Experts predict what’s going to happen with subscription apps in 2024
Innovation through AI, strategic approaches to user retention, and adaptation to regulatory changes are common themes.
Peter Meinertzhagen
The annual RevenueCat State of Subscriptions report delivers benchmarks from the most extensive collection of data on global subscription app performance. With the 2024 edition on the horizon, we’re excited to offer a preview featuring insights from our guest expert contributors.
This blog will present in full our experts’ forecasts for subscription apps, derived directly from our data. Their analyses address everything from AI’s emerging role and effective strategies for keeping users engaged to the challenges of adapting to new regulations.
Common themes from this year’s predictions
A lot of ground is covered in these predictions. However, there are three big themes that stand out.
Integration and innovation through AI
Of course, artificial intelligence (AI) is one of them! A recurring theme across multiple predictions is the pivotal role of AI in enhancing app functionalities, marketing, and user engagement. Experts like Jenny Kay Pollock and Phil Carter emphasize AI’s ability to enhance the app experience, from generative features that boost user engagement to AI-enhanced CRM tools that offer hyper-personalized messaging. This trend underscores the opportunity for subscription apps to incorporate AI innovations to stay competitive (and, in some cases, relevant).
Strategic focus on user retention and engagement
Eric Crowley’s insights on focusing on “Locals” over “Tourists” and the emphasis on more personalized user experiences, as mentioned by Andy Carvell, indicate a shift towards strategies aimed at retaining and engaging a core user base. This approach involves identifying and nurturing loyal users who find genuine value in the app, rather than solely focusing on broad acquisition tactics. This theme is further supported by suggestions for optimizing onboarding processes and paywall personalization to improve conversion and retention rates.
Adaptation to economic and regulatory changes
Predictions also cover how apps must adapt to economic challenges and changing regulations. Jenny Kay Pollock’s mention of experimenting with third-party app stores and Thomas Petit’s note on the potential for sideloading and third-party payment processors reflect a broader trend of seeking alternative revenue models and distribution channels. However, as Thomas notes, “sideloading and sales outside of IAP will remain only a scalable option for a minority of apps”. Time will tell.
📚Further reading: Many of these predictions were written before Apple unveiled their response to the EU’s Digital Markets Act. And while the notion that there’s potential to be had from the new options available to developers is still true, the opportunity-space is more narrow than we could have predicted. To find out more about these changes and what they mean, read our guide to Apple’s App Store DMA changes.
AI’s impact and strategic shifts: Jenny Kay Pollock, mobile app expert and founder of Women and AI
- Generative AI will continue to supercharge the app experience. AI-centric features will boost user engagement. A great example of this is Duolingo’s Max subscription, a learning experience powered by ChatGPT 4.0.
- We’ll continue to see spend stagnate due to the global economic landscape. Apps with strong value propositions and compelling engagement loops will capture a larger share of the market.
- Due to the ever-evolving app ecosystem and changes to App Store terms of service, app publishers will be able to experiment with sending users out of apps for purchases and distribute through third-party app stores. These have the potential to boost their margins by reducing the “App Store Tax”.
- App publishers’ tools will keep getting more powerful. AI will continue to make the tools used by app marketers more powerful. Aampe is doing a great job of providing hyper personalized messaging through AI-enhanced CRM tooling. Canva is making asset creation easy with the AI-powered Magic Tool. Smartling is providing translation quality scores with machine learning.
- SubClub podcast will continue to be a go-to place for the latest info on subscription apps. Make sure it’s set to auto download on your favorite podcast app. (Editor’s note: This prediction was not planted!)
Connect with Jenny on LinkedIn
The make-or-break opportunity of AI: Phil Carter, growth advisor and angel investor
AI represents the single most significant technological innovation of the 21st century.
Consumer subscription companies that fail to adapt may quickly become obsolete, particularly those in categories like Education whose premium products and business models are based on content that can be easily replicated with AI. Others in crowded categories like Fitness and Productivity may be forced to consolidate to find a path to liquidity.
Yet AI will also create an unprecedented opportunity for consumer subscription startups to disrupt existing categories and invent new ones. Companies that harness the power of AI to build differentiated products, establish defensible data moats, and delight subscribers stand to reap significant rewards, leading to the next wave of billion dollar consumer subscription businesses.
AI meets marketing: Hannah Parvaz, Founder of Aperture
It’s clear: this year’s all about marketing. Expect to see our feeds flooded with even wackier influencer-led UGC, to the point where we might just crave a return to the more immersive, slow-burn storytelling in advertising.
