00:00:00 ◼ ► Welcome to Under the Radar, a show about independent iOS app development. I'm Marco Arment.
00:00:05 ◼ ► And I'm David Smith. Under the Radar, it's usually not longer than 30 minutes, so let's get started.
00:00:09 ◼ ► So a couple episodes back, we did an episode talking through what we sort of outlined as the
00:00:16 ◼ ► three pillars of app development. So the pillar number one was acquisition, pillar number two is
00:00:20 ◼ ► conversion, and pillar number three is retention. And those are the three sort of like legs to the
00:00:26 ◼ ► stool, that if you want to build a sustainable business, you want to have an indie app career
00:00:31 ◼ ► that has sort of length and sustainability to it, these are the kind of things that you need to pay
00:00:36 ◼ ► attention to. And so this this week, we're going to go into the second of those pillars and kind
00:00:41 ◼ ► of talk that through. And so we're going to talk about what I'm calling conversion. And is broadly
00:00:46 ◼ ► you could also call monetization. But it's essentially it's the now that you have a user,
00:00:51 ◼ ► so you've gone through the acquisition phase, you have a user, what are you going to do with them?
00:00:58 ◼ ► developer, there is something that you are presumably hoping to get out of that. And this
00:01:03 ◼ ► is most often money in terms of if you're running a business, this is what you're doing. But it's
00:01:07 ◼ ► also just generally what is the reason that you made this app? And what are you trying to
00:01:11 ◼ ► accomplish? And I think it's something very important to start off with ever you whenever
00:01:15 ◼ ► you start to think about how you're going to sort of monetize or convert the use of your app is to
00:01:20 ◼ ► be very specific and realistic and honest about what it is that you want from the app. Because
00:01:27 ◼ ► very often I think I've seen in people, you know, and friends and colleagues and people I've worked
00:01:31 ◼ ► with over the years is the sense of it's, if you don't aren't clear with yourself about what you
00:01:37 ◼ ► want this app to be, it's very hard for you to then structure your work and align things towards
00:01:42 ◼ ► that. And as an example of this, it's like whilst many people are, you know, are an app indie app
00:01:47 ◼ ► developer, because they want to, you know, make a living of this have be a business. There are also
00:01:52 ◼ ► many people who I think kind of vaguely would say that but in reality, what they really like is they
00:01:57 ◼ ► just like making software and putting it on the App Store. This is a side hustle for them. It's
00:02:00 ◼ ► a thing that if you know, if it buys them a cup of coffee every week, like that would be amazing.
00:02:05 ◼ ► Like their goal is not really to truly convert the app in that way. It is more something that
00:02:10 ◼ ► they're doing as a hobby as a passion project as something that they are doing on the side.
00:02:16 ◼ ► And if you're going down that road, then you don't need to worry about some of the aspects of this in
00:02:20 ◼ ► quite the same way. And I think in many ways, you would be have more fun, get more enjoyment from
00:02:24 ◼ ► your hobby, get more satisfaction from this process, if you were honest about that, and just
00:02:29 ◼ ► didn't try and go down these roads and went through all the pain and suffering that's involved in
00:02:36 ◼ ► with app review for a lot of that stuff. Like there's a lot of these aspects of this that are
00:02:40 ◼ ► becoming increasingly complicated the more you go down this road. And so I think it's just something
00:02:45 ◼ ► to about before you even start, it's like, what is your goal? If your goal is to make a living is your
00:02:49 ◼ ► goal to make an app that will one day be acquired is your goal, you know, to sustain and support a
00:02:54 ◼ ► large team of developers. Like depending on where your goals are with that, you're going to have
00:02:59 ◼ ► very different sort of requirements and baseline things for what you can do as a result. Because if
00:03:05 ◼ ► your goal is ultimately, you know, to be acquired, well, you don't really need to convert users very
00:03:09 ◼ ► much, you just need to keep acquiring them and keeping them like follow focus on pillars one and
00:03:13 ◼ ► three, because the goal is to really just have a nice big wide user base. But if your goal is to
