During an economic downturn, everything is impacted, from the cost of food and fuel to consumers' discretionary spending budgets. As discretionary spending patterns shift, app monetization will be affected. The apps that can succeed during an economic downturn differ from those that thrive in upswings.
As frivolous spending from users and investors dries up, cockroaches become valuable, not unicorns.
Subscription apps that provide high value to a committed user base are hard to kill. Adjusting your app's mobile monetization to match the economic conditions will help you and your users weather the storm. While there is talk of subscription fatigue, data shows a continued evolution towards use-based subscriptions.
Venture capitalists are now looking for revenue and coveted hockey stick growth. A solid and elegant mobile monetization strategy is key to providing the required payment to continue to woo investors while you seek long-term growth.
Mobile Monetization Strategies
Mobile monetization strategies need to shift to account for economic conditions.
Think like your users as you calculate the impact of inflation.
Can you be generous with your offering and promotions to drive a higher sales volume?
Consider how hiring freezes and the most recent jobs report will impact your user base. Will this decrease their budget? Could it increase their session time? Can you offer a steeper discount on volume purchases? Is it possible to provide an introductory rate for your subscription offering?
Answers to these questions will vary based on the unique user bases of individual apps. Additionally, unique cohorts within a single app's user base can answer these questions differently.
Verticals Expected to Perform Well
Subscriptions in verticals that help people navigate tough times will have staying power and perform better than verticals with other focuses. Apps with subscriptions focused on education, the gig economy, FinTech, HealthTech, and entertainment will experience better performance in this market. Let's examine each vertical and why it's expected to perform well.
Education becomes a more significant focus as people are trying to level up or change the role or industry they work in. Subscription apps help people find new positions or grow their networks, likeLinkedIn Learning, Coursera, and BumbleBizz. There will also be a higher demand for online education apps that help children K-12 to learn core STEM and college prep skills as parents look for cheaper alternatives to offline tutoring centers. Apps like Tynker, Quizlet, and Elite are well positioned in this market.
While budgets are tight, more people are looking to increase money coming in via gigs and community-based monetization. Gig apps with subscriptions that provide work like DoorDash'sDashPass, Lyft Pink, and Instacart+ will be positioned well as desired by consumers and people looking to make extra money.
Community-based apps that help creators monetize, like Patreon and Twitch, help users create their revenue streams. As more and more people become content creators, community-based business models are becoming a widespread monetization strategy. Twitch recently increased the generosity of its offering by allowing multi-platform streaming.
We will also see the increased popularity of fintech apps. These apps help people save money with deals and discounts and budget better. Apps that can ensure users better control their income and expenses, such as You Need A Budget (YNAB), will see growing success in this market.
Healthtech apps help people get more access to content and services that help them with mental health and wellness. Businesses that aim to help reduce stress and anxiety during uncertain times will see an influx of users. Apps that help connect patients with medical providers, such as Lyra and One Medical, will see more downloads. Meditation apps like Calm and Headspace offering subscriptions to on-demand guided meditations will see an increase in demand as people look to navigate uncertain times.
Finally, we will see success for apps and services that help people escape and forget about inflation, such as Nintendo Online or Apple Arcade. Thepower of subscription models still holds in gaming. As seen by Netflix's first global subscriber loss in over ten years, there is room for new and scrappy video streaming services to enter the video entertainment space.
Netflix's recent dip in earnings shows that users in the market are hungry for new content, and there is space for scrappy competitors to take subscribers away from the established streaming giants. Streaming services are attempting to step into this space with various strategies.
Strategies for All Verticals
The first cut made by many consumers when faced with budgetary constraints is their subscriptions. The subscription services most likely to survive this climate are the ones with low price points and high-value offerings. Adding a lower price point to your subscription can help retain users who would have otherwise churned.
Increasing your app's value will incentivize users to stick around.
When adjusting pricing, use the 4-Step Pricing Framework from First Round. What was optimal at 10,000 users won't be optimal at 100,000. Identifying a key user segment and applicable levers will help you make sustainable changes as you scale. Be generous when your unit economics allow for it.
Subscription-based businesses that have additional monetization through microtransactions are a strong bet as it's easier for users to justify smaller purchases. Digiday reports that podcasters provideexclusive and early access content alongside subscriptions to help boost subscriber retention and joins. Offering microtransactions or exclusive content alongside your subscription will help capture more revenue. This is a best practice for mobile app monetization, no matter the economic conditions.
Freemium business models that include a free version and paid upgrades will perform well. As users have more time, they will test out free apps and eventually convert to paying users as they become immersed in the app. Securing users will set your app up for success as the economy recovers and discretionary budgets return.
Apps should lean on advertising options to keep entry price points low.
Advertising will allow you to provide value to your users at a low cost while bringing in that much-needed revenue. Netflix is exploring ad-supported subscriptions at the $7 per month price point. Keep in mind that the mobile advertising landscape has changed in recent years. Be sure to Update Your Subscription Monetization Strategy to Account for IDFA Changes.
Adjusting the mobile monetization strategy for your app during an economic downturn will help you retain payers and increase your staying power. Think like your users and work with your internal teams to make swift adjustments to match your monetization strategy to the economic conditions. Be ready to make adjustments again when the economic conditions improve.
This article was co-authored by Lomit Patel and Jenny Pollock.