Annual subscriptions for apps: The pros and cons

From a brand side, the idea of annual subscriptions sounds kind of dreamy. You’ll pay a year upfront for my app? Even though you’ve only used it for a week? You are too kind! Imagine if we applied this thinking to most of our physical products. Would you pay a year upfront for groceries? Would you pay for a year’s worth of oat lattes from your local cafe? Although the second sounds tempting, when it comes to physical products, we usually see monthly subscriptions at most.

Yet for apps, annual subscriptions make up 41.43% of all app subscriptions (SOSA Report 2025). We consider them the pot of gold at the end of the rainbow. If you ask any app marketer for their benefits, I’m sure they’ll dreamily list off all the joys of annual subscriptions, from higher Lifetime Value (LTV) to lower churn. There is so much love for those annual subscribers.

But it’s time to take off the rose-tinted glasses for annual subscriptions. There are risks with annual subscriptions that we can’t overlook. I’m guilty of this myself, as I even wrote an article about how to increase your annual subscription uptake. And while they may add value for some brands, it isn’t a one-size-fits-all approach when it comes to apps.

Let’s stay in our dream world a little longer and first focus on the value that annual subscriptions can bring. We’ll discuss some lesser-known benefits before taking off those rose-tinted glasses and looking at the flip side. We will also discuss how to know if you should offer an annual subscription. Spoiler alert: they’re not for everyone.

What are the benefits of annual subscriptions?

Imagine you have thirty seconds to share the value of annual subscriptions. Your list would probably look something like this:

• Higher LTV due to a commitment of a year
• Lower churn rates as customers are already committed to a year vs. monthly, where they have a moment each month to cancel
• Customers are often more invested in using the app as they’ve paid for it upfront
• Better value for customers as they get a discount
• Users are paying upfront, which reduces the payback period and allows you to reinvest that in your business, improving cash flow

Phew, app marketers talk fast. But these are all important benefits, and I certainly don’t want to diminish them. The lowered churn rate is backed up by the data from the State of Subscription App report. If we look at the average retention year over year:

	Monthly	Weekly	Yearly
Y1 retention year over year	Average	Average	Average
2023	13.0%	3.6%	29.8%
2024	13.8%	2.7%	33.9%

We see that only 13.8% of monthly subscribers are still active after a year, vs. 33.9% for annual subscriptions. Those are some pretty damning figures.

But these are just the most obvious benefits, the ones that a marketer could recite in a 30-second panic. Let’s dig a little deeper into the lesser-known advantages of annual subscriptions.

For customers: additional benefits of annual subscriptions 

From the customer perspective, annual subscriptions allow for a longer time for results and reduce subscription fatigue.

The first point is relevant for apps that take a while to show results. With one meditation session or one workout, you might feel good and post it on your Instagram Story, but you won’t really know if it’s working. You won’t look down and find a six-pack just yet—I wish! It takes weeks, if not months, to feel the full benefit of it. Meaning that if you offer it monthly, they may churn before they feel the benefits. They think your app isn’t working when you know they just need a little more time.

This was an issue back when I worked at Heights, a brain supplement. We knew that vitamins take several months to begin taking effect. However, individuals would cancel their subscriptions after a month or two, citing that there were no differences. An annual subscription would allow them to take their vitamins long enough to reap all the rewards and become fans of the product.

The second benefit is lower subscription fatigue, which occurs when consumers feel overwhelmed by the number of subscription services they have. With more and more subscription apps and products out there, subscription fatigue is a real challenge in the app market. Not seeing charges every month reduces customers’ debate about whether to keep this app. You kind of slide under the radar longer, hopefully winning them over in the meantime.

For brands: additional benefits from annual subscriptions

On the company side of things, lesser-known benefits include the ability to forecast revenue. Your monthly revenue is less varied so that you can budget more effectively. 

A final benefit is that it can also reduce support and payment issues. The State of Subscription App report showed that billing errors account for 28.2% of cancelations on Google Play and 15.1% on the App Store. That’s a lot of lost subscribers due to billing issues. With only one payment, that risk should, in theory, be reduced. This also reduces the strain on your customer care.

However, if it were that easy, we wouldn’t consider whether you should have an annual subscription. Nothing comes without downsides, annual subscriptions included.

Where do annual subscriptions let you down?

The other day, I had an unexpected charge from the Apple Store. Naturally, I immediately thought I was the victim of fraud—don’t we all?

 Now, my Apple account is connected to an old email address (I’m talking Hotmail-level old), so I had to go digging. It turned out that the charge was for an annual app subscription. 

Thankfully, I use this app quite frequently. However, for some users, this can be a “Nope, not paying for that” moment, which results in disputed charges and higher refund rates—something no company wants.  

Another issue is around tiers. When it comes to web, it’s quite easy to show multiple tiers and monthly vs annual pricing. For example, Notion, the project management app, does this really well with its little toggle:

You have the space to see the different tiers, plus a toggle to compare. Now, on mobile, this experience already declines because you have to scroll up and down to change between monthly and annual:

So how do they do it in app? They don’t it seems, their payment seems to be purely web-to-app. It’s more complex for apps that do offer both tiers and monthly/annual. It isn’t an option for all to offer only web-to-app. 