00:03:17 ◼ ► make like kind of a very nice stable level income, well, then there's certain kinds of income streams
00:03:22 ◼ ► that you're probably going to be much more important to pursue. And so just like before you
00:03:26 ◼ ► do anything, like start with the end in mind there and understand what it is you actually want. And
00:03:32 ◼ ► then you can decide, well, how am I going to convert user activity into whatever it is that I
00:03:36 ◼ ► want? Yeah, and I think it's important to leave doors open wherever possible for you to change
00:03:41 ◼ ► your mind or modify as you go. So for instance, like, if your goal is to get as many users as
00:03:47 ◼ ► possible, to leave that door open, you have to either have funding, or run things very, very
00:03:54 ◼ ► cheaply. So that way, if you get a bunch of users, and you haven't figured out monetization yet, you
00:03:58 ◼ ► don't want to really like stop the flow or restrict the flow of new users coming in. You want to be
00:04:03 ◼ ► able to keep running what you're doing as cheaply as possible. So what kind of business are you
00:04:07 ◼ ► running? What kind of features do you add? How do you implement those features? You know, if you're
00:04:11 ◼ ► not going to have, you know, a huge staff of people, then for instance, you probably shouldn't
00:04:15 ◼ ► have features that rely on major server resources or human review or human involvement in the content
00:04:22 ◼ ► that's on the service or that's in the app or whatever, you know, because those are all very
00:04:26 ◼ ► staff heavy or server cost heavy. There's all sorts of decisions you can make, and it really
00:04:30 ◼ ► depends on what you're building. And so this is going to be kind of general, broad advice that's
00:04:36 ◼ ► not going to apply to everybody, because the answer to every single business is, it depends.
00:04:41 ◼ ► But we'll try to do our best here of, you know, what, you know, broad themes you should be
00:04:46 ◼ ► thinking about. Yeah, because I think it's what we can do here is hopefully is like, I'm, I think
00:04:51 ◼ ► it's easy to think of monetization as there's like, there is one path that is like the best.
00:04:57 ◼ ► And there's perhaps the for any particular goal, there may be a sort of best thing or generally,
00:05:04 ◼ ► like a good place to start. But I think my goal in this is that really, it's just to kind of
00:05:09 ◼ ► lay out this broad menu of different ways that you can sort of convert user activity into benefit to
00:05:15 ◼ ► you. And by looping, you know, sort of having this wide view of that, it can give you much more
00:05:22 ◼ ► opportunity to tailor what it is to you and to give yourself flexibility in the future. Or if
00:05:26 ◼ ► you find yourself in a place that one path isn't working, very often you can change business models.
00:05:31 ◼ ► I mean, I've done that in I think, almost every one of my apps that is, you know, had any kind
00:05:35 ◼ ► of longevity, the ultimate business model or way that I'm sort of seeking to convert users has
00:05:40 ◼ ► changed over time, some of them started with ads, and later had subscriptions, some of them started
00:05:44 ◼ ► with subscriptions, and then later had ads, some of them started as one time in app purchases and
00:05:49 ◼ ► went to subscriptions, like all those kinds of changes are very much possible and very much
00:05:53 ◼ ► things that you should be thinking of as you're going through this process of is there a better
00:05:57 ◼ ► form? Is there something else I can choose from the menu that is going to make this a better suit,
00:06:02 ◼ ► you know, fit either to your current needs as a, you know, individual, or to the app in terms of
00:06:07 ◼ ► the way that the platform is growing or changing, like, these are the kinds of things that it's just
00:06:11 ◼ ► always good to have in the back of your mind, like, is there a change because eventually,
00:06:14 ◼ ► you will probably settle into something I mean, I can say for, you know, it's like for pedometer,
00:06:18 ◼ ► plus plus and widgetsmith, they've now settled into something that feels really stable and
00:06:22 ◼ ► sustainable. It seems like overcast went through like seven business models in the first, you know,
00:06:27 ◼ ► the first couple of years, but it's, you know, for the last few has at least been very stable.
00:06:31 ◼ ► And I think it's like, eventually, you'll find something that probably works in the long term.
