How to Avoid App Store Fees with Web Payments

This shows a little bit exactly what I was talking about what you can do now. Um, so this is this uses Apple's web view tech um to basically pop up a browser upon initiating a purchase. You prop up a browser um that browser is pre-authenticated. The user's already signed in. It's pre-populated with their with their um purchase item. Hi everyone, welcome to another episode of Tangent AI 101. This is Roman from Tangent and today I'm joined by Archie from Stash. Hi Archie. Hi. How's it going? All good. All good. Do you know why we're here, Archie? What are we going to discuss? Um, I think we're here because of the most recent news about the uh ruling and the Epic versus Apple case in the United States. And we're going to discuss the consequences of that. Right. Right. Right. But tell us about your a bit about yourself, Archie. Why are you on the show? Sure. So, um,

my name is Archie. I lead, uh, I'm head of product for Stash. And Stash does and direct to consumer platforms for games. We help the biggest game developers in the world build really compelling direct to consumer channels. And this is a topic I've been following really closely for years. from when I was an investor at makers fund. This was a big kind of thesis of mine and an exciting area of opportunity and eventually it got so exciting that I decided in 2023 to leave the investment industry and kind of be part of the DTOC movement in games full-time and that's when I got involved with Stash. Well, that's a good timing. Yeah, I mean it was it was interesting because it was the first time as an investor I could pick a date. you knew from, you know, early 2023 that that on March 7th, 2024, the the digital markets act in Europe was going to come into force. And I was like, why is no one talking about this? I think it's going to be a big deal. So that's why I decided to jump in. Yes, this is great.

Uh we will ask Archie to prepare some slides on the topic. So if you have no idea what we are talking about, you'll get it soon enough because it is like super important. So if you have an app, this affects you like directly affects you, right? Uh yeah, just start Archie like share your screen, show us what you got. Cool. Um, so I have yeah put together some slides on the most recent news and um, a bit of this we've already covered. So I'll talk a bit about what anti- steering is and why we're going to see no more of it. That's the hope anyway. We said I'm the head of product at Stash and bit more background on Stash. to build really compelling direct to consumer channels that players want to use um by making them really authentic, really custom for each game developer and trying to focus on like an engagement first, a gameplay enhancing

player experience as part of their direct to consumer channel. Um and so yeah, there are kind of three main ways in which the app store restricts developers or or protects its payments um uh monopoly. Uh the first is that um for apps distributed through the app store, they require you to use their own payment methods. Um and uh this everyone knows, right? uh both for Google Play and for Apple's App Store. If you use the App Store, you're required to use um you know, Apple's IP store kit or Google Play billing. The second way that they've restricted game developers is that they've said game developers have to um be basically there you're highly restricted on how much you can tell players about other ways to pay for goods in the game. Uh so the actual the big people that have been fighting this are also like Spotify and Netflix uh

because Spotify and Netflix you can subscribe on the web and you can subscribe in the app or some of them have refused to allow you to subscribe in the app and they've wanted for a long time to be able to like link out to their web pages but Apple's restricted them from doing it. That's called anti- steering. Then the third way is alternative ways of distributing your app. Um so this is kind of allowed on Google Play right on Android sorry. um and it's not at all been allowed for the app store. Um but the way we've really seen movement on this is that in the last 2 weeks um anti- steering provisions were were ruled to be illegal in in the app store um iOS ecosystem in the United States at least. Um there's other legislation in Europe that's going after more of these. In fact, Europe's digital markets act kind of touches on all three of these. But the big news is that iOS in the US now doesn't have anti- steering policies. Gotcha. Can you just define steering? If there is this when I want to pay elsewhere, is it

steering or? Yeah. So steering is what the app store calls um when developers direct users to other places or ways to pay for the same content. So if I have a game and I say, "Hey, you can buy this stuff on my web store in the app." That's steering. If I link out to an alternative web-based purchase method, that's steering. If I link out to a web store, that's steering. Gotcha. Gotcha. And it's all good unless it's like it would be all okay unless it's like 30% commission, right? Is it the main? Yeah. Um I get into this like a little bit further, but Okay. Okay. Okay. Then let's I just tease it. I'll just tease it. No, this is just a recap of um uh kind of what's happened in the American ecosystem at least. This doesn't really cover what's happened in Europe, but in America, a big change kind of happened in 2021, which is that um pre prior to

