The State of Subscription Apps with RevenueCat's CEO Jacob Eiting and David Barnard,Growth Advocate

Live streaming across our Twitter and our LinkedIn. You can be you will be able to watch the session immediately following on our YouTube and the slides will be available on our SlideShare as well. So I'll drop all the links for that here. But if you do have to jump off, you'll be able to catch up shortly. So before we dive into introducing our amazing speakers, just want to do a couple of quick reminders for everyone on other Saster events that are happening in just two weeks. We are hosting our next mini digital event, Saster Money. It's going to be during this time slot on Wednesday, May 22. And this is an event that we're bringing back from a few years ago by popular demand. It's back on the agenda and you can save your slot. I will drop that link for you as well. And we are really excited. We already have the CRO of 0 confirmed bill.com and Adyen to come talk about finance, fintech and SaaS. So it's going to be an awesome session and we're excited to see you there. And then as you guys know, Europe is right around the corner and we always have a special promo code for our Workshop Wednesday follower. So I'll drop that in the chat too once we get started. But without further ado, I am thrilled to welcome our guest today. We have Jacob, CEO at revenuecat and he is joined by David Barded, growth advocate at Revenue Cat. They compile and release an annual state of subscription app report every year and we are thrilled that they're going to be here talking about the 2024 findings. Jacob and David, welcome to Workshop Wednesday.

Hello.

Thanks for having us.

Yeah, thrilled that you guys are here. We always like to get to know our guests a little bit with a few warm up questions. Um, so since there are two of you guys, would love to just hear a little bit more about what you're up to in your day to day role and how you guys work together.

Should I go first, David, or do you want to go first?

Go ahead.

So my job is chief executive officer of revenuecat Co founder in my day to day is very weird. Uh, it's just lots of random stuff. But you know, these days it's, it's you know, building the, building the winning team, shipping stuff and selling stuff and helping developers make more money. But what that really boils down to is a lot of emails and webinars and whatnot. So David, you want to go?

Sure. I run the podcast that revenuecat does called Sub Club. And so our mission as A company is to help developers make more money. And one of the interesting things about that is that providing great content for our customers isn't just marketing. It actually helps us make more money. So we do webinars, the podcasts, newsletters, all sorts of content on the blog. I'm actually in the middle of a world tour. Podcast, podcast, world tour. So I've been in London, Vegas. I'm headed to San Francisco, Berlin and New York.

Italy.

Well, Italy on the. For our revenue cat offsite. But I'll be live in all those places or have been live in those places doing live tapings of the subplot podcast. Our last guest was Microsoft. I'll be at Google I o next week interviewing Google. So kind of all over the place, but talking with and trying to help consumer subscription businesses grow.

Awesome. Thank you for that. And we certainly understand the power of content and the impact on the bottom line. So obviously we're advocates over here. The question we always like to ask everyone is what is the latest SaaS tool or platform that's your favorite right now? Jacob, we'll start with you.

Yeah, I'll go. This one's a little bit somewhere between. It's definitely a business productivity tool, but it's somewhere in between. SaaS, maybe a desktop app, but it's. It's called Limitless. It used to be called Rewind AI, but it's one of these like desktop AI, watch everything you do, creepy robot things. But it is so, so powerful because it will. If I have transcripts from conversations, it will help me summarize them. It'll help me like pre prepare. It has my email. So like when I have a meeting on my calendar, it will like tell me a summary of all the emails I've had with that person for the last couple months and kind of give me a quick way to prep. Um, and it's just been for somebody who's well bey their limits for processing information, it's been a really, really helpful tool. Um, and they're also coming out with like a hardware thing too soon, I think. But, but the desktop's good enough for me. I don't need. I don't need listening in all parts of my life necessarily. Um, but that one's been something that's really changed kind of how I work.

Love it. That's really cool that we haven't heard about that one before. Limitless. That's awesome. Thanks so much. David, how about you?

Well, we had some trouble with it about two years ago, but since then Riverside has been rock solid for recording the podcast. I mean it's genuinely quite impressive how they record full res audio and video in the Google Chrome cache and persist it. So we've recorded like 70 or 80 podcasts with them now and never lost a single minute of audio except for a few hiccups where live things got a little dicey. But yeah, now they offer all sorts of stuff with like podcast editing and other stuff. I don't think the production team uses all of it. But you know, for doing a live podcast you don't want to lose anything and it's never lost anything.

So kind of shocking.

Pretty incredible.

I was a real doubter when we switched from Zoom to to Riverside and it was a little rocky. But yeah, you're right David. They've gotten really good in the last couple of years. So I am, I am now a net promoter as well.

Awesome. Love to hear it. Well, thank you guys for that. Without further ado, I'm going to pass it over you to jump into slides and I'll be back for Q and A.

Awesome. So I wanted to kick things off talking about the consumer SaaS opportunity. I know a lot of folks here are probably more to be SaaS oriented and may not, you know, be paying attention to the consumer market, but it is growing crazy big and it's already huge. I think, you know, one of the key things from a recent report is that overall consumer spend on digital goods and services is predicted to be 2.2 trillion in 2030. A lot of dollars up for grabs. And one of my favorite things Jacob always talks about is what a sneaky big tam consumer digital is. You want to speak to that, Jacob?

Yeah, I mean it's one of these things where I think our, I mean obviously you build stuff for businesses or consumers, right? Those are kind of the two markets. But the consumer propensity to spend on purely digital content, not even content utility in software has kind of snuck up on us in the last decade. A $10 billion market, not even that long ago, 2016, that's now a, you know, $65 billion market is a huge difference. Like we're approaching an order of magnitude in less than a decade. And I think that's likely to continue to grow especially as like developing markets increase their propensity to spend also as people like human beings. And I think this will relate to our B2B audience here. It's just like individual human beings propensity to spend on software. I think it's for the first time in history, but history like that, human like People are willing to pay for software that will make their lives better on an individual basis. And that's kind of what I was talking about with this limitless tool. Right. Like, it's ostensibly for my work, but really it's like a personal SaaS that I use. And I think that's kind of as we like talk through some of the slides today, I think that's the intersection where some of our content might be relevant for the, for the Saster crowd is because we've seen this from the consumer to the B2B side where a lot of apps will start as like toys or like very personal things. And then they'll realize like, oh wow, there's a lot of value and moving, you know, towards a little bit of that more B2B oriented use case. And so I'm hopeful that, you know, the learnings we have there on the intersection can actually be useful. So anyway, I digress there, David, but that's my.

