Slopes Diaries is my ongoing journey to turn my indie app into a more sustainable part of my business. First time reading? Catch up on the journey so far.

What is Slopes? Think Nike+, Runkeeper, Strava, MapMyRun, etc for skiers and snowboarders.

Oh boy, it's been a spicy few months in the Apple ecosystem 🍿.

Ever since the EU alternative payments ruling a while ago, and especially now with the injunction in the US opening the web payment floodgates, I've had people asking me about what I intend to do with Slopes and Apple IAPs vs web-based purchase flows? To answer that, I need to take a step back and explain why I've long-held the opinion that IAPs weren't just a "3% credit card fees, so they're charging us 27% for hosting and bandwidth!" situation.

There are two things Apple provides as part of the IAP system that has always been undervalued, and in my opinion they are well worth that theoretical 27% (or 12% on subscription renewals).

Banking, Taxes and Compliance

I don't think most developers realize how much of a PITA it is to sell internationally.

Slopes is a global app, with only 60% of its business coming from the US. If I wanted to sell with Stripe today I'd need to register in many of the countries/states we have a presence in. Each country has a threshold of sales where you don't need to register/report; sometimes that's a volume of transactions and sometimes it's sales volume. But if your app has any international traction you'll hit those thresholds quickly.

Once you do, you have to worry about keeping on top of each countries' various reporting requirement about sales, