App Store Fees Exposed: Maximize Your Revenue & Bypass the 30% Cut

Strategies for App Revenue Success

Welcome to "Upwardly Mobile," the podcast that empowers founders to scale their ventures! In this essential episode, we look into the often-challenging world of app store fees, exploring how Apple and Google claim a significant cut from your hard-earned revenue and, more importantly, how you can navigate these charges to maximise your profit.

The Reality of App Store Fees: Discover why Apple and Google typically claim up to 30% of revenue from in-app purchases1. While a reduced 15% rate exists for smaller businesses earning under $1 million annually, founders serious about scaling need to understand the broader implications1. We discuss how increasing regulatory pressure, particularly from the EU, is forcing these tech giants to loosen their grip, but often only where legally compelled.

Key Regulatory Changes & Exceptions: Learn about Apple's compliance with the EU’s Digital Markets Act (2024), which now permits app distribution outside the App Store and the integration of external payment systems within the EU, albeit with a reduced commission of 10% to 17%4. Crucially, this flexibility does not extend beyond EU borders45. We also examine Google’s User Choice Billing program, which allows developers to offer their own payment methods alongside Google’s, with fees still applying at 11% or 26%4. We explore other exceptions born from legal battles and regulatory requirements, such as reader apps like Netflix and Spotify being able to link to external sign-up pages due to pressure from Japan's Fair Trade Commission6. Additionally, legislation in the Netherlands and South Korea has forced Apple to allow external payments for dating apps, though Apple still collects a slightly reduced cut (27% and 26%, respectively).

Mastering the Hybrid Model for Revenue Optimisation: One of the most effective strategies to reduce Apple and Google fees is implementing a hybrid monetisation model3. This approach combines in-app purchases with a web-based payment system, allowing you to bypass the hefty 30% cut for your most loyal users who are willing to take an extra step to pay outside the app37. We illustrate the potential savings: for a health app with a dedicated user base paying $15 a month for premium features, converting just 5% of 100,000 users via your website could save you an incredible $25,000 in monthly fees compared to being locked into Apple’s in-app purchase system8. However, we also highlight the critical importance of careful strategy and clear messaging to avoid losing users who might bounce if they encounter a paywall with no clear way to pay9. This approach requires balancing fee reduction with the potential sacrifice of some organic traction provided by App Store visibility57.

Alternative Distribution & The Debate on Fair Fees: While alternative distribution methods like sideloading apps or distributing outside official app stores can help you bypass fees, they come with their own challenges, often sacrificing mainstream adoption and App Store visibility59. For example, 

Google’s sideloading flexibility doesn't mean most users will jump through hoops, and Apple’s EU compliance with the Digital Markets Act is limited geographically5. We delve into the compelling argument that app store fees should be low or even zero, as proposed by experts like Damien Geradin10. This perspective suggests that fees should reflect only the intrinsic value the app store brings to developers, rather than the 'lock-in' or 'gatekeeper' value created by restrictions of competition and resulting network effects. Furthermore, it acknowledges the significant value that app developers bring to Apple and Google’s mobile ecosystems by drawing users to their platforms. This synergetic relationship has become conflictual due to imposed restrictions and fees.

Ultimately, success comes down to knowing your audienc