00:06:35 ◼ ► Oh, yeah. And really, I cannot overstate enough what you said about keeping it flexible,
00:06:39 ◼ ► keep your options open with business model as well. And don't be afraid to try to experiment
00:06:44 ◼ ► with different models or to make changes if one's not working for you. Because yeah, you're right,
00:06:48 ◼ ► like overcast, I've tried almost every business model there is. And even even settling now on like
00:06:54 ◼ ► ads plus plus a paid unlock for things. Even that I have done a lot of variation within that model,
00:06:59 ◼ ► and a lot of different different types of ads, what different things that are unlocked different
00:07:03 ◼ ► methods of unlocking them, like it and it took me a while to figure this out. And in large part,
00:07:08 ◼ ► one of the big reasons why I didn't really succeed that much with Instapaper over time, is that when
00:07:15 ◼ ► the environment around it changed, I didn't change the business model with it, I stuck with my old
00:07:20 ◼ ► business model forever, and I drove it into the ground. And with overcast, I'm I consciously was
00:07:26 ◼ ► trying to avoid that. And, you know, leave my options open, start with a more defensible
00:07:31 ◼ ► business model, a more resilient business model, and be willing to experiment with new things as
00:07:35 ◼ ► time went on. And that's that's worked much better for me than, than holding on to the one forever.
00:07:39 ◼ ► But anyway, so let's talk, you know, monetization models. And I think the the number one that many
00:07:46 ◼ ► apps use then for very good reasons is ads. By the way, we're brought to you this episode by Factor.
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00:09:12 ◼ ► Our thanks to Factor for their support of this show and all of Relay FM. See, ads work, ads are
00:09:17 ◼ ► great. Everyone gets what they want. You get a free show and we and the advertiser gets customers
00:09:22 ◼ ► and we get money for doing the show and everyone has what they want. And it couldn't possibly be
00:09:26 ◼ ► more complicated than that, right? No, I mean, I think ads are amazing. And I think and I say
00:09:31 ◼ ► that as someone who makes a very meaningful part of my app, and I think I've my income from them,
00:09:36 ◼ ► because I think what's amazing about ads is I used to have a very broadly negative view on them,
00:09:41 ◼ ► right? That in the sense of like, oh, ads, they clutter up the UI and all these things. And like,
00:09:45 ◼ ► that is true. But the reason they are pervasive and that they exist in lots of places is because
00:09:51 ◼ ► they work, right? It is, most advertising, at least the kind that you would put in an application,
00:09:58 ◼ ► is my is you know, I get paid when someone clicks on the app or on the on the ad. Like they I don't
00:10:05 ◼ ► make any money just for showing it. Typically, it's like I make money for you know, it's like
00:10:08 ◼ ► based on the number of clicks. And inherent in that is the understanding that like lots of people
00:10:15 ◼ ► click on the ads that they see in my apps. And they're clicking on them presumably because they
00:10:25 ◼ ► benefit to to them and to the, you know, to the advertiser that the advertiser is trying to get
00:10:31 ◼ ► awareness or attract users for whatever it is. And, you know, I'm providing a method for making
00:10:37 ◼ ► that connection. Like, I don't love ads as the like, if I only had to pick one method of
00:10:42 ◼ ► monetization, I don't think it would necessarily be ads, there's some issues and problems, you have
00:10:46 ◼ ► to be very careful about what the kind of ads you show, who's you know, which brokerage you're using
00:10:50 ◼ ► to show the ads, like, there's a lots of issues with them. But the main thing that is so amazing
00:10:55 ◼ ► about them is like that ads are almost the like most directly connected form of monetization,
00:11:02 ◼ ► where app, you know, you make money, the more your app is used, like that is a beautiful connection
00:11:09 ◼ ► that you can't get from hardly anything else that mean you sort of to some degree, you can get it
00:11:14 ◼ ► with subscriptions. But that's even that that's a much more limiting, challenging thing. Because
00:11:19 ◼ ► with ads, the nice thing is, there's no upfront cost to the user, there's no limit on that user,
00:11:24 ◼ ► you're just putting the more they use the app, the more that you will make money from the ads. And so
00:11:29 ◼ ► you have this delightful kind of like, passive connection that is both motivating for me as a
00:11:35 ◼ ► developer, because the more I you know, if I can encourage more people to use the app, more people
00:11:39 ◼ ► will view the ads, and I'll make more money like that's great. Like that kind of past the sort of
00:11:45 ◼ ► the passivity of it is just a really nice thing. And when I say passivity, it's like you can have a
00:11:49 ◼ ► passive form of monetization or an active one, like, am I requiring the user to really be active
00:11:55 ◼ ► and do something, you know, I do have to open their wallet, maybe is like that, that that level
00:12:00 ◼ ► of engagement, whereas, you know, the past conversion with ads, they just need to be there.