2021, developers were not allowed to communicate to their players or users about alternative payment methods even outside of the app. Um, so if you acquired that user information from within the app, so if you got a user's email from within your app, you were not even allowed to email them saying, "Hey, like try our web store. Try purchasing in the web." That changed in 2021 as the first ruling from the Apple versus Epic case. Um, then a bit later in 2023, Epic actually won its lawsuit against Google. Um, one thing that's important to know about the Apple lawsuit is that actually Apple won 11 out of 12 counts and it was generally ruled to be a big victory for Apple except for this one count about steering provisions. Um, Epic uh, unlike Apple went up and against a jury instead of a judge and they actually lost on every uh, they actually won on every count against Google. Um, that ruling is under injunction, but it would be even more radical, much more radical than the

Apple ruling. So, we're all kind of waiting to see what happens there because that would apply to Android. Um, and then what we had most recently is that the Supreme Court basically agreed with the standing ruling against Epic that that inapp communications had to be allowed. Apple had come up with this scheme that basically put real restrictions on what developers could say and charged them a 27% fee on any revenue sourced from linkouts. And that was what happened most recently is that like the judge in that case ruled that that was not complying with the previous order and that Apple's conduct had been pretty bad. In fact, they were referred for criminal complaint alleging that they basically lied to the court about why they came up with this implementation. So in response to the most recent ruling, Apple has now allowed um uh Apple has now allowed fees. This is just a deep dive timeline on the Epic store. Like what happened with Epic is they deliberately launched a non-compliant um version of their game. This is what

they launched uh and it allowed people to use either App Store or Epics's direct payments with a big discount. Um so Apple's new policies now um are that uh basically um no no restrictions on promoting uh or telling users about um an alternative uh payment method or an alternative purchase method. Um, and you can link out with total free. You're not required to get an entitlement or dispensation and you don't have to pay any revenue. So, it's a big big change. Spotify has already capitalized on it um by sending players to their website. And you you saying May 30th here and I read that Spotify already uploaded. Yes, they have. They have. Yes. Uh I think they should be in force. I don't know what the May 30th is here. I think it's I think that's meant to be April April 30th. Ah, okay. Okay. Okay. Yeah. Yeah. Yeah. I think that's a typo. Okay.

Good. Good. Good. Um, so um, now we get to, uh, kind of what this means for games. Um, and, uh, we get into a little bit later like what the kind of like benefits of this are. Um but uh uh in one major major way this is important is it allows developers to freely link out to um their uh kind of accounts. I think this will really unlock uh kind of the DTOC opportunity for um uh for uh kind of like other genres. Um and this will uh yeah like I think allow for um new like opportunities for user acquisition because this is going to be more profitable um for them. So I can deep dive into like why I think each of these things. So the first is just like this will make direct to consumer far less friction far have far less friction than it used to. like the free opportunities to link out to alternative payments will

mean that a lot of the what developers have been trying to do building web shops and stuff like that which has been a big movement in the games industry over the last 2 years will just become even easier. So games that already have direct to consumer monetization I think we'll see that grow to new users and see spend per user increase. I think the second development here is the one I'm probably most excited about, which is that um if you um now implement like a really smooth linked out user experience that directly takes like a purchase link and links out. Um this means that games that previously have not been interested in DTOC because their monetization systems are too impulse-based or um require a purchase to be made without ending the game session. Think here of match games for example which a lot of their monetization is done at the end of a level when you can buy five extra moves. Um uh that's now much more addressable for direct to consumer because you can uh you can make a purchase without without basically

ending the game session. And then the final uh opportunity here is user acquisition I think is likely to see a kind of reversal of what's been happening over the last two years because um when you add an incremental amount of margin which this will do. So if you're you know average margin on revenue goes from uh you know 70% which is what it has been with Apple and Google to 80%. that unlocks much more profitable user acquisition and has a really virtuous cycle that will enable much more growth in the games industry. So I think it's very exciting for developers um around the world because all of them rely on the US app store right and this is um I'm not sure if you have the slide but this is absolutely the US have the most in app purchases undoubtedly uh but uh we had some uh noise from

Europe a couple of years ago like a year ago is it the same or it's a bit different. So Europe is in progress. Um both the Europe and the UK have pretty similar pieces of legislation. In Europe it's called the Digital Markets Act and in the UK it's called the Digital Markets Consumers and Competition Act. Um and that takes a much more expansive view of of of like what it once changed about the app stores. Um, so, uh, Apple was fined a few weeks ago for not complying with the digital markets act in in particular its linkout policy. The 27% linkout was ruled to be non-compliant with what Europe was mandating. And so, we haven't seen Apple's real response there. Apple was fined, I think, half a billion dollars, but I anticipate Europe, now that they've seen this development in America, looking to replicate it very soon. Gotcha. Gotcha. Gotcha. Okay, now

