How to Reduce App Store Commission

how the transaction works so you have the gamer right plays your he plays your game and then they want to buy something within the game right then they want to use their their card for example their credit card instead of just using Google Play Google pay or Apple pay hey everyone this is Roman from tenen Laura App Store commission myth or real today we have uh payman expert Andrew that will help us to figure this out Andrew please introduce yeah hi everybody hi Roman thank you for inviting me it's a lovely to have this chat my name is Andrew and I'm a payment expert and business development manager at wordline which is a Global Payments company um focusing on yeah pay processing and kind of helping companies um process their payments

yeah cool all right let's get started uh today we would like to do something like a little bit different so we discussed with Andrew that on this episode we can like draw we can go and look at the existing slides or we go to the websites whatever can help us to explain things better um so let's start with the basics like how does uh um overview for the mobile payments looks like in uh 2024 yeah 2024 is interesting just like every other year to be honest but in terms of Ina purchases and payments within the app stores we had this radical change within Europe uh with uh the introduction of the dma This legal piece that kind of persuaded uh big Tech like Apple and Google you know that run the major app stores right

to change their approach when it comes to Ina payments so currently if you're a company that publishes games or if you're a developer that publishes games in the EU you can offer your users thirdparty payment options which basically means that instead of using the payment options only of the Google and Apple App Store you can use payment options outside the stores so you can forward them your users outside the store to process their payments meaning a lot of other things like uh lower commissions paid to the app stores and also uh having the opportunity to keep more of that money internally right so you you your studio needs to be or some legal entity needs to be in the U EU right yeah and you need to have users in the EU yeah okay so both yes but there are also um the big Focus that's currently in is in Europe because this is the major piece that moved but there's also other regions

that are also working on it right you have Japan that uh they're also working on it South Korea is also working on it so there are also other reg that are you know moving blocks the us as well they also had this big uh event with the case with the epic games for example where they uh kind of disputed uh the current structure of the app stores the 30% commission so there's a lot of moving blocks but currently the focus that's been in the spotlight for the past uh few months in 2024 has been the EU because that's the one that actually changed radically right um but let's talk about the specific commission like in general it's like 30% right let's let's look at the slide you showed me a slide I think that kind of Illustrated everything yeah for sure yeah it's interesting because it really highlights um exactly how uh the split is when it comes to the

payments and the fees so with a gatekeeper like the app stores you know we have 100% of the amount of transaction right let's say you have 10 in a purchase then you get to keep seven of the euros and then three EUR go to fees for the App Stores right now but uh this is changing with this new structures of in know payments where you can actually process them outside the store but currently this is how it looks like yeah and uh for a long time this has been okay but now with the more time progresses and the more you know Tech changes and the more we kind of move into another sphere the next step of tech then we see these changes where you know you can actually move outside the stores as well I see and is this a real number 38.1 billion yeah this is

uh yeah this just an estimation for an average yeah obious Enterprise company or Etc but it's just an average amount let's say just an example yeah yeah yeah yeah got it yeah cool and um is the Google Play also affected by host yeah so it's both of the big app stores and other Gatekeepers let's say um but when it comes to yeah the main app stores Google and apple because they're the biggest ones the ones with the most customers the most users the most uh money that goes in goes out but they don't have the same approach to it so both app stores decided to move in different ways when it comes to charging their fees um let's start with then like I see here from 50 to