Hey guys, it's Jason. Could I add one quick hi Jason, to help the audience a little bit? Yeah, there's a lot of meta things that I think are interesting here. That and obviously I've been involved with revenuecat since fairly early on, being a very early investor, you guys. And one way to think about you is B2B2C. Okay? You are a business app used for business purposes to manage mobile subscriptions. But your end customers primary are more, much more consumer than business. Okay, so, but one meta question from that for the audience in the world. Is there any downturn in B2B2C? Have you seen these, everyone? Half of Twitter and 80% of LinkedIn is saying the world has ended. There's a macro downturn. No one's spending any money. By the same token, we're looking at the Wall Street Journal and unemployment remains at record lows and the US economy is at a global high. Is there a downturn in B2B2C?

We saw, I think a bit of an exhale in 2022 where it was a little bit slower. We were lapping just an insane year.

I guess we can see that on this chart too, right?

Yeah, maybe. Yeah, you might be able to. Yeah, right. Look at 21 to 22. That was kind of. We felt that in our data, 100%. And I was kind of panicked a little bit, but it only lasted just that long. And I'll tell you, we're. We're tracking in terms of our volumes, like as a. As an aggregate, it looks as good as it always was. And in terms of, like, energy for new entrants, like new apps popping up to address new needs. It's. It's as electric as it's ever been. So I would say, like, no, like, there hasn't really been anything aside from that, like, slight macro, which I think was just more due to, like, interest rates and consumer behaviors around Covid than it was to any sort of, like, real technological shift or, you know, behavioral change.

Yeah, it's interesting. I want to hit your data, but I think it isn't just to reiterate it. I think when folks think the whole sky has fallen, make sure you open your eyes. And one of the. One of the. One of the benefits from investing, if you have. If you're lucky enough to invest in a bunch of good companies, is you can see that the effects are very disparate. Right. They're not. They're not. And so there absolutely are impacts.

Right.

For whatever reason, it's beyond the scope of today's workshop Wednesday. Sales tools and to some extent, marketing tools have been decimated. I mean, some of our favorite products, literally, literally, you guys, that are. That we're growing 100% at the peak are growing close to 0% today. Okay. It's tough out there. And it. And I have empathy for the founders even more the teams. But don't draw the wrong conclusions that, like, the world is ended. The more you are exposed to the end consumer economy for now. For now, the stronger it is now. In the old days, like 2008, 2009, in many ways it was the opposite. Like if you sold the consumer, the world ended. Like every jewelry store closed, the world shut down, but businesses didn't. And actually the renewal rates are pretty good. In B2B, we kind of powered through that global downturn. This is the opposite, but it may be one other take. So that's just one thing and then maybe another takeaway. And I don't know if this one's true. We'll have to see as a. As a community. But consumer is faster than business. Right? The cycles are faster. And maybe it's interesting, you guys, I forgot. You did see this Covid overhang going into 2022. It was there. You can see this flattening of this, but it's back. And so maybe the business side, it's already happening. It's just not showing up in the numbers yet. Maybe we're at 12 to 18 months away. It's a reason for optimism because consumer always iterates faster.

Yeah. You could argue that maybe in B2B we went farther and deeper in 21 on over buying and sort of like over investing and the whiplash has been stronger. But if you just like draw a line through 2019-2023, it's like nothing happened. Right. Like it snapped right back.

So we'll see what happens in B2B in 25.

Yeah, fingers crossed. But I'll say, like, I don't think. Yeah, I don't think, you know, we've been blessed to kind of be in a fairly protected. Because we're so exposed to the, to the consumer. I'd be interesting to know how, you know, like a lot of our consumers. I don't know, David, if we had a spot in here to talk about Photo Room specifically as like one of my favorite examples of It's. It's an app for like editing photos. And that was kind of where they started, was fully in a consumer use case, removing backgrounds and things. They kind of caught the like, beginning of the AI like generative editing trend. And. But one of the big, one of the big inflection points for their business was Shopify sellers or like online e comm sellers. So they were doing okay as a consumer, fully consumer app. But once they like tapped into this, this industry of people like reselling on Shopify, their retention rates went through the roof. They had much better feedback, they had a much more targeted ic. And so I think David has some, some stuff in here about like prosumer as a segment. But like, I think that's an area that's been particularly strong and like particularly unaffected by, by these macros. But yeah, yeah, let me add just.

One other and then I'll, I'll shut up and let you guys go. But one reason I wanted you guys to present for the audience, we kind of missed this in the beginning. Revenue CAT is sort of a quiet giant. And what I mean by that, for purposes of workshop Wednesday, is 30% of all mobile apps that have a subscription. We're all subscription people. Whether we're B2C or B2B or B2B 2C. We're subscription folks for the most part. Or pseudo subscription. 30% have revenue cat as the software, the API, the SDK that's managing their subscription. 30%'s a lot. Right.

And in the U.S. in the U.S.

In, U.S. outside the U.S. they have a lot of work. We're working on 30% of the U.S. and. And they actually do more API calls than stripe. Right. If that's still true. Which actually boggles the mind. So they have a certain amount of scale. That's why I want to learn these learnings. Whether some of them are more in the consumer, some of them are B2B. Some of them are in the middle, which we're talking about here. But that level of scale, we don't see that often. So 30% in the US of everyone paying for a subscription on, on. On these phones. HA Is using is. Is managing those subscriptions to revenue cats. So that's a fundamental. The guys don't hype this enough. The team. But you don't. You don't meet that many people that are truly managing. I don't even know if Stripe has 30% market share. Right. It's kind of an interesting question not to have a mini, mini investor meeting. All right. But keep going. That's the context. It's pretty rare.

Thank you.

That the data. Most of our vendors publish data and they have no market share. Right. This is the opposite Revenue cats. Market share is far vaster than you might think.

Yeah, we waited a long time before we'll talk about our state of subscriptions report and our data report, but we waited a long time before we put this out because we wanted to really make sure we had a good sampling and it wasn't fully biased by like when we entered the market. But anyway, I'll hand it back to David so we can keep hitting some of the good content here.