I remember. So there was some decision and the 27% instead of 30% was implemented and now it's not sufficient, right? This is Yeah. So Europe still needs to get a revised ruling from Apple or a revised policy from Apple and I think it's highly likely that they look at this policy and say okay at a minimum we don't want to be outdone by America. Mhm. Gotcha. All right. Thank you. Cool. Um, by the way, I don't know if I did address this, but I do want to mention what you what you brought up about like why this matters for developers. And the 30% is the biggest part of it, right? Um, any spend you get going outside of the app stores is going to have, you know, 5 to 10% processing fees as opposed to 30%. Uh, and that's very very significant because that can often mean 25% plus more revenue than you were getting under the app stores. Absolutely. But beyond that, you also have major benefits um from for example getting

ownership of your players data. So when you make a purchase outside of the app store with direct consumer channel, you get um uh you get like direct access to the players emails um you know who those players are especially in the response to IDFA. That's been something a lot of developers care about. And then the final way I think direct to consumer can be exciting is that um you don't have any any restrictions on what you can do with players. Even uh you know with with some of these restrictions loosening the app store still has really tight controls over the type of type of content you can serve. So they don't like you to be a store within a store for example is one of their restrictions and you have none of that with direct to consumer. So you can create new ways to engage players with loyalty systems and cross promotion etc. Gotcha. Gotcha. Gotcha. I I just wanted to ask if you looked into the price items uh difference for Spotify and uh Epic from the I think Epic was $9.99 versus $7.99 um

was their price difference. So about I think what's that 20%. Um less. Um so 20%'s the highest I've seen. I'd say most developers look at giving away like 10% of value and that that is t that's typical in the industry I would say 10%. But um we can get into that a little bit more but like one of the things Stash always makes sure of is like instead of giving getting players to spend less you give them more in direct consumer channels. So rather than discounting your prices by 10% you'd give an additive bonus of value of 10% while keeping the value the same the amount they're spending the same. Interesting. Yeah. I'll do it. Um, so kind of practically what this what this is like an example flow of Stash's um, Stash Pay product which is like an embedded checkout product and this shows a little bit exactly what I was talking about what you can do now. Um, so this is this

uses Apple's web view tech um to basically pop up a browser upon initiating a purchase. You pop up a browser um, that browser is pre-authenticated. the user's already signed in. It's pre-populated with their with their um purchase item. And then you can even add in like rewards. Stash has a pretty sophisticated loyalty and reward system. And all of that stuff can be embedded in the session. Um then you pre pre-save the payment date payment details. You can also configure it to pull save payment methods from Safari or use Apple Pay. So you really reduce the the payment method friction. And then you can make a purchase in like three clicks. Um, and what's particularly cool about this image is it shows that you don't have to end the game session. So, you can make the purchase and continue that level or whatever the kind of um trigger was and that really is is very exciting I think for for casual games and match games. So, so the browser is open inside the app. So, this is what I

also see for the messengers for example. You it doesn't redirects you to the Safari app. Stash uses web view for that. Web view. Gotcha. Yeah. Yeah. Have you measured like the conversion rate? Like it's too early. I would say like this will be one of the big questions that we have going forward is to what extent this is just viable if you give players an alternative with no incentive they use it. Um this is why we'll have to like iterate very rapidly and test these things. Um I don't have any data for you right now. It's too soon. Okay. Okay. Yeah. It's a very interesting topic because I would imagine that the conversion rate would improve because users will get used to paying. Yeah. Off the app and on this new browser for them, right? Yes. And developers will learn how best to implement it. I agree. A bit like IDFA

opt-in rates improved. I think we'll see this improve. Mhm. Um, any best practices from what you've seen so far on that? Yes. So, that's exactly what this tries to get at. Like, I think the best practice to keep in mind above all else is that if you're just competing on convenience, you will never make an out of app purchase experience that is more convenient for players than the App Store's AP system. like Apple just has an inherent advantage with convenience. And I think you have to minimize friction as much as possible, but you also need to think about giving players an incentive, a motivation to overcome that inconvenience. So this massively reduces the inherent friction, but you should also think about how to make your purchase experience a better experience um in order to get players to buy into it. So that is stuff like um adding in loyalty and rewards. Like loyalty is