[Music] 30% yeah yeah yeah so it's different with the job store so you have apple for example that um stated that they will charge 15% for uh as we as we know by now for the uh Publishers that have less than a million in STS per year right so the ones that are under the small business program and also for companies process outside the store it's going to be between 15 and 20 if I'm not mistaken 20% if you process outside the store but then you have uh Google which also decided to reduce the commiss from 30 but down to 27% overall without any additional charges yeah uh because comparing taking the two yeah if you look at the bigger picture you have apple that is charging 15 to 20% overall for externally payments then you have

their core technology fee which is 150 uh Euro and this is dependent on the amount of installs per year and then you have Google uh Google Play Store that charges overall everything 27% without any additional fees yeah always you don't need to op in so if I'm my new developer over 1 million uh and I publish on Google Play the commission is going to be 27 27% yeah but we to highlight that these things uh have been constantly changing right they are not absolute we don't know if this is going to be the case next year maybe it will change again because we got here after two years of this dma this digital markets act movement that happened within Europe within the European Union so who knows maybe next year again the fees may change there was a lot of uh a lot of voicing from lot of uh Publishers

and developers about the cor core technology fee because if you look at that it kind of hinders growth for other companies they let's look at it Andrew so I'll change the screen um so you could um uh show us this like little calculator that Apple has yeah absolutely so if we take a look at this uh very nice actually calculator that Apple posted on the Apple developer section of the website you can actually estimate the fee changes for apps distributed within the EU right so if we go down to this page we can see the Fe calculator where you can kind of give yourself an estimation of how much you end up paying if you choose to go with

the old terms so stay as it is 30% everything or go with the new terms where you process with that third party payment processor but answering here just the basic questions so how much uh annual sales do you have let's take let's say 20 million so we're Enterprise gaming company are you a member of the appstore Small Business program no we're not uh how many first annual installs do you expect yeah we can go with uh yeah let's say 3 million just a random number and looking at to this capabilities we have to pay our gaming company 500,000 in ABS commissions per month yeah this is the current state but if we take the new capabilities and we just use the App Store with Ina payments

so AB with yeah with payments then we we pay 4,223 U around per month it's a small reduction but if you use alternative payments so the app store and then outside the store alternative payments you go down to 373,000 yeah and from the initial change of 500k per month that comes you kind of shave off around a fourth of the amount just by changing how you process payments so this is a big differentiator and obviously you can also use other options if you have uh a different marketplace where you can place your game and app and uh only process with a payment processor that goes down even more right so it really depends uh as a company where you want to take this because you can save a lot of money by

focusing on how you process your payments right but so I let let's stop here right so I have this alternative at Marketplace and that means I can use the payment provider that I want and the commission is going to be whatever this payment provider has set up yeah exactly exactly and that uh it really depends on what you want to offer your users so going a little bit more in depth to uh payment providing I can just maybe give you an idea of how it works with payment providing yeah because this is where it gets a little bit glitchy I think for a lot of um gaming companies right this is not the first thing you you think of in mobile games because yeah historically app stores what thing yeah exactly yeah developers yeah so if we

take for example uh how the transaction works so you have the gamer right plays your he plays your game and then they want to buy something within the game right then they want to use their their card for example their credit card instead of just using Google Play Google pay or Apple pay then they use their card then immediately once they put the numbers within the app or within the game to use their card then a payment provider like warland for example uh comes in takes the transaction takes the money from the card right yeah and this because we're talking about cards now uh we have you know the small charge that pay providers to which is you know it's in basis points which is 0.03 0. 2% much less than what is charged right

now for app stores then they take let's say 0.03 yeah and then they take that 0.03 and then the amount of the object so how much the object was worth let's say let's say somebody somebody bought a sword and that sword was1 Euro yep so the full transaction is 1.3 cents y then this amount is put into the bank account of the company so the bank account of the gaming company and then this happens over and over and over again just like it's currently being done through Apple and Google but with this way instead of being charged 30% flat for every single you a purchase you are charged cents so very little

because pay providers work in the way of uh bulk transactions you know that's all they do they specialize in that um so the structure then becomes radically different you spend less money on pay and processing and ultimately you can put that money back into production or uh back into you know salaries developments and all these things so if um I was using the default app store commission I would pay 30 cents for this purchase with our example of like one uh Buck a sword yeah and now I'm playing three and three is the actual num this is the yeah yeah it's three cents 4 cents 5 cents it's cents it's not 30 you know because if we take for example one Euro yeah if you take 30% of a Euro 30 no nobody chose it 30 cents um I I mean that's uh yeah and the higher