Yeah, I mean, to Jacob's point about photo room going prosumer, I've always loved this little chart that Nico Wittenborn, also an investor or primarily investor in consumer subscription, but also a revenue cap investor. He created this way back in like 2015, 2016. And so I want to go through this and we can talk about the differences between what your B2B audience typically faces compared to what our customers and consumer sides typically face. But then to Jacob's point, these lines actually are blurring more and more where B2B are finding more consumers paying and prosumers paying and then consumers are finding those prosumers in enterprise. And so this all gets really blurred. But if you're going to work in consumer or you're going to serve companies who serve consumers, I think this is really important to understand. And so enterprise SaaS, you typically have that much higher average residue for per paying account in consumer. It's like. And we'll get to this like 35 cents average realized LTV.

Well, it depends on the, depends on the period. But like, you know, dollars for acv, sometimes anywhere between ten and a hundred dollars for an annual customer value if you retain them for a whole year. Right. It's very, very different than most consumer or most B2B SaaS. It's going to be high, very low.

And then churn is typically much higher on consumer subscription.

As if the first point wasn't bad enough.

Yeah. And then you have higher expansion revenue. You know apps like Tinder are actually starting to, to lean into this and get better at it where with consumables they are seeing and, and by I.

Say duolingo as another really great example of this where they've figured out how to actually tap into expansion on, on consumer side.

Yeah. And then it's not just the consumables, but having multiple tiers of subscription. And you know, Tinder famously releasing a $500 subscription like that, that can be massive expansion revenue for a small cohort of users. But they're finding ways to get more expansion revenue. But typically NRR is going to be much, much lower on consumer. But the way you make up for it is that mass market potential. There's 5 billion consumers with their credit card attached to the app stores and that is massive. I was talking to Microsoft on stage at the last event I was at and they said they see a 5 billion times increase in conversion from trial to paid on the app stores because of that credit card being on file, because of the trust and everything else. So the mass market potential is huge. Conversions can be big dunning and retention.

Apple not having to worry about it. Yeah.

Really good at that kind of stuff.

And then actually I guess on that too is like internationalization. Like on when you ship on the app store like you're in I don't know how many countries it is David. 200 some on day one, like with doing no work, which is crazy to do that in B2B. I mean a lot of people end up doing it to B2B but it puts a lot of work on the consumer to like figure out how to pay in dollars and like have a US credit card and like all this other stuff. But for, and consume when you're selling to the app stores, it's on day one, which is really cool.

Acquisition costs dramatically lower for consumer, you know, advertising on meta and platforms like that. For consumer subscriptions, you're talking about like cost of acquisition in the pennies and dollars, not in the tens of dollars and hundreds.

It better be with. It better be with a 12 DOL.

Yeah, exactly. And then word of mouth distribution. You know, apps go viral. You know, people talk about what's on there. People see what's on your home screen. People see what you're scanning and sending them that scanner and it's watermarked or tagged or whatever. There's just so much more opportunity in word of mouth and organic distribution and even the app stores themselves getting featured promotions.

Yeah.

All those kind of things being on.

Being on Apple or Google's good side is like the best free money you can get. I mean it's not free. You have to work to get it but like getting their blessing and tailwinds. Can, can, can make or break a company. It's great.

So if you're an enterprise SaaS like look at this and think like how can we, how can we leverage some of those benefits and move into some of that prosumer. And if you're more focused on consumer it's like how do we kind of upmarket and at least get a small cohort of users who are paying more, churning less, you know, expanding revenue and stuff like that. So I think it's, it's an interest and we have such an interesting perspective Too as a B2B company serving B2C we see both sides of it. So it's really a fascinating industry.

And also, and some truly, truly B2B like notion's one of our customers, reference customers and they're a case of like most of their business is, is online. Right. It's, it's seats and it's a traditional SMB SaaS product but they also offer a mobile subscription as a part of their, their offering. And it's partly it's to make the, the app experience more smooth but it also creates like a very small bumper business on the, on the consumer side.

Right.

That they can, they can maybe lean on or lean into at some point to T. And so I think you see that more and more I guess with like especially like companies that lean on an SMB sort of motion of sort of lower ACVs having a component that works with the app stores can be, can be additive.

Yeah. And Microsoft talked about this as well again podcasts that was just released on the Sub Club podcast and then one that's coming out in I think next week. You know Microsoft, I always thought it's strictly enterprise like oh, the apps are just an afterthought. But over the last few years they saw consumers where their phone is their primary computer and they're doing like 50 page documents and then they saw tremendous organic growth on the app stores and they've built a $500 million a year business plus something, something in that ballpark on the, on the iOS and Android.

App Store, what are the flagship. You know, I haven't listened to the podcast yet. It's coming up next. But. But what are the flagship apps that.

Are driving that, that Copilot 365 Word, Excel, PowerPoint, like, just a traditional stuff, but they see people, you know, I need to create an invoice for my small business. They go to their phone, they download Excel, they pay for it with the App Store, and instead of, you know, getting a small, you know, business invoicing app, they're just using Excel, they're, you know, writing documents for school. It's like they've really blurred those lines.

Yeah, I would say you made me think of another, Another example near and dear to Adjacent's Heart, which is Adobe. Like, they have a ton of apps that. And I don't think you can get the Creative Suite, but they have, like, they have, like, mobile versions of a lot of the Creative Suite tools that you can subscribe through the App Store as well as, like, some of those tools you're talking about, David, the, like, PDF scanners and, and digital signatures and all that stuff as well. And I don't, I don't know how big that is for Adobe, but there is a certain thing at a scale, at a certain scale, and you have a certain amount of blurred line between what's a. What' work and what's a personal productivity tool. Yeah, I mean, $500 million, that's. I don't know if that's meaningful for Microsoft really, but. Sounds meaningful, right?