“Expect to see our feeds flooded with even wackier influencer-led UGC.”
With the new superpower of being able to generate videos in a few clicks, AI-generated ads are stepping up their game, bringing us closer to the uncanny valley than ever before. So, as we’re going through the year, brace yourself for a blend of hyper-creative content and AI-driven narratives that will surely lead to some interesting conversations.
📺 Further watching: Watch Hannah outline the steps to scaling your performance marketing.
Why your “locals” matter more than ever: Eric Crowley, Partner at GP Bullhound
The beauty of consumer subscription (CSS) apps is that consumers can quickly find and subscribe to services. The challenge is that they can unsubscribe just as easily!
2023 was a challenging year for developers as consumers churned off subscriptions that they did not utilize. However, not all churn is equal. We frequently reference a concept called “Tourists vs. Locals” when working with our CSS clients.
When apps are in heavy growth mode by offering promotions or discounts, they frequently attract users who may not need the subscription. We call those users “tourists”. Tourists like to try a lot of services, but cancel frequently.
Instead, we encourage entrepreneurs to focus on their “locals”. These are the core users who love the service, engage with it frequently, and share it with their friends and family. Most importantly, they do not need to be swayed by discounts or promotions — they are willing to pay full price.
To find your locals, look for the users who stay past six months on monthly subscriptions or after the first annual renewal. Measure the churn of those users carefully to ensure your retention flattens — i.e M6 or Year 2 retention rates for each cohort. When speaking with investors ensure that you are showing them the stickiness of your product with your locals using those retention rates, not just the overall average retention rate of the entire user base.
Using first-party data to engage and retain: Andy Carvell, CEO & Co-Founder at Phiture
In 2024, we’ll see more app developers recognizing the value of the first-party data they collect directly from users, either explicitly through surveys and form fields or implicitly from user actions, inactions and exhibited behaviors.
We’ll see increased personalization: in paywalls, onboarding flows and ongoing user journeys to increase relevance and deliver more engaging experiences and content over the long term. This is easier said than done; effective personalization requires careful consideration and collection of the most valuable user signals and ensuring such data is leveraged to deliver value for the user at the right moments.
We’ll see increased personalization in paywalls, onboarding flows, and ongoing user journeys.
Traditional silos between product and marketing — both technical and organizational — need to be dismantled in order to enable data to flow more freely and to create more dynamic, coherent, and deeply-personalized experiences.
Apple might make a bigger move to launch an OS-level ad network that would enable iOS developers to monetize their apps and games with in-app advertising delivered and attributed through SKAN. There’s a clue in the name: “StoreKit Ad Network”. Most of the groundwork is in place for a bigger play that would prove many times more significant and disruptive to the mobile monetization ecosystem than Apple Search Ads has been to date.
Retention over reach: Reid DeRamus, Founder at Caddie
I expect there to be continued downward pressure on growth for consumer subscription businesses.
Acquisition will become harder, in part because organic and paid acquisition from social platforms isn’t what it used to be. Paid and organic partnerships and word-of-mouth will grab a larger share of new acquisition, but those channels are less controllable and consistent.
More emphasis will flow to improving retention, increasing price, and reducing costs. It’s hard to follow best practices during tough times — I expect to see some businesses optimizing for near-term revenue by doing things like over-discounting annual plans or offering ill-advised lifetime plans.
Shorter cheaper plans to combat churn: Seth Miller, CEO at Rapchat
My 2024 prediction is that more companies will drop subscription prices and be more willing to offer shorter-term plans as they attempt to combat churn on the higher-priced annuals and consumers’ general adversity to them.
Most subscription apps will have to figure out how to convert a higher % of users to paid and focus on actual usage retention and delivering value instead of trying to build a machine that churns out payback to feed the advertising engine.
Rethinking post-trial engagement: Sylvain Gauchet, Chief Insights Miner at GrowthGems.co and Director, Revenue Strategy at Babbel
Declining trial conversion rates will lead to more developers experimenting with post-trial “onboardings” to help improve activation as well as offering a direct purchase option in addition to or instead of a trial.
Gaming turns to subscription: Ariel Michaeli, Co-Founder & CEO at Appfigures
- Apps will turn to convenience and customization as a form of differentiation thanks to ChatGPT and other forms of AI.