the transaction is the uh the less you have to pay to pay provider the have the bigger the transaction is but the bigger the transaction is the more you have to pay to the app store right because it takes 30% if it's 30 EUR you take 10 EUR right to to the App Store but with pay providers it's different they charge less I see yeah and and the the number depends on the like what cart it is what country and so on so yeah so so in terms of credit cards and debit cards they have a specific um charge within the Europe because of again the set um legislation that we have in the European Union and there uh specific amounts that can be charged but when you go with other things like alternative pay methods um open banking Solutions like um if you use your an app to pay for things then that charge will be even you know lower or different because then you

don't have to pay the different parties you just work with the app and the payment provider when you work with credit cards you work with the card scheme you work with the bank you work with you know a lot of a lot of ENT a lot of people a lot of different entities within the transaction so the cost is different and you know in Europe because a lot of regions in Europe have now their own local pay methods you can leverage that because also mobile games Gamers you know there's a lot of young people in there they use their phone a lot they use mobile apps a lot so um you can save some money on that too so there's a lot of ways where you can actually move away from the App Store commissions and take back that money and put it back into your company right and um based on your experience um what type of companies has switched to this um core fee plus

alternative payment yeah yeah so it's very new the whole experience is very new right everybody's trying to see how is it going to go there's been a lot of press on Spotify um doing it and kind of processing it outside the App Store there's also a lot of um talk that Spotify is GNA start it again because they stopped inup P inup payments within the Apple App Store because they didn't want to pay the fees you know and that's fine they didn't want to do that it's okay and now they're going to come back to it and also there was a lot of talk that epic games is going to bring back the Epic gam store within again the app stores right so it's still new it's evolving it's changing the fees are being changed they may go lower again so this is targeted specifically for Enterprise but in the next coming years it will become a norm and you will have we have a choice you know and if it makes sense for your business even if you're Enterprise SMB

if you're startup you will see if it works for you and in the long in the long term it's going to be this massive change maker you know and we're g to look back 10 years before and say how were we able to just you know go with the the past scheme of things 30% commission etc etc you know and didn't have this in the past yeah yeah especially now when there are so many challenges on the advertising side ad mization side and yeah you you need to find the way um what about Google yeah for sure and I mean Mobile gaming is yeah uh yeah Google was similar to Apple you know they are have been a bit more uh exploratory let's say when it came to it because they launched also their models of how you can monetize within the app stores in their app store they created this user Choice billing option and this is the option that you can use as a

developer to process transactions outside the App Store yeah you can do either user Choice billing and Google play or purely user Choice billing if you use user Choice billing 27% if you use both yeah 30% 27% it really depends but both major app stores have been Cooperative they've both they've both been kind of trying to see you know how they can accommodate the new way of doing business but either like a practical way for me to use like I don't word line with u Google Play Market yeah for sure again they have it on the Google developer portal if I'm not mistaken as well and they also show the API like yeah kind of the process how you can do it so how you can use third party payment providers so it's all available accessible the only thing that

you need to do is just go there have a look and if it makes sense for your business after calculating how much you're being charged how much you will you will be charged in the future then yeah why not uh but for now this makes a lot more sense for Enterprise I see currently yeah in the next few years it will make sense for everybody yeah just currently the way structured in the way because the fees have not radically really really really changed they didn't go from 30 10 you know they dropped for Google 3% for Apple 10 12% um so it's really targeted Enterprise because from you know three 30 million in Trans in flow let's say uh you have a lot of difference if you go from 30 but if you go if you only have one million of flow then the difference is not as big but if you prioritize that and you think that's GNA Save A Lot for your company then go for it as well you know think and um I heard this this term like web stores so basically you're