Yeah, Yeah. I mean, they're putting a lot of focus into it. So our report. We'll have to go kind of quick. We've been droning on about all this. Hopefully that was all really interesting, but we'll go quick on some of these numbers. But the report we put Together covers over 30,000 apps that we work with 18,000 plus developers. As Jason said, it's a sneaky, huge business. 290 million subscriptions managed by Revenuecat, and we've tracked almost $7 billion of revenue. And so the data we're going to share is based on these numbers. The first, I think, most interesting thing to talk about from the report is conversion to paid varies tremendously, but is actually fairly low. 1.7% median conversion to paid. So you download an app and less than 2% on median end up becoming a subscriber and paying you anything. It's low.

I always love to hit consumer founders with 98% of your users won't Pay you anything. Right. When you put it in this framing, it maybe changes how they think about some of their product. I'll also call out an interesting outlier in this particular graph. Little busy. But if you look at the business category, which is the second from the left and the, the top mark there, which is North America, you actually have a much, much higher number for business related tools in North America, which kind of like plays into what I was talking about. And that number, I don't know what like a standard conversion to paid for a B2B SaaS that has like a freemium thing. But it's probably kind of similar 2% still. Jason says okay, well see, I mean.

You can manipulate, of course you can manipulate it by how you manage, lowering your denominat, how you manage to choke. Right. But the classic metric is 2%. Right.

Wow. So, so there you go. If you just launch on the App Store business app, you'll do 10% North.

America, but orders of magnitude smaller average revenue, potentially.

Yes, that's right. You're going to trade that off by it being. Well, I don't know, like some of these, you know, we talk about, especially the business apps like, you know, I think of, of, you know, another pro I would call a prosumer app that I use for flying. There's this app called Foreflight for pilots. It's $300 a year. You can pay for it within app purchases. Right. So there's like there are outlier cases where that ACV isn't super small.

Right.

But, but I don't know what photo room dollar amount is. It's probably close to 190 a year. Yeah. You know, and there might even be pressure above that that they could go depending on how much value they're providing.

I do think this is, I don't want to monopolize too much of it. I do think this is a more important triangulation than you might think. I raised my hand for 2% because I've been doing SaaS for 19 years and it was 2% when I built a, a free, you know, a PLG freemium app and launched it on TechCrunch January 1, 2006 and it's been 2% ever since. But now to see the scale tied to it, it's a reminder to found like what's happening a lot. Your first slide is more interesting than people realize. A lot of folks are trying to both go down market and up market. Right. If folks that are struggling a bit with bigger customers want to magically bolt on a PLG offering because I think it'll solve their problems tomorrow. And folks that have high churn at the bottom of the market want to bolt on some higher value add because that 5% a month churn in consumer is fucking brutal. Right. So both of them are doing it. But if you want to make first the product has to be good enough to support any conversions. There's some that have zero. Right. But my rambly point why this data is so valuable across so many paying customers is your denominator has to work, work. Just think as founders, as executives, how big your denominator has to be if 1.7% is going to convert. Right. And the fact that that is true today, it is true across this massive paying customer base at revenue Cat it's like it sort of ties to the end of the day you need 50 million plus active free users to build a big paid business. You need just, it's just the math, right. Almost no matter what the price is, you need 50 million.

Yeah, I was gonna say and it's almost like you're, you're not really trading the conversion rate. Yeah you can go double, triple this and up and down. But like you're just going to trade size of TAM versus size of contract. Right. So you have a really small contract value, really high tam. If you got a really high contract value, you're going to have a really, or to get a, you know, large tam, you're going to have to have a high contract value, really low number of customers. But potentially that, that, that, that there's some fixed physics there about how many of them you'll actually get to pull out a credit card or, or a wire transfer in the case of the enterprise. And so that's interesting. Realize it was so, so similar.

One of the things I'm going to be talking to Google about next week though and the podcast will come out I think on the 19th is that in the Play Store specifically they are seeing a ton of success with micro transactions or like smaller transactions and giving people the opportunity to pay for little things and non recurring subscriptions and kind of like diversifying the monetization. Now that would typically be at a more mature stage of the company. But like we were talking about before a Tinder where you have like an entry level subscription but then you have consumables on top. It's like finding, meeting the consumer where they are at on pricing and offering different price points and offering different ways to pay can start like pushing that up. And I think that's a trend that we are starting to see more and more in consumer is just getting more sophisticated about it.

There's a lot going on here. I mean I don't know this is pretty tangential but like in. In AI and how tools and AI are pricing because they obviously have some like fixed costs but then they're also like do we charge people based on tokens or is it a subscript and whatever. So there might be some innovation and discovery there but I think I try to think of stuff on the B2B side that actually does sort of really crazy a la carte. I think about Zendesk is very flexible and you can kind of just add and subtract from your plan and they'll recharge you. I think HubSpot's pretty good about this as well. But maybe the ultimate example is like AWS where you can buy anyway and every item you can buy there's like four different matrices for how you can buy it. And that doesn't work in consumer almost at all because like you know you don't have a biz ops team that's going to. That's going to run the math for you. But. But yeah I do. I think there's something there David with that's going to be. I think subscriptions are great but they are very obtuse and that they often leave a lot of uncaptured value on the like edges of the like value whatever the demand price curves. And I think as we see more maturation we'll see just more of this. I mean we've seen it in a couple of companies that are very mature in the revenue which is Duolingo and Tinder is two great examples. They've already done this so it's a good opportunity for us as Rodycat.

Yeah the numbers we're not even numbers we're not even talking about here too are advertising is that you know, even though 2% are going to pay you can still capture value from that other 98% if you have a retentive product.

Yeah. Is there anybody in the in the B2B stable advertising putting ads in their SMB SaaS yet? I don't think the numbers support it but they do on consumer but maybe not what you're going to do for your prosumer app.

Well in interest of time let's rush through these next two but I do think they're really interesting North America and iOS really dominates spend. I think everybody kind of knew that but we were able to share the numbers the average realized LTV per download in North America. America in 14 days is four times the global average. I mean you can just see it in the chart. US just overshadows everything else. And even Android in the US overshadows iOS and the rest of the world. And so I think what we're seeing is that a lot of companies will just focus on iOS in the US first, but then as their business matures they have to start looking at these other opportunities, create that Android app, focus it on the US and then it's just kind of a progression of low hanging fruit of where to kind of go after that spend.

