Monetization and Payment Models
Continuing our series on mobile app publishing, with a focus on monetization and payment models.
Watch below to hear how we navigated this step of the process for a video chat app that connected retired NFL players to their fans.
Monetization & Payment Models
00:00:01:05 - 00:00:19:17
One of the most challenging aspects of publishing a mobile app are monetization and payment models. So in this episode, we're going to dive right into the ins and outs, things to look out for. What we've seen in the past, and let's just get right into it.
Fortnite & Epic Games
00:00:19:20 - 00:00:47:19
All right. Welcome to episode three. This is monetization and payment models for the App Store or what we typically call in-app purchasing. Around the 2020 timeframe, the makers of Fortnite, Epic Games, got really upset that Apple was taking 30% of their revenue from every license they sold for the app. So they started exploring, outside of app monetization models where they could basically charge fees.
See A Star
00:00:47:21 - 00:01:16:13
And so, Apple famously booted them from the App Store, which triggered a lawsuit. And it went on for years. And the whole time this was going on, we had a client that was doing this interesting project, was a pilot project where they were connecting NFL superfans with retired players from the NFL. And we started with the Minnesota Vikings, and we did this thing called See a Star and they had a model where, you know, we built for them a system where you could video chat with like Chuck Foreman.
In-App Purchasing
00:01:16:13 - 00:01:39:08
Right. And you know, all the NFL or the Vikings greats and we were trying to figure out how do you bill for that? And our model was complicated because we were taking cash from the consumer and then distributing it out to the players, issuing 1099’s and all that. And we ended up doing it with Stripe. It was kind of a cool system, but we then immediately ran into the whole in-app purchase minefield.
Token Model
00:01:39:10 - 00:02:00:18
And, at the time, because the landscape was shifting, because of the whole Fortnite thing and Epic Games, we opted for a token model. So you could basically buy tokens on a website, you could buy them on the app, or you could do them through the in-app purchase model on the phone. And then the tokens would be converted into minutes and you could chat and blah, blah, blah.
Three Types of Payment Models
00:02:00:18 - 00:02:20:07
And it just got really complicated. But that was one way to kind of get around it. So let me talk about the three basic things you have to look out for, when you're doing in-app purchase. And I'm, I'm going to kind of read off this list here a little bit so I get this right. So number one are digital goods and services, apps and subscriptions.
#1: Digital Goods & Services
00:02:20:09 - 00:02:42:28
Basically you're selling stuff that comes over the phone. Maybe you're unlocking features in the app. You're unlocking some kind of back end processing that's going on or processing of information or whatever it'll be. But it's a digital goods and service, pretty much. If you're going to do that on the iPhone, you are going to have to, you know, eat either the 15 or 30% commission fee that Apple charges for that.
App Store Tendencies
00:02:43:01 - 00:03:02:14
And Google does a very similar thing with a Google Play billing system. One thing you'll find when you go into this is that even though Apple you know, sometimes Apple does something first or Google does something first, they tend to follow each other in lockstep in terms of their policies and things go on. So digital goods and services, you are pretty much going to have to go through the App Store.
#2: Physical Products & Services
00:03:02:15 - 00:03:22:28
You're going to have to eat the commission fee. And it is what it is. The second item in here are physical products and services. So you are I don't know, you're selling, t shirts or tennis shoes or whatever. It'll be through an app. And Apple and Google are a little bit, a little bit different there.
Our Experience
00:03:23:00 - 00:03:53:02
So purchase of physical goods and services are exempt from Apple's in-app purchase requirement. In fact, Apple forbids using its in-app purchase for tangible goods or real world services, and Google is very similar. They limit in-app billing to digital content only, so Play Store billing cannot be used for physical product sales. When we ran into this recently with a customer who's selling lumber right in the App Store, guys, we're looking at it like we were trying to bypass the in-app purchase, and it's anyway, whatever.
#3: Ticketing & In-Person Events
00:03:53:04 - 00:04:18:22
So apps that facilitate e-commerce for physical items or services, online shopping, to booking real world service like a taxi or a hotel, they have to handle payment through external means and there's lots of payment processors. There’s Square, there’s Stripe, whatever. Ticketing, number three is ticketing and in-person event purchases. So with iOS payments for in-person events or experiences, think concert tickets, sports events, maybe live classes you attend at a venue.
App Store Differences
00:04:18:24 - 00:04:37:19
App store does not take a cut of real world event ticket sales, but you are allowed to use the in-app, you know that basically, the in-app purchasing or billing system to do that kind of thing, which is kind of nice, that they did that. Google is different in this regard. Google's payment policy draws a similar line for live events.
The European Union
00:04:37:19 - 00:04:59:03
However, Google Play's billing system cannot be used, must not be used to sell tickets to in-person events. I will tell you, too, that there's a lot going on in this space. There is all this stuff that went on last year with European Union and forcing Apple to support third party app stores and whatnot, and the rules are constantly changing.
Everchanging Policies
00:04:59:10 - 00:05:15:24
And so one thing you'll find when you're going to build your app that's going to support either the purchase of a digital product and service or a physical product or an event, that kind of thing. Always be careful to check the App Store policy and see what the current stats are. Or you can do what most people do.
Pivoting After Rejection
00:05:15:24 - 00:05:23:27
They just build the app and they throw it over the reviewers, and then they'll get rejected and they pivot from there anyway. All right. Thanks for your time. See you next week.
End Note
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Ken Krutsch is Founder & President of KRUTSCH, a digital product design firm. From concept to delivery, KRUTSCH specializes in designing consumer and commercial applications. We generate and execute ideas, finding opportunities for our clients to innovate. Because solving the right problem builds careers, organizations, and professional relationships.
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