- More games will turn to subscriptions as their main revenue channel causing prices to normalize.
- Consumers will spend more but will be more critical of what they’re spending on requiring developers to refine and optimize how they present their subscriptions.
Higher prices and hybrid models: Thomas Petit, independent app growth consultant
I can foresee the following developments growing among subscription apps in 2024… or maybe that’s just a wishlist as a practitioner:
- Higher prices: I can see how the average price of subscriptions might continue to increase. A notable example is Tinder, which released a $500 subscription plan (!). This trend isn’t solely an effect of external forces like inflation or merely following a few pioneers. Higher subscription prices are driven by the need to balance unit economics with the increasing cost of user acquisition, the low elasticity of the minority of payers, and the positioning as premium by many apps to differentiate themselves.
- More hybrid models: Most subscription apps currently monetize solely through subscriptions, but I believe more will follow a few pioneers to combine with complementary revenue streams, such as non-renewable in-app purchases (IAP), in-app ads, partnerships, e-commerce, and affiliate marketing.
- More no-trial plans: The “free trial” model has proven effective in many cases and has been adopted by the majority of apps. However, for specific user cases — whether that’s across the whole app or more likely for segments of users or trigger points in the app — I believe offering “upfront” subscriptions (without a free trial period or introductory offer, as Apple calls them) can be positive if executed and tested properly.
- Third-party payment processors & app stores: While regulation is increasingly putting pressure on in-app purchases rules, I believe both sideloading and sales outside of IAP will remain only a scalable option for a minority of apps in 2024, although the attention and headlines might lead many to believe the opposite.
Despite the increasing quality of apps and efforts to improve UX, retention, and more, the first three scenarios could lead to further degradation of yearly renewal rates.
Connect with Thomas on LinkedIn
Only high-quality apps will survive: Jake Mor, Co-Founder & CEO at Superwall
The mobile app space is only getting more and more competitive and apps that double down on their competitive advantages will win. That means excellent customer support, niche problem solving, and incredibly high-quality products. Apps that cater to Gen Z and can go viral on TikTok will have a high advantage as well.
📺 Further watching: Watch Jake in our paywall optimization webinar.
The case for building app ecosystems: Jacob Rushfinn, consultant & Founder of Retention.Blog
Apps are going to find it harder to scale through continuing to grow their user base and are instead going to spin out tangential new apps. Having a huge win in the consumer space is very hard. Having multiple small to medium-sized wins will be much easier. They’ll also have the advantage of using cross-promotion between apps to jump-start their growth. App companies will start seeing a new product as a more obvious revenue expansion opportunity.
“Apps are going to find it harder to scale through user base growth alone.”
We’re also going to see more long paywalls. This will be in the form of multi-screen paywalls and in the form of paywalls with tons below the fold you can scroll through. This follows the trend of long web landing pages and longer onboarding flows. Subscription app price points are increasing, so customers need more information to feel confident in their purchase. Imprint won Google’s Best App of 2023 with a seemingly endless paywall and Duolingo now has four screens before you get to the actual paywall on their purchase flow.
Web landing pages often have pages and pages of information like testimonials, comparisons, social proof, and more. Common advice was to limit your paywall to one screen to not distract the user, but I don’t think these will always perform better. Especially, if you have a higher-priced product.
The niche app revival: Steve P. Young, Founder and CEO at App Masters
- AI will completely dominate the conversation.
- Niche apps are going to make a comeback. My theory and our approach to building apps is to build a portfolio of apps making $5-10K MTR instead of trying to build one app making $100K MTR. It allows us to focus our efforts on organic downloads and diversify our income stream.
📚Further reading: Steve shares the black hat app store optimization secrets of some of the top apps.
How to do more with less: Rosie Hoggmascall, product growth consultant
In 2023 we saw limited investment, smaller budgets and a tighter focus on product-led growth. I think we’ll continue to see this into 2024 as the fundraising landscape remains more bleak than in the last five years. With that, we may see an increase in these benchmarks as teams focus on activation, onboarding and driving conversion from install to purchase. Things like paywall testing, discounts, CRM, and product-led growth via referrals can help drive up numbers and do more with less.
Connect with Rosie on LinkedIn
What about your predictions?
And there we have it! Experts weigh in on what they think we’re going to see in 2024 in the world of subscription apps. Once we’ve released 2024’s report, we’d love to hear your own predictions.
Join Sub Club if you haven’t already to be the first to know and to join the discussion.
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