So I had an interesting discovery last week. I was looking at our mobile usage for our dashboard. Assuming like most in my experience this is a very, I'll expose my bias viewpoint. I was like, oh, most developers are probably using iOS right? I thought like 95% of our dashboard use this was going to be on iOS. I was shocked. 25% of our mobile usage for our RevenueCast B2B SaaS dashboard is 25% of it's Android mobile. So I think this is sort of outside of like the B2C like or building, building a business use case but thinking about, you know, even if you're just a B2B SaaS, that's not thinking about monetization on mobile. But like how do I build a product? Maybe we want an app or something like that. I think the world where you can just ship an iOS app is pretty much over. Like there's so many especially like especially probably in a business context and, and luckily there's also really good tools now like Flutter's really good, React Native's really well developed and those tools weren't so good. Maybe 10. But yeah, especially and then on the monetization side, you can't really not look at Android anymore. It's gotten big enough that you kind of have to, you have to mix.

It in and then the last slide is on Consumer Churn we talked about earlier that it is super high but resubscription rates are surprisingly high. So a lot of companies are just kind of embracing this, the HBOs of the world, you pay your 10 bucks a month while the show's active and then they make sure they've got the right email to get you back when, when the next, you know, season comes on board or that next hot show that you might want to watch. But then we, we've also seen a lot of companies kind of refocus their efforts away from monthly to annual specifically because of this. And if you do the math on like, you know, somebody you know subscribes for nine months, churns for three resubscribes. Sometimes it's easier to just offer them that annual discount. It looks a lot cheaper and then you get that annual rate. But you know, very different than, than the B2B SaaS is that, you know, you do see a lot of resubscription, so even is high, there's like opportunity to win folks back. Yeah.

And I think it's just a sign of, you know, it's, it's, there's more leverage in reactivating a Churn subscriber and this is true in B2B as well than in a lot. Maybe in a lot unless there's a total rip and replace or something. But especially in B2C where yeah, there's more leverage in reactivating somebody just because you've already paid the CAC once. Right. Like you've already got awareness, you've already got them signed up, they have an account, you now have a way to access them via marketing and messaging. And like, often people just the seasons of their lives change, right? Like maybe they need the app in the summer but not in the winter. Maybe it's hbo, their show is on. And so I've seen this in sort of later stage or mid stage consumer subscription setups. But I think this is true for anywhere where you have like a large consumer base is like you really got to spin up those automated marketing engines to make sure you're like consistently recapturing demand via like content or something that they can interact with to keep your brand present. Because like there is, I think unless they churn for some real product market fit, like the app did not do what they needed, a lot of times they just weren't using it enough. There's a lot of leverage in just like reminding them why they used it in the first place and getting them back on board. And I have to imagine that lesson probably applies to a lot of, a lot of SaaS as well. Or maybe the timing is just right for their business to actually implement it now, for example. So yeah, we've been dancing. This is kind of like a related to Churn number. But David, we've been talking about the churn on iOS or churn on mobile being really high and it's brutally high. Like David, Jason said, 25% per month is a lot worse than 5% for a lot of apps. Like, like 25% is not unusual. I don't know what the median is, David, if you have it off the top of your head. But it's.

Yeah, I mean the median one year retention on a monthly plan is something like 12%, 12 to 20% somewhere in the like.

Yeah, you got to reverse. You got to reverse compound that I guess. But to get the number but it's double digits of churn. And so that's why the first month.

Churn is like 30%.

Now again we go back to the if it's a prosumer use case, if it's something somebody's using every day, if it's mile iq, I don't know if that's still one of Microsoft big brands, but if it's Word or whatever like then your churn goes much, much, much lower. Right. And so those are the businesses I, I think we've seen really break out in this like kind of gray area between B2C and B2B.

All right, quick summary before we take questions. Consumer SaaS is massive. And there's opportunities to both in consumer SaaS prosumer and also serving consumer and prosumer SaaS via B2B tools like Revenuecat. Consumer SaaS does have a lot of drawbacks, but there's tons of benefits, especially scale. It's just so, so massive and growing so fast. Conversion to paid varies markedly by geography and category. So look at the opportunities that you're going to go after. And like Jason said, like the numbers got to work. It's all funnel. If it's 10%, that's amazing. But maybe you're bringing in fewer customers so you got to make the math work. North America is a great place to focus, but you're going to want to grow beyond that. And then consumer churn is high, but so are resubscriptions. So lean into the facts on the ground and find ways to win people back. And to that last point, there's also a lot of opportunity to just create new features. I mean apps are so innovative and like Jason was saying earlier, consumer moves so fast. Like those folks you lost early on. You can win back also with new features, not just by offering discounts or whatever. So last thing, you can download the full report. There's way more like nuance and quotes from industry insiders and it's like 60 pages or something. It's massive. So you can go to revenuecat.com report to read up on that a bit more.

Hey, can I, can I, can I jump ahead and just ask a few other questions from the report. I summarize it actually on Saster, I put the, just put the link in the chat for Folks, we'll figure it out for the podcast how to get it to you. One that was interesting because it's so a little bit inconsistent with what we're seeing in individual use cases. You looked across all your mobile apps and found found that pricing didn't go up, is that right?

Oh, like through that period, like people.

Ratcheting pricing points were stable year over year despite a lot of pricing increase. Not just in B2B, we see Google Workspace way up. I just got a massive price increase from Adobe today for my, for my, my subscription. Right. So it's interesting to me, if I read the data right, that you're not seeing aggregate price is go up.

I mean I think it might be a window on the data. Just I think we definitely did in, in 20, in 20 and 2122. Like when it, when inflation was like north of 10%, we definitely saw people like bumping a little bit, but it kind of cooled off pretty fast. Consumers are I think in a lot of ways much itchier to price increases than than B2B is. It's like B2B, you're more sophisticated. You probably understand like the cost of things. If it's a reasonable increase and whatnot and you're sort of expecting expect prices to go up in some, in some ways I think in B2C it's more often not the case and you can just basically guarantee you're going to lose a lot of users and they're just going to churn. Because it was already in a nice to have category. But I would be interested to look back. I don't know if we have the data handy, but I think the prior year, if it didn't show in the data, certainly.