highly effective if for one of our shops um rolling out loyalty more than 4xed our daily sales volume. So you can just imagine how effective that is. Um, if you can like layer in your your additional reward systems into this purchase experience, it'll make a huge difference because it'll give players an immediate no kind of questions asked motivation for for overcoming this friction. Uh, I think that what you've seen in particular across genres is that this concept of loyalty has massively expanded out loyalty and rewards. So, as you can see here, yes, you have some, you know, casual casino titles, luck based games, um, like Monopoly Go or Coin Master, but you also have Supercell doing various things with loyalty. You have Angry Birds, you have WWE, like a midcore, you know, puzzle match game. So, I I think you really should be thinking about loyalty if you're a reasonably large developer. Um, and all of this is to say like, you know, if you want to go beyond um, just

having an embedded checkout link, you can even do a more full web- based checkout experience, a more full web- based web shop, um, loyalty hub. Um, this is kind of like I think still going to be a reasonably popular thing for developers to do because it just further cements in the practice of going to the web to make purchases and um, uh, you know, gives kind of your most engaged players a really cool reason to to purchase in the web. Um, so I think I don't think you'll see web shops go away. Um, let's say let's give an example. So, I have an app, I don't know, crazy bunny and I will have a crazybunny.com website, right? And my users can go to website crazybunny.com and buy the items there and they will appear in the app. Is it the idea of the full web shop? Yes. So the full web shop would be supporting a full browsing experience catalog in the web that players can go

and they can search for which product to buy as opposed to being directed to just a checkout experience from within the app. A web shop goes beyond that and allows players to go there to source a purchase to browse to to choose an item. And then it also has functionality related to loyalty and rewards and stuff like that. Um, and then the other component of all this is as a developer, if you're thinking about doing this, you have to um, think about how you're going to handle payment operations, which is reasonably important. Um, so I have a page on that. It, um, just outlines these are all the things that Apple kind of does for you that, um, developers don't necessarily realize. Uh, and these are three different ways of kind of thinking about what method you want to take. um as a developer uh you know Apple has taken all of this off your plate and so if you are going to roll out a um a out of app payment process you can either go and integrate with a

PSP that's like Stripe um which will give you access to core payments processing but it um you know won't take care of stuff like tax and compliance and fraud and stuff like that that well take care of a little bit of fraud and you'll have to manage refunds and do customer support. Same with the payment gateway. That's basically just core payment processing for a few payment methods. The mer the model that's most popular in the industry is using what's called a merchant of record. Stash is a merchant record, for example. And these guys basically sell the goods on your behalf and they take all of the operations off your plate and enable you to just kind of have the exact same relationship with the merchant of record as you have with the app store. So, you know, depending on your size, although I would argue pretty much every developer kind of benefits from using a merchant record, that's that's normally the model most developers opt for. And uh yeah, talking about the size, uh I really love uh my indie developers. Do you think it's it is the

time or it's too early maybe from the client base that you already have? Um, I would say you've already seen a good number of indie devel indie developers move into the web shop space. It very much depends on your genre. Um, but if you have like high monetizing users, um, then I would say I've seen developers of all sizes go into web shops with varying levels of sophistication. Um, I think that webshops in particular lend themselves to more sophisticated monetization systems. Like if you have a reasonably strong offer and monetization system, um then I've seen web shops work pretty well for you. If you just sell one or two SKUs and you don't have that many products and you don't swap them out that frequently, I think then you know web shops may not be much such a great fit. But I think embedded checkout um with Apple and with the new Apple ruling is definitely something to think about. So I do think this will make it far um

far easier for smaller developers to get involved in direct to consumer and the embedded checkout is uh which one here is it payment gateway or oh so that you have to do all of this for checkout. So that is yeah so this is just taking payments but you'd still need to build or use like a service like stash to basically integrate their SDK and and no no no indies are not focus on product um and then oh sorry go ahead I was just going to say I think you I think you asked about best practices so just to summarize them and this is kind of the last page I have like I think what we'll see a lot of is AB testing, sidebyside pricing, incentives, different ways to get players to motivate themselves to opt into using a web checkout link. I think it's unlikely we will see Apple's IEP system fully ripped out and

developers just using web- based checkout. I think that's highly unlikely because developers worry about conversion. So, I think you will mostly see um these things offered side by side and people will figure out how to AB test that to make it the most compelling option. And I think as you said like players will get more used to it. I think then the kind of two things you want to make sure you're doing with everything you do is to try and make direct to consumer like as low friction as possible. Don't leave the app. Pre-authenticate users. Don't have them sign in. Pre-save payment methods. Oneclick checkout. And then the second part is is making player increasing player motivation as much as possible. Offering incentives, web exclusive rewards, web exclusive currency. If you do use a web shop, you can offer web exclusive products, exclusive content, etc. Um, and then I think for almost every developer, you'll want to keep the payment operations, you know, out of your operations. So, probably using a merchant record makes the most sense. Gotcha.

