There’s a bit of a dirty truth in freemium and VSB (Very Small Business) recurring revenue apps: a lot of folks pay and don’t use. And thus, in many ways, get ripped off.
It’s almost core to a lot of freemium business models.
But how common is this? Well, RevenueCat has the real data, at least for mobile subscriptions. They manage $100m+ of mobile SaaS and subscription data, and put together interesting information on how churn really works here.
Answer: a drop in conversion, i.e. an increase in churn, of 29%. By asking folks to confirm they still want to subscribe.
This is pretty interesting hard data, so I reproduced a bunch of the post below.
The past few years have seen a scourge of shady subscription apps using dark patterns to push expensive subscriptions. Like $8 per week ($416 per year!) for a wallpaper app. Or $10 per week ($520 per year!) for a math learning app targeted at kids.
But wait a sec, maybe someone really loves changing their wallpaper frequently. Having a curated collection of fantastic wallpapers could save hours of searching sketchy wallpaper sites online. Or consider a parent, desperately trying to get their child up to speed on math: hiring a tutor could easily cost hundreds of dollars. Who’s to say $8-$10 per week is too much to pay for an app? The market! Certainly not Apple or Google.
Developers should be free to price apps as they see fit because some apps really do deliver that much value to customers. But, complete pricing freedom for developers only works if there’s a safety net in place to protect consumers from predatory pricing, dark patterns, and outright scams.
Since Apple and Google both profit directly when developers use these shady tactics, they don’t have a direct incentive to rein it in. However, Apple and Google do have a lot to lose in the long-run if consumers feel ripped off and sour on subscribing to apps.
Apple has been slowly working to rein in subscription fraud, but hadn’t taken any big steps toward building better safety nets to thwart bad actors… until iOS 13. Now, when you delete an app with an active subscription, iOS asks if you want to keep that subscription.
At RevenueCat, we now manage over $100 million per year in subscription revenue, so we decided to take a quick look to see if the new subscription management prompt was having an impact.
TLDR: It seems to be working!
We looked at the difference in conversion rate between iOS 12 and iOS 13. 80% of the apps we looked at showed a statistically significant decrease in trial conversion rate for users on iOS 13 vs iOS 12.
Across the apps we sampled, we measured an average drop of 9% in absolute conversion rate, which translates into a median relative drop in conversion rate of 29%, but with a pretty wide range depending on the app, anywhere from 0% to 60%. Apps that already have a high trial conversion rate should be relatively unaffected by this change. However, apps that rely on customers forgetting to cancel a subscription will see the biggest change.
So, an app with a 60% drop in trial conversions is obviously a scam right? Not so fast. Looking at the raw data like this doesn’t tell the whole story. There are lots of factors that aren’t captured in our data. This might just be a signal that an app’s most recent marketing efforts are not attracting true fans. Or, it could also be that people are taking advantage of the free trial just to get something done, and never intended to keep the subscription anyway.
Whatever the case may be, it’s important to not read too much into the performance of each individual app, but the overall trend is clear: this seemingly small change should help prevent unwanted subscriptions and better align long-term incentives for consumers, Apple, and developers.