taking a user from your app to uh web page and they make a purchase there is it similar or is this is completely different what's your look on it yeah so the web stores are new new not so new but they beginning traction now because of yeah these changes that are happening the thing is that um you move away from the front shop right of Google and apple and then you go to the front shop of another website and then the website charges less but they still have a charge right but they do charge a lot less and the way it works there is that they have paying providers in the back process the transactions and working with a web store is more um it's nicer more yeah for a gaming company mobile game company because they just pay less even and they don't have to go into the hustle of integrating with

payment providers and trying to understand the payments world because payments in general it's you know in totality is interesting I think but it has its language it has its specific to take into account you know it takes a lot of effort so yeah I see and um I wanted to ask you what the one things that is usually being ignored like by mobile developers when they uh look into the mobile payments yeah what is our to gain right so yeah I mean it comes down to fees Right comes down to revenue it comes down to gross margin and all these things that play an important loan at the end of the year when you look at your financials because again when you process through the app

stores purely keep the status quo you pay 30% when you process outside the stores it gets lower depending on just the model you want to use if you want to go into an alternative Marketplace it's going to be different if you work just within the stores but process outside the store so side loading for example then it's going to be again less fees so you save a lot of money and then you can put that money back into your business so that is the big the biggest pull and also you know it comes down to offering your Gamers more options to pay and kind of giving them the opportunity to use whatever they want to pay because payments are all about culture they're all about what we're used to right I mean when I grew up in Cyprus we only had cash that's all I knew right then we had cards and then I got used to using cards right so you love that and then you know we got mobile we got phones and then we started using mobile wallets we started using Apple pay which was a

magnificent thing at the moment and then yeah so it's kind of this giving the users more options to pay yeah because we love what is familiar we love seeing you know what we know so giving that option it really also kind of keeps the users in right and that's what you also want now you don't just want Revenue you just want you know repeat transactions and retain users right makes sense like from my be like personal Behavior like whenever there is pay with pay just because it's so easy and I don't need to put the C details I just choose them yeah yeah you don't you don't want to get in your wallet you know take card out it takes effort so yeah and and you set a side load maybe you can expand on the this term too is it like what we've already discussed or that's another thing yeah no it's uh it's related to what we discussed yeah so it's again side loading processing outside the stores and then you just move out

momentarily from the game and then you just pay through the page that you're shown for that split you know two three seconds that hasn't been possible uh in the past because the Apple ecosystem has been shut obviously for SEC for security reasons and for all these things that they they've said but now you know with s loading this gives an opportunity as well to kind of push this third party payment option further yeah yeah yeah got it um last question Andrew what are your predictions for the upcoming year let's say 2025 yeah upcoming year I think we are going to see more countries more states around the world fighting for this third party payment option because if we look at last year right there was a lot of

commotion in the US there was a lot of commotion in Korea in Japan India they're trying to kind of create a Freer Market when it comes to payments and kind of let companies choose how they want to do their transactions you know so I think for the upcoming months and until the end of the year we're going to see more countries jumping on this trend because it's becoming a trend within payments you know and um slowly adopting similar policies uh within the countries and this would further uh incentivize and kind of pursue persuade Google Apple you know other Gatekeepers too not just the app stores right because you have other Gatekeepers as well like uh yeah Tik Tok for example is also one and other ones really big tech companies that have users to let you know let their users pay the way they want because ultimately yeah having the option to pay however you want is also kind of something that

would be necessary thanks a lot Andrew um this was very insightful um Andrew has also his uh newsletter on LinkedIn where he shares the the the facts and the news like this uh we'll leave the link in the description so you can follow him um yeah then give us a like subscribe leave your comments uh uh under this video and uh yeah we I think there we haven't touched a lot of topics to because this is a vast thing right the payment yeah it's very very big yeah exactly um so yeah I'm sure there will be another episode thanks again Andrew have a good one you too byebye