You know what I'm slightly misreading. It's actually, there's actually two conclusions which are not inconsistent with each other, but at first seem inconsistent. Not one is that the most common price point stayed the same. So there's organic tiers for pricing. Right. Our classic supermarket 99 cent tiers are. We can mock them, but they're as true today as they were before. But it sounds like people are pushing up against them because you also. The average price is up 14%. Right. Even though the tiers are consistent. So it sounds like people are pushing whatever that 1999, 29, 99, 99, whatever the tier is is. But they're not trying to do anything clever by going beyond that. Unlike Google Workspace and others. Right. They're trying to stay at the classic price points.

It looks, yeah. I would imagine mostly in aggregate. Now our data is so big that you're probably going to just track the consumer price index, slash inflation. Overall developers are just going to realize their bottom lines are getting eaten up by costs and they're going to increase them, which I think to some degree is what happened in B2B as well. But I think people got greedy. And we're also like, this is an opportunity to drive margin expansion beyond just margin maintenance. Right.

I think part of what's reflected in those numbers too though is the blurring lines where prosumers are paying more. So the most common price points because across our entire user base of apps is very consumer focused. So that's where those, those, the most common price points stay the same. But then part of the reason that the average price went up is that we have more apps pushing those prosumer use cases. So a photo room charging 90 bucks a year versus like my side project weather app charging 40 bucks a year and scanner apps charging 20 bucks a year, whatever those numbers are. So I think that's a little bit of what we see as well. But I mean we did see quite a few price increases.

Yeah, I think it's just interesting that people. We did see this inflation, this 14% per your data. You have the real data. But, but they're not breaking the natural price points. They're rushing toward them. I think it sounds like.

Right.

Just one other. And then, then let me. I know, Go ahead. What's that? Sorry, Jacob, did I interrupt?

No, just go ahead, go ahead. Next question.

Oh, just one. Which I thought was very helpful to folks to see, to reinforce. I think maybe one of the top mistakes that, that folks make in startups, which is that 85.1% of the business mobile app trials activated in the first 24 hours. Hours. And I see way. Listen, I did it myself as a founder. I never thought about. I see way too many startups at 20, 30, 40 million don't actually know their activation rates or see like sub 80% in the first 60 days and you're just flushing your customers down the tube. Have you learned anything around best practices here from the customer base? Do you have any insights about how to maximize those activation rates?

I just say like the customer's never going to care as much about you or their problem as they do. The moment they say sign up. Right. Like that's, that's the moment they have the most pain. They found you. Your cold drink of water, don't blow it. Right. Like maximize that opportunity and that means good Onboarding that means making sure you're telling them, reiterating that you're going to solve their problem. If you can solve their problem, show them how you're going to solve. Don't let them get lost. I mean if the app doesn't do what it says it does and that you can't actually help them, then that's naturally good non activation but like really make sure. And this is especially true in consumer where you're often paying for that, for that opportunity to get somebody in and see it. You, you, you almost can't spend enough time on that onboarding experience. And then talking about trial starts like that, you know, in consumer where cash flows and, and you know, sort of capturing that moment are so important, getting that trial started in that first interaction. And the thing is it's counterintuitive because I think of a lot, lot of builders of things go like, oh, I don't want to force anything on my users. I don't want to pinch them too hard. Like, you know, I want to be like mindful that choke point. But the reality is like consumers, if they really don't want to pay, they're not going to pay. So don't feel like you're going to like, you know, you're scamming anybody, but just show them what they get, show them what's going to be and ask them to start a trial if they want your very good software. Right. And I think that works, that works fine too. In B2B when you're, you know, if you're an SMB motion, a PLG, like you can sign up and try it out. Like don't, don't put any, any you know, crazy gates. But also like make sure the commercials are understood. The last thing I want to do is like sign up, kind of get it half integrated. But then there's like the contact sales. If you want to like whatever. It's like no, just tell me, let me get started. Let me put a credit card in. I know at some point I'm going to contact sales if it's like something we're going to spend a lot of money on. But like don't put any gates and really like optimize that. You know, founders. I think if you're, if you're selling to a certain, you know, depending on what your solution does. If you're selling to founders and just from my personal experience, like we're so busy, like we are so like just trying to like put a fire out and like, like not communicating that you're going to put the fire out and here's how much it's going to cost in a minute. I'm just going to go like my classic objection, I'm going to write a Python script. Right. Like, I'm going to go do this another way if it doesn't, if it's not, if it's not obvious. So, yeah, just seizing the moment is what I always tell people. Just make sure you take advantage of that first day.

Yeah. I think a lot of consumer founders and myself included for years on the App Store feel like, like you don't want to be too aggressive with your paywall. Like, asking for money is like being aggressive. And I was just talking to a founder Monday who it's simple change. They, they, they. We were so scared to put their paywall in onboarding, but once they finally did it, because I was asking like, what, what's the biggest unlock you've seen in your business? He's like, honestly, it was when we finally just put our paywall in onboarding. And he said it led up to a 50% increase in revenue. And that has sustained like they've done all sorts of tests and they've increased revenue in other ways. But like that one thing, just moving the payroll into onboarding, creating the great experience of onboarding and then asking for money, like that's like pretty much the number one tip for anybody who's not doing it.

A hungry, a hungry person wanders into your restaurant. David, you know, don't be shy about the fact you sell food. You know what I mean? Like, just exactly. Just be honest. And I think it's a largely a psychological thing for a lot of people who are a little bit embarrassed at what they make that, you know, whatever. But yeah, to get over it, right. It's like sales, like knocking on doors. You just got to get over it, take a deep breath and tell people to pay for what you built.

Yep.

We have a lot of good questions.

Thanks for the great questions, Jason. Yeah. We're going to move on to some questions in the chat. So let's start first with some specifics about some with the report. So I'm going to pass it over to Katie if you want to jump in. You have a question about churning.

Hey, y'.

All.

Great conversation today. Impressive data. I'm curious if we can talk a little bit about, like, what data you're.

Seeing about customer Churn.

Because of course, if Churn's increasing, it doesn't really matter if our subscription close rate is increasing. Right. So I'm Just curious if you can.