What about apps that offer both or only in-app purchases? How do they solve this? They keep the tiers separately and show the options per tier. Like Duolingo, the language learning app. This is their Super (one of their tiers) paywall:

This is their Max (their highest tier) paywall:

Did you notice that their Max option doesn’t offer a monthly payment option? From a user perspective, I’ve used Duolingo on and off for years (haven’t we all?), and I still don’t really understand exactly the difference between Super and the newer Max tier, because it’s two separate comparison charts in each flow:

I’m sure Duolingo upsells from Super to Max at some point, but the whole flow feels clunkier, especially with the addition of family plans. I believe that you have to choose your priority: push for annuals or higher tiers. 

Now, as much as I love the quick reward of an upfront payment with an annual subscription, you could be leaving a lot of money on the table by not pushing users to upgrade to a higher tier. With an annual subscription, you are stuck at a fixed price with annual billing, so any additional efforts to push for new tiers or pay more for extra features can be trickier.

The other consideration is that if you push hard on an annual subscription, you might miss users who are currently on the fence about whether to continue using you. Monthly subscriptions typically see higher conversion rates (especially if you only offer an annual option and no monthly). The higher cost of an annual subscription can make it more difficult to convert customers, resulting in a longer sales cycle and higher cost of acquisition. 

Finally, from a retention perspective, it is also harder to understand what drives retention. If you only have annual, you might have a false sense of security because, from SOSA, it seems the majority cancel in the first and last month of the annual subscription:

So, anything you are testing around months 2-11 to improve retention will be harder to measure the impact of unless you have a massive dataset. Annuals can also give an artificial feeling of low churn. We saw this at Heights: the monthly churn rate dropped immediately with the introduction of quarterly and annual plans, but it didn’t mean we were necessarily doing better. 

Finally there are certain industries where annual subscriptions are either offered less or just not as popular. Here are the shares of subscriptions sold from the State of Subscription Apps report:

Share of subscriptions sold – By category	Weekly	Monthly	Yearly	Other
Business	44.65%	34.42%	20.71%	0.22%
Education	5.26%	33.80%	55.99%	4.94%
Gaming	77.87%	16.27%	5.72%	0.13%
Health & Fitness	4.47%	23.41%	66.64%	5.48%
Media & Entertainment	22.86%	45.35%	31.01%	0.78%
Photo & Video	38.78%	17.75%	43.35%	0.12%
Productivity	19.13%	37.67%	42.89%	0.30%
Shopping	20.90%	51.25%	27.33%	0.52%
Social & Lifestyle	46.88%	28.89%	21.90%	2.33%
Travel	5.33%	25.30%	65.07%	4.30%
Utilities	36.08%	24.24%	38.96%	0.72%
Overall	27.02%	29.75%	41.43%	1.79%

SOAS Data: Variation in weekly, monthly and annual subscriptions per category

Most notable is the Gaming category, with only 5.72% of subscriptions being annual ones. Business (20.71%) and Social & Lifestyle (21.90%) are lower than the averages across the categories, with 38.42% buying an annual subscription.

When should you offer an annual subscription?

Despite the message of this entire article, I’m definitely not set against annual subscriptions. However, I believe you should consider if they are right for you. There are a few cases where they make a lot of sense:

1. If your app has high long-term retention and naturally leans towards longer-term retention, e.g., fitness apps, educational apps
2. If you can offer a significant value-add for annuals, e.g., additional content, exclusive bonuses, a strong discount
3. If you are B2B, as annual plans are more industry-standard in this sector

But here are cases where I would recommend avoiding an annual subscription option:

1. Where the users’ Job to be Done may be shorter than a year (e.g., they only need your app for a shorter period of time)
2. Your users’ lifestyle/needs are constantly changing, meaning they may need to adjust/degrade their plan
3. Upsells or tiers are a key part of your pricing strategy
4. Your target audience is very price-sensitive and/or may not be able to afford an annual upfront payment
5. It doesn’t make sense for your specific industry, take the example of gaming, which has a very low uptake of annual subscriptions
6. You aren’t sure you have product-market fit and strong retention yet, so you need the data and insights quicker to see if it’s working
7. Your app is expected to change and adjust a lot over the coming year
8. You are seeing high refund rates for annual plans, in which case, you again want to focus on that retention first

The first two reasons may result in the fifth and sixth reasons—a kind of ‘Chicken or the Egg’ scenario. I love Formula 1 and have subscribed to an F1 app, but I hated the idea of the annual subscription because for three to four months a year, there were no races, so the app added zero value for me. So, the yearly offering at about the cost of ten months wasn’t worth it for me and would just frustrate me.

All in all, I believe offering an annual subscription shouldn’t be an industry standard but instead evaluated on a case-by-case basis. Early-stage startups shouldn’t be too quick to offer annual subscriptions as they need that retention data and will also evolve a lot. Their apps are often unrecognizable after a year (in a good way). 

As mentioned, there are other cases, from industry-specific to audience-specific, where offering annual subscriptions just might not make sense. So don’t assume annual subscriptions are right for your brand; find out.