00:12:04 ◼ ► And that is kind of a powerful thing. And it's a great place to start, if you have an app that will
00:12:08 ◼ ► kind of work well with a large number of users, or even if you just want your app to be used by a lot
00:12:15 ◼ ► of people, like there was something just purely fun about, you know, having an app that's used by
00:12:20 ◼ ► lots of people. And if that's something that is desirous to you, like potentially think about
00:12:23 ◼ ► putting ads in it, like, I don't think there's that's necessarily a bad thing or a problem.
00:12:31 ◼ ► you don't have to put any paywalls. It's just you just show ads. And I think there's a simplicity
00:12:36 ◼ ► to that, that I think for a long time in my career, I would just sort of like shy away from
00:12:41 ◼ ► for kind of these vague, philosophical reasons. But like, the more I've been doing this, the less
00:12:52 ◼ ► are useful to the people. And if you're doing them in the right way, I think you can do ads in a
00:12:56 ◼ ► really, you know, sort of skeezy way. But broadly speaking, like, you know, the ads that are shown
00:13:01 ◼ ► in overcast, that are showing people podcasts that they might be interested in, in subscribing to,
00:13:06 ◼ ► like, it's a form of, you know, it's almost a form of discovery, in addition to, you know,
00:13:13 ◼ ► a form of revenue for you. And so it's like, in some ways, it's like, all three of us win,
00:13:17 ◼ ► like the publisher, you know, it's like, I benefit, the advertiser benefits, and the user
00:13:22 ◼ ► benefits in some ways as well. So it's like, it's a very virtuous thing that is hard to get,
00:13:26 ◼ ► like a win, win, win, in a lot of other ways. Yeah, and I think it's, it's, it really gives
00:13:31 ◼ ► everybody what they want. And that's, again, it's something that is not going to work for
00:13:36 ◼ ► all apps, in the sense that you, what you need for ads to work is you need a high amount of
00:13:44 ◼ ► relatively low value engagements with your app, because the ads are going to pay you a very,
00:13:50 ◼ ► very, very tiny amount of money each time they are viewed or tapped or whatever. And so what makes
00:13:56 ◼ ► ads work is apps where people are coming back to them frequently and using them frequently.
00:14:01 ◼ ► So there are certain business models where this is not going to work very well. For instance,
00:14:05 ◼ ► if the number of users is going to be very low, because the app is extremely specialized.
00:14:09 ◼ ► So for instance, if you're making something that's like, I want to make software for the people who
00:14:14 ◼ ► service the machines that are used in dentist offices. Okay, probably, I'm sure there's markets
00:14:18 ◼ ► for that. But it's going to be difficult to make a large ad based model for that, because that's
00:14:23 ◼ ► going to be a much smaller percentage of the user base out there than like, something that people
00:14:32 ◼ ► Similarly, you know, if you think about something like those apps where if you have a corrupt camera
00:14:37 ◼ ► SD card, and you want to like undelete files on an SD card, data recovery apps, this is something
00:14:43 ◼ ► that most people don't need. When you need it, you really need it. And generally, you really need it
00:14:49 ◼ ► once. And then you never need it again. So it would not make sense to have an ad based version
00:14:54 ◼ ► of that because you're getting a very small number of people something that has very high value to
00:14:58 ◼ ► them once. And then they're probably not using it a lot after that. So if you made a penny from that
00:15:04 ◼ ► ad that was shown, that's not a great business model for that case, whereas you could have
00:15:08 ◼ ► probably charged them 30 bucks for the app or whatever, you know, and they would have had the
00:15:12 ◼ ► value in that. So it depends on, you know, again, everything depends. But it's useful to know, you
00:15:16 ◼ ► know, what kind of situations ads are useful for. And it's what you would think high volume, you
00:15:22 ◼ ► know, frequent engagement kind of apps. So you know, an overcast case, it makes perfect sense,
00:15:26 ◼ ► because typically, if you will listen to podcasts at all, you probably listen to them regularly.