Talk a little bit about the data that you've discovered on that. Yeah, I don't know if we have any like year over year trends. There might be some buried in the report. Um, I'll say you're always, you're always going to be trading off Activation and churn, right? So like off. Not always, but often, you know, if you let more people into the funnel, you're going to increase your Churn rate. And ideally what you want to find is some leverage there where like increasing activation 10% only increases churn, you know, 5% in the correct relative comparison. But, but yeah, I mean beyond that, I don't know if there's, if there's like underlying trends or anything like this. Like, you know, if you see, if you see a spike in Churn Churn, it's usually some sort of exogenous thing like either the market shifted or your products losing footing in the marketplace. You know, absent of something, something else. I always feel like, I always feel like unless it's a payments issue, which can happen, like Churn is a pretty good indication of truly like your customer's affinity for us for a set of customers. I don't know if that answered your question. I don't know David, if, you know there's a, if there's any like deeper cuts on the Churn D data.

Yeah, I was just pulling that up and, and yeah, actually it's 120 page.

Report, so it's, it's going up 50% year over year.

I was gonna say you were underselling it, David, earlier.

Yeah, I, I for, yeah, it's a lot.

Next year it's 400 pages. So prepare.

The first 60 are kind of like the primary kind of part or actually first like 70 are the kind of primary part of the report. And then we do breakdowns by category and that, you know, which we've gotten requests for for years. But anyways, yeah, in the report, first renewal, first renewal rates did drop in 2023 across all durations. So. So this was a relative drop. So. But we did see annual subscriptions, a median drop in first renewal was 13%. For monthly it was 3%, for weekly was 6%. So we have seen a drop. I think there's a lot of factors there.

I don't think we have a theory though as to a singular cause. Right.

Yeah, there's probably like 10 different macros.

There's also, as competition increases, Churn will naturally increase as well. And we've just seen a lot of new Apps coming into the space and.

Then as you get more aggressive with your paywall, which is what we saw a lot of our customers do, aggressive with your paywall, increased activation decrease churn in 2023, it's like you're going to, to. As you activate more users who might not be a perfect product market fit or whatever, then you're going to see that increase in churn. So yeah, there a lot of factors but we, we do have numbers around increase in churn.

Cool, great. Thanks guys.

Thank you. I've never had live callers before. It feels very official. David, we should try this format.

Well, next up we have Corey. Corey, I go. You can go ahead and go off mute.

Yep.

I appreciate you guys taking the question. So regarding this is really a question about monthly versus annual subscriptions. @ our business we do monthly. I've been pushed internally and hear a lot of talk about going to annual. But I know like I, I pay Netflix and I pay them every month and I've been paying them for 10 years and I don't ever think about it because it's just a small bill that I get every, every month. HubSpot on the other hand, you know, once a year we have this big scramble meeting trying to figure out is this the right tool, are we on the right subscription? And I tend to think it's almost better to be to have a monthly subscription that you just pay every month that it is, you know, small enough that it, it doesn't break the bank and, and people just continue to pay. But what is your data set?

Oh, what does the data say? I was gonna say I have, I have, I have made up anecdotes I can do. But like the data I. I'll as. As David's probably, probably dig in for some data here. One, one thing I can say is that in consumer pulling for the annual. This might be true in B2B depending on the financial condition of your business. Sometimes pushing for annual can just be like a pure cash flow, like financial engineering thing. You just want. You need that cash up front. So it may, you may be right that it and I think a lot of cases the annual payment has, has like custom, you know, negative customer. Yeah, it's not great. Customers don't love it. But it might be the right decision for your business depending on your cash flow constraints. Constraints and things like that. But yeah, I think there's a real theory that I'll shout out to Jason something he said because this came up in a board meeting. We were debating how hard do we push customers on paying us for a year up front because yeah, you read. Oh, it's the right thing to do. It's like public companies, they all want free cash flow. Yeah, yeah, yeah. And Jason, I think was just like, you're not big enough, we're sneaky giant, but you're not big enough to tell customers how to pay you yet. Right. And so I, we've, we've since internally really rotated on just letting the customer pay how they they want to pay. So I'd say if that would be my like non. My intuitive answer would be like if your customers want to do monthly and you feel intuitively that's good, do that. If like they want to pay annual, I would let them do that. And then until you have some really strong evidence that one of those things is strongly preferred. I always feel like as a company, as a provider of a service, we should be as accommodating to our customers as possible. Until we're big enough that we have enough market leverage to not be nice to customers, I guess. I don't know, I feel like that's something you should do forever.

But for what it's worth, I just put up some data in the chat. This is a little bit data, but I looked at about 10 of the more low end leaders from Zoom to Expensify to freshworks to smartsheet. Input the data when I looked at it and what I actually learned from this analysis was what actually you would expect. I learned this from smartsheet. Smartsheet is sort of an asana and everyone competitor. They actually started with me in the old days days but their niche became relatively complex implementations of workflows so they abandoned monthly because the onboard it was terrible if you didn't commit for a year. Okay, so that was my aha moment. That's the, that's what it all boils down to. Too many VCs on social media tell you to go annual for cash flow. They don't know what they're talking about and have never built a business because it's fake. If you, if fewer customers take your money, money, but more of them, but they a subset give you annual, like you don't come out ahead, you lose. You lose because those customers bounce off your website. Right. So here's the until you're like really big like Smartsheet, the simplest a B test anyone can run is to have a toggle between monthly and annual. Set it at 20% like the world has done since the 18th century for business software and see what Happens and most of you are going to see 20% ish take annual. Right. And if you force it because your VCs tell you to be careful. The other reason people do it, one of them is the smartsheet reason, which is there's change management. Right. Even for SMBs. The other reason true consumer folks do it, and this is folks, is to hide churn.

Yeah. Right.

And so hopefully no one watching this has that sort of. But if your churn exceeds 20 or 30% a year, year then you should use even dark arts and gray arts to get people to go annual because it's brutal. Right. And so there's some dark arts and gray arts out there. But B2B shouldn't be doing that. Right? You should do it. Look at all this data, what the customer wants. Run an A B test even if you don't know how to with the toggle. Right. But don't listen to the VCs. It does not create cash flow. And the other thing is if the check size is too high and you have to invoice people, it often has a negative impact on cash flow. It's great if you can. If the app store will take a $500, I don't know what even the limit is these days. 5,000 or 10,000, it's in a thousand. Invoice them and it's net 60. And then they don't pay and then you, your finance team has to follow up. You could be four, three to four months before you get the magic cash flow.