Um, what are the biggest mistakes that developers are making when implementing this? Um, that's a great question. Well, I'd say it's too early for the it like checkout links product to um uh to to make a call on that. Um, but I would say a lot of developers start by saying um they want to do uh they want to do like uh kind of the this in-house and then I say a lot of them then realize that that involves more work than they think it does. So that's one mistake I have seen a few developers use. There's a couple of have built successfully inhouse but there's a lot of nuance and subtlety to it. Um and then the second big mistake I would say I've seen is to like treat the treat your direct consumer channel as like if you build it they will come. Like I

think that you need to think about this as something you actually need to invest some thinking and time into to make sure that players have a good motivation for using it. like a lot of developers think don't don't think about the fact that just because it has a benefit for developers i.e. you get a higher share of revenue that doesn't necessarily mean it has a benefit for players and this really needs to have a good reason for players to use it in order to get higher adoption. Mhm. Gotcha. And I also wanted to chat about the configuration. So there's so many parameters here like okay you mentioned taxes there are also currency rates um prices commission right um how how does it all look you guys have a dashboard where they set it all up um um yes this example yeah basically yes like um for some stuff like prices,

it doesn't have to be as complicated as you think it does because um you know the app store already does some currency conversion for you. Now that's not optimal like their currency conversion has lots of problems, but we generally recommend developers stick to that same currency conversion because you don't want app store prices and web prices to be wildly divergent without you necessarily knowing about it. And if you did, you know, localize your pricing kind of correctly for, you know, the Peruvian dollar peso or whatever it is, like um, you know, that would lead to a much different price than the app store. So, what you can do is something simple like just import your app store pricing and use that as localized pricing. Um, taxes are complex and that's very complex. Uh, a lot of taxes are inclusive as well. So, in America, taxes are additive. if you add them to the price. But in other countries with VAT, they're inclusive. And so that needs to be taken into account when you think

about what players pay and what you end up getting. It's going to be a difference there if you're taking like 10% tax. So um that is something that requires a bit of visibility and we always provide like per transaction level reporting to each developer that outlines like for this transaction how much was taken by taxes, how much was taken by FX fees, how much was taken by payment processing. So you can actually see what the kind of deduction looks like from what players spent to what you end up getting [Music] in the do do you guys have a fixed uh commission and then the developers can add on it whatever um yeah so we we basically take um normally our model is like a 5% fee plus the cost of the channel processing costs. So we pass on processing costs which depending on what payment method you're using for US iOS users they're going to be very low. They're going to be like you know 3%. So that's probably all in commission is like 8%. All in kind of deduction is 8%.

Gotcha. Gotcha. Yeah that's good to know. Last one uh but important one refunds. How does this stuff works? So we can handle refunds for you. we kind of do the management and reviewing refund claims and interfacing with develop with customers on your behalf. Um, and then really kind of how generous you want to be on refunds is a combination of us recommending stuff and the developer making some decisions like um, you know, it really depends. If you see someone who's really gaming the system, you might want to place some restrictions on like refuse to do a refund. But one thing I'll say is like you generally want to be reasonably generous on refunds because there's something called a chargeback which is basically when a player disputes the charge on their credit card. Um that can get very bad if you have a lot of them. Um so you you never really want to have many chargebacks accumulating. And so um you know one way to comp one way to kind of counter that is by having a highly responsive and fairly generous refund

policy. Gotcha. Well, great that it's already supported like that early. Yeah. Yeah. Nice. Nice. Um, okay. Uh, thanks a lot, Archie. Uh, any things that you want to share at the end? Any predictions? Yeah. Beautiful slide, of course. Any predictions? Anything about stash? I think your prediction was very good, which is that like everyone's going to learn how to do this much better and players will get more and more used to it. And so I would like applaud the early experimenters um you know and I would just monitor it very closely because this could be a really seismic shift for the games industry if this starts taking off and I think you know from what we can see now there's absolutely no reason this isn't going to take off massively. Um so I think every developer should be thinking about this. Um I think it is a requirement now to think about this if you want to remain competitive. Gotcha. Super. Then thanks a lot. One more time, uh we usually ask the viewers

to leave their comments uh their questions in the comments. So we'll then if you leave your comments about the stash or how it all works, we'll ask Archie to answer them. So please comments on the video. We also leave all of the links in the description. Um yeah, then super then until next one. Thank you. Cool. Thank you.