I think nowadays it's really good because I guess Apple are spreading that message that privacy is important and the industry is kind of changing. So they have to pay for it. With in-app purchases, if you're focused on that, then I guess the focus is primarily going to be how to get more users. More users equal, that's how you're going to get in-app purchases. With subscription, that is probably the best model if you care about the product itself because with that one, it's about how you can keep your users. So I've talked a lot about this, but I'm telling you right now, I'm just saying, the best business model to go for is subscription-based and you've got to get the mentality in there or out of your head depending on where you come from in the world. For me, I hate the idea, I came from open source so I hate the idea of charging people, but now I realise that your time is important and you need to pay the rent, you need to pay the bills. So the developer does need to earn money for making a product that's used for the end user. So you need to think your time is valuable and the best business model to have is the subscription-based one because it really helps you focus on retaining your users. Retaining your users because if you have someone that subscribes to you, that pays that monthly fee, your focus is to add features or tailor the experience to make them keep paying that monthly fee. Whereas if you're in-app purchase, that's your business model, then really you're only making money once you get a new user who pays you the in-app purchase. Your existing users, you can focus on taking advantage of them by adding more in-app purchases and maybe disgruntling them or maybe adding good features for them, that could be another focus. But personally, if I've paid for an in-app purchase, I expect the app to be free going onwards. So the focus on there makes you think more about marketing the app and with advertisement-based business models, the focus on there is really just taking advantage of your users because you're just trying to get them to click the app or stay on the app as long as possible. So I hope you guys followed me through that journey that I just came to and what do you guys think? Do you guys think that subscription is the best business model that I just described? Do you like paying subscriptions and what business models do you guys use out there in the start-up world? And of course, if you have any cool apps you're developing, drop it in the comment section below. I'd love to check it out and let's grow this xCreate Lab Co community. Hope you guys enjoyed the show.