00:15:30 ◼ ► People who use overcast tend to use it every day, or at least every couple of days or multiple times
00:15:36 ◼ ► a day. So you know, they're in there a lot. So you know, judgment wise, ads are great, too, because
00:15:41 ◼ ► if you if you're being very precious about your app pricing, and you're saying my app is going
00:15:46 ◼ ► to be paid up front or paid only somehow, and I just don't want to put ads in it. I mean, look,
00:15:52 ◼ ► again, for many apps, that makes sense. However, there will be a lot of people who will be
00:15:57 ◼ ► interested in your app, which is a very, very hard thing to get like people who are interested in
00:16:02 ◼ ► your app, that's that's a very valuable resource, that if you try to pay for that resource,
00:16:08 ◼ ► sometimes by buying ads, it's very expensive to buy that resource. So you if people are already
00:16:12 ◼ ► interested, that's an amazing thing. And if you turn them away with a paywall as the only way to
00:16:17 ◼ ► experience your app, you are turning away a valuable resource. And depending on what you're
00:16:22 ◼ ► making on the other side, that might be worth it. But it's useful to know, okay, I'm turning
00:16:26 ◼ ► away these people. So it better be worth it. Because otherwise, if you offer a free version
00:16:31 ◼ ► with ads, then you get to capture basically 100%. I'm obviously not quite but like, you know,
00:16:38 ◼ ► all the interest that is in your app, you will be able to capture all of it because all the people
00:16:43 ◼ ► who are interested enough to try it for free, but not interested enough to pay you 10 bucks a month
00:16:48 ◼ ► or a year or whatever, you will capture way more of those people than zero. Whereas if you don't
00:16:54 ◼ ► have any free option with ads, then you will get none of those people. You know, you only get the
00:17:00 ◼ ► ones that are willing to pay you who are very interested or very wealthy or whatever. And you're
00:17:04 ◼ ► turning away huge parts of that market. So again, it depends on what you're going for. If you're
00:17:09 ◼ ► going for a market where things are specialized, or people are, you know, have more limited options,
00:17:14 ◼ ► or are desperate for some reason, or have very high value associated with your app, then it's
00:17:19 ◼ ► like, you know, charging for food in a baseball stadium, you can charge whatever you want,
00:17:22 ◼ ► and people will come. But if you are in kind of the broader environment of, you know, this huge
00:17:28 ◼ ► sea of apps that most people can take relief, because there are just so many to choose from,
00:17:32 ◼ ► it's best to let as many people in the door as possible who are already knocking on it.
00:17:37 ◼ ► And I think something you said that is just really probably worth like expanding on is this,
00:17:42 ◼ ► the sense of, whenever we're trying to monetize our app, it's an understanding of looking at your app
00:17:48 ◼ ► and seeing, there's a spectrum of sort of user engagement, and the value that the user is
00:17:56 ◼ ► receiving from your app. And like that, that is any sort of exists on a spectrum where you could
00:18:01 ◼ ► go from the, you know, on the one end, you are, you know, you're in your example, it's like you,
00:18:06 ◼ ► you have an application that is going to retrieve someone's wedding pictures that only exist on this
00:18:11 ◼ ► SD card, and the value to them is like functionally infinite, like there is a tremendously high value
00:18:18 ◼ ► on your ability to do that to them. And it goes all the way down to the other end where
00:18:22 ◼ ► the app is providing just sort of like light amusement, like barely, it's barely useful,
00:18:30 ◼ ► but it's like it's a different kind of utility that you're providing. And your hope in monetization
00:18:35 ◼ ► is to sort of capture all of the different levels of utility that your app is providing,
00:18:42 ◼ ► and to sort of capture that utility and that value to the user in terms of value and revenue to you.