Compared to credit cards. Credit cards are kind of great. Like we were a long time on revenuecat, just pure stripe, credit card, whatever. And I got of a lot loved it because it was just like it worked or it didn't.

It's hard for a million dollar deal.

Yeah.

So this is data from 2023. We unfortunately did not replicate this slide for the 2024 report. But to Jason's point, in, in like consumer, consumer, the annuals do work, but I think it really does have a lot to do with price point.

And I think even the selection criteria, like you're selecting for like more committed, lower cash sensitive users. Right. That go on annual and so they have higher retention. But just to Jason's point, it's like if you're not taking people's money, you're not making more money.

Right.

It's also a price point thing that, you know, if it's 9.99amonth versus $30 a year, our data skews, you know, and Jason was bringing up Those most common price points, I think our most common price point was like 29.99 for an annual plan. And so 30 bucks, that's nothing. And that's why you see this number being really higher for individual items lapse and then especially where the annual price starts pushing $100, that's where especially in consumer it does start to become like oh wow, $120 out of my budget this month is actually a lot of money versus that, you know, $9 a month or whatever the, the monthly price.

Point is on the consumer side. I don't know any consumers that do accrual based personal accounting. So like the, the annual really just hits hard.

It does.

Awesome. Okay, we have another question up from Sean. I'm going to bring Sean up. He has some questions about app building. Sean, passing over to you.

Yes. Longtime user of Revenue Cat. In fact when you guys first launched we were one of the first customers in there.

Oh, thank you so much.

I love what you guys have done. So our strategy was we had a physical consumer product people could purchase with a companion applied app and then with that app there was upgrade options for monthly and annual subscriptions. We found that using that model we could offset customer acquisition with the physical product. And then the app conversion rates were exceptionally high as well as retention rates were exceptionally high. Could you talk a little bit about IoT style apps which was not really covered in your presentation and is that an anomaly that we had or is it something that is fairly common in the IoT physical product plus companion app with subscription basis?

I would say yeah, it's fairly common. I mean if you just think about the physics of it, right. Somebody's going to buy a thing and then they're being asked to put up a little bit extra to you know, to get unlock more functionality. It's usually a no brainer because they have some sunk cost and generally the physical thing will like out price the software component and then you're right. It's a great way to build margin into these businesses and we've seen them. I don't know, I hope they're okay. Sharing Bird Buddy is another one of our customers that I really think is really cool. We have a lot of these like software bundled with a hardware component. Um, I, I, I don't know if this is particularly interesting but like there are a lot of like edge cases here with how Apple. This is one of those cases where Apple's treatment of this particular category can be a little tricky sometimes because I think there's an exception for like, if it's fully to unlock stuff like Tesla's Autopilot, for example, you can buy that in the app and you don't have to use iap, which is really interesting cause like, how does that differentiate from like you're unlocking some features in, you know, whatever your IoT paired device is. And I think the line is drawn on it being like mostly software in the device or something. I don't. Maybe, David, you might have a better.

Sense of the rule is that if, if the primary value is software, then then you have to have a in app purchase and then. But if the primary value is this is the hardware and software, just the Tesla hardware, the Tesla, like, you know, I have an OURA ring, you know, they're not required to use IP. So we didn't include IoT in the report specifically because our data is a little skewed. And it's like we have some part of that market, but not all of that market because of those intricacies around Apple's rules around that. But I mean, just broadly, I mean that's what we see is like high intent audiences. So somebody who's bought hardware. I saw this in my own app recently. I was on a podcast and saw a ton of traffic come in from that podcast and those users converted at 20% versus like then. Since then I've been watching the data and they're converting at 5%. And so intent is just so huge. And so I think that's what you're seeing and it's not necessarily normal or scalable or scalable, but it's normal in the sense that if you're bringing those really high intent people, people who have the hardware and then the unlock is so compelling, then you are going to see it apps where the unlock is less compelling, then you're not going to see it as high. And this is one of the things we talked about a lot around the report is that everybody's funnel is so different and so it's hard to draw too many generalities around that. And then like Jacob was saying, just because you have these high conversions doesn't mean you're going to be able to scale.

Yeah, I was going to say that's the thing. You may have, you might have really high retention and really high, but it might not matter because like you're just selecting a very Sam, you know what I mean? That might not make that business super scalable. But I think just to summarize, you've sounds like you've discovered this is, is pairing this onto an IoT or some sort of physical thing can be a really good way to increase margin and just like stickiness and usefulness. I use the bird buddy example again like the. I'm sure my mom uses her bird buddy. I got her for Mother's Day way more because the app is good and she has a subscription and she gets notifications and now has her little birdhouse or whatever in the app and all those things. So I do think it's a, it's a, it's a really good way to like to improve your, your, your physical.

Business and if there, if there is software value that can be had without the hardware that can be an expansion business to bring in more of that kind of mass market and have more opportunities.

Yeah. Bridge to an actual funnel like an actual.

That's what we found. We.

Yeah.

Hardware plus software in our case physical product plus software. Very, very hard and demanding on the product side, not on the software side. So y did allow us to capture customer information so that we could market to them additional things which if you're selling something on Amazon, which shields the buyer information from you. A natural avenue. Thank you very much. Huge fan of revenue Cat.

Keep going.

You made our life better.

I'm blushing. Thank you.

Thank you so much, Sean. We love when we have a fan in the house. So thank you guys. Well, thank you guys both for an amazing session. It we. So many great questions, comments in the. In the chat. So many great questions. Everyone needs to go Download the full 120 page report. Amazing insights. The link is down below and Jason's great recap post is in the chat as well. We hope that everyone can join us next week again for workshop Wednesday. We have a very tactical session lined up with Rick Nucci. He's the co founder and CEO of Guru and he's going to be doing a session about how to get your company all hands meeting right. So very tactical, very practical. Something we can.

Jacob, you should join.

It'll be lots of great prep for you. But Jacob, David, thank you so much and we appreciate the time and all the effort into the. The great annual report. We're already looking forward to 2025.

Thank you so much for having us. It was a lot of fun.

Thank you.

Yeah, thanks everyone. See you next week.