00:18:49 ◼ ► And like advertising is fantastic for places where the utility that you're providing is only sort of
00:18:55 ◼ ► slightly valuable to the user, that it's the nature of what it's doing is that each individual
00:19:00 ◼ ► interaction, each individual thing is relatively near low value to the user, if a user didn't open
00:19:06 ◼ ► your app that one time, it's not going to make a huge impact to them. And so if you tried to
00:19:11 ◼ ► monetize a kind of low value to the user, but potentially high frequency situation with something
00:19:17 ◼ ► other than ads, you're almost certainly going to sort of fall down because you're trying to
00:19:22 ◼ ► count you're saying, even if it's like, I'm going to offer I think the cheapest in app purchase you
00:19:27 ◼ ► can have is 49 cents, I think now something like that, like, and you say you need to pay 49 cents
00:19:32 ◼ ► to use the app. It's like these, these might say it's like, well, the app is kind of like
00:19:42 ◼ ► even though that's not that much money in absolute terms, but it's like there's a massive mismatch
00:19:46 ◼ ► there. Whereas with ads or those kinds of models, it's like you're providing them with a 10th of a
00:19:52 ◼ ► penny of utility, and you're receiving a 10th of a penny of you, you know, of income back from them.
00:19:57 ◼ ► And so there's a beautiful similarity to that. But then as you move up in the sort of utility
00:20:02 ◼ ► spectrum, that's where you can start to get into other ways potentially of trying to capture
00:20:06 ◼ ► that value that you're creating. And that's where you start to get into like either in app purchases
00:20:12 ◼ ► or subscriptions or places where you have more opportunity to capture it because you're targeting
00:20:18 ◼ ► someone who's getting more out of it. And this is very often and very commonly is, you know,
00:20:23 ◼ ► you'll have the base use case of the application, where it is, you know, sort of broadly applicable,
00:20:29 ◼ ► but the relative utility is a bit lower. But then you have areas of the application or certain users
00:20:34 ◼ ► of your application for whom it may be like, Oh, I'm the, I'm the power user, I'm the one who uses
00:20:39 ◼ ► this in a very powerful way that provides a lot of value to the user. And as soon as you start
00:20:44 ◼ ► providing more value to the user, you create more space for you to sort of like, I guess, I don't
00:20:49 ◼ ► know, harvest that value. Like it sounds a bit negative, but I think it's like a good model for
00:20:53 ◼ ► this is you're trying to kind of keep in step with your user, if you provide them more value,
00:20:58 ◼ ► they should be providing you with more value as well. And like that balance is a good thing,
00:21:03 ◼ ► because that means it's incentivizing the right things that I'm as a developer incentivized to
00:21:08 ◼ ► give the powerful, you know, very advanced user of my application a wonderful experience,
00:21:12 ◼ ► because by providing that to them, you know, I'm making money, they're making you sort of utility,
00:21:18 ◼ ► and everything works out. And so like, you're trying to match those things along the spectrum.
00:21:22 ◼ ► And I think right now, the main way that people tend to do that is with subscriptions in software
00:21:27 ◼ ► applications, like these were added as a means. Gosh, what was it three, four, five years ago,
00:21:33 ◼ ► something like that, where previously it existed only for content. But like, since then, it's been
00:21:37 ◼ ► huge, in terms of my ability to focus on, you know, sort of power user in, you know, features
00:21:44 ◼ ► in depth in my applications. And there's a new you have the same connection that you have in ads,
00:21:49 ◼ ► where there's a connection between the use of the app and the income you get from it, because the
00:21:54 ◼ ► nature of subscription is if you stop delivering the value, the subscription revenue disappears.
00:22:00 ◼ ► Whereas even in the paid upfront model, or the one time in our purchase, the issue is, once I've got
00:22:05 ◼ ► your money, I've got your money. And I the there's a mismatch of incentives, because the user wants
00:22:11 ◼ ► to receive that benefit forever. And I have no incentive to provide it to them. Like that is a
00:22:16 ◼ ► really tricky thing. And anytime I see a user who's a developer who says something sort of like the,
00:22:21 ◼ ► like a lifetime unlock or a lifetime thing, it's like, lifetime is a long time. Like that is a
00:22:28 ◼ ► really tricky place you're putting yourself into. And you're misaligning your incentives, whereas a
00:22:32 ◼ ► subscription is fantastic, because you are perfectly aligning your, you know, your incentives
00:22:36 ◼ ► where I continue to provide, you know, utility to the user, and they continue to get benefit. And
00:22:42 ◼ ► those two things work well. And that's like works fantastically for like, if in a lot of my apps,
00:22:46 ◼ ► I have this two tier model where I have, like high value customers and low value customers,
00:22:50 ◼ ► and my low value customers make me money, you know, my 10s of pennies from their engagement
00:22:55 ◼ ► with the ads, and my high value customers are on a subscription. And those two things work really
00:23:01 ◼ ► well in parallel, and provide a lot of opportunity for the app to have a really nice, sustainable,
00:23:06 ◼ ► dependable income stream. That for me has worked really well, and it's worked a lot better than
00:23:11 ◼ ► trying paid upfront or one time in-app purchase, or those kinds of models, which can work for
00:23:15 ◼ ► certain things. Like there may be a situation where that makes sense. Because like in the
00:23:19 ◼ ► example of the SD card recovery tool, it's like they may only ever use the app once. And so you
00:23:24 ◼ ► need to capture their value, like right away and in a one time purchase way in a way that doesn't
00:23:31 ◼ ► make sense to have a subscription to that, because hopefully they're not corrupting their SD cards on
00:23:35 ◼ ► a regular basis. Like that's a different problem. But generally speaking, for a nice, sustainable,
00:23:40 ◼ ► long term indie development kind of like lifestyle business that you and I both have and enjoy,
00:23:46 ◼ ► like that combination of subscription plus ads is like seems super, super good and aligns the
00:23:52 ◼ ► incentives so well for the long term. Oh yeah. And another reason is just diversity of income
00:23:57 ◼ ► sources. I mean, that's a huge benefit to any business. The ad market, for all of its benefits
00:24:04 ◼ ► of being relatively easy and satisfying everyone on all sides, the problem with the ad market is
00:24:10 ◼ ► that it's a rollercoaster. The ad rates go up and down like crazy. Right now we're in a down period
00:24:15 ◼ ► for most types of ads. I don't know anybody with an ad based business who is very happy about how
00:24:20 ◼ ► 2023 went for them. Like overcast, overcast ad income is down something like 40% year over year.
00:24:28 ◼ ► It's a huge, it's the biggest drop I've ever seen in the history of me running ads, like and the
00:24:34 ◼ ► longest running drop so far too. But what's great about the business model is that that's not the
00:24:40 ◼ ► only way I make money. I also make money from the premium subscription to get rid of ads. And this
00:24:45 ◼ ► is such a good model for apps that have the kind of high frequent usage rates that things like
00:24:51 ◼ ► overcast have where yes, I have ads that most people see. And for some small portion of the
00:24:57 ◼ ► user base who don't like to see ads or who want the pro features or whatever, whatever that
00:25:01 ◼ ► differentiation is, they can pay me a subscription and then they don't see the ads and they get a
00:25:05 ◼ ► couple more features. That model is so effective because first of all, again, everyone gets what
00:25:10 ◼ ► they want. Most people who don't care about the ads, they get a free app and that's what most
00:25:15 ◼ ► people want. Most people don't like spending money and they want their apps to be free and they'll
00:25:19 ◼ ► put up with ads because they don't care. They'd rather see the ad than spend the money. For some
00:25:24 ◼ ► people that's flipped around. For some people, they would rather spend the money than see the ads.
00:25:28 ◼ ► And so both people can be satisfied. Both groups can be satisfied. And then I get a diverse stream
00:25:34 ◼ ► of income and the subscriptions are amazing because I've never had as reliable and steady
00:25:42 ◼ ► income from apps as I have with subscriptions. Like before, when I was doing paid up front or
00:25:48 ◼ ► when I was doing a one-time in-app purchase to unlock stuff, that was always an even bigger
00:25:52 ◼ ► roller coaster than ads. Talk about roller coasters. Your app would launch or you'd do a big
00:25:57 ◼ ► update. You'd get a big spike of revenue if you were lucky and then it would just trail off and
00:26:03 ◼ ► it would just crash down and you'd see that line just slowly going down over time as you're like,
00:26:08 ◼ ► "How do I get more people to use the app or get my existing users to buy an upgrade or whatever?"
00:26:12 ◼ ► Subscriptions are just even. There's some churn and there's some spikes here and there of new
00:26:18 ◼ ► users but it's way more even than anything else I've ever seen. I can count on that money every
00:26:24 ◼ ► month coming in and being roughly in a certain range and it's amazing. So I would strongly
00:26:30 ◼ ► recommend if your app works for that kind of model of ads plus optional subscription to get rid of
00:26:37 ◼ ► the ads for some reason, that is a great model to have. It works very, very well. There's a reason
00:26:43 ◼ ► you see it so often in apps because it works for everybody, for the customers, for the developers,
00:26:48 ◼ ► for the advertisers. It works great. Yeah, and I think that sustainability aspect of it is huge.
00:26:56 ◼ ► I think what I personally really enjoy about subscriptions too is that dependability is coming
00:27:03 ◼ ► from almost the inertia of your existing user base. We talked about this a while back when
00:27:11 ◼ ► I talked about the tyranny of the turn equation. It was a great episode. I'll have a link in the
00:27:15 ◼ ► show notes to it. But it's like because you have this existing group of people who are regularly
00:27:21 ◼ ► giving you money, you can start to very quickly get a sense and a model for how many of them will
00:27:28 ◼ ► continue to do that. And barring some dramatic change, like if you radically redesign the app,
00:27:34 ◼ ► maybe you'll have a big spike in drops or if you increase the price, maybe you'll get a big spike
00:27:39 ◼ ► in churn rate. But if you don't do much, if you just keep the app ticking over in a really positive
00:27:45 ◼ ► way, taking care of your customers, those numbers become very stable and very easy for you to then
00:27:50 ◼ ► plan around. That you can get a sense of it's like, this is my churn rate, this is my growth
00:27:54 ◼ ► rate. You can do a bit of math and end up with like, this is what the app is going to almost
00:27:58 ◼ ► certainly going to make next month. And being able to make those kinds of then you can make choices
00:28:03 ◼ ► and decide things about, you know, what costs make sense to take on. Oh, maybe I'd like to hire a
00:28:09 ◼ ► designer to do work on something. It's like, great, you know, whether or not you're going
00:28:12 ◼ ► to have that money in a way that you're not reliant on kind of the next customer. You're
00:28:19 ◼ ► relying on the previous customer. And that is such a wonderful place to be. And honestly, I kind of
00:28:24 ◼ ► just love the philosophy of it. It almost feels like I have this group of people who my number
00:28:30 ◼ ► one job is, is to take care of them. And that is a kind of a nice, like warm feeling in a way that
00:28:36 ◼ ► if you're in the paid upfront model, which can work for some kinds of the one time in a purchase
00:28:41 ◼ ► model, it's like, your mindset is much more of you're hunting, like you're trying to find the
00:28:47 ◼ ► next customer. You're out looking for someone else, versus the kind of like inwardly focused,
00:28:54 ◼ ► like, okay, these are my people. And I'm going to take good care of them. And you hope that more
00:28:59 ◼ ► people will join that group. And you should still probably be out, you know, every now and then go
00:29:02 ◼ ► out and do some hunting. But more generally speaking, you can just take care of these group
00:29:06 ◼ ► of people who've demonstrated that they really care about what you make. And if you take care
00:29:10 ◼ ► of them, they'll take care of you. And like, those are the line incentives just work so well for this
00:29:15 ◼ ► and can make for it to be a lot that can be very stressful, much less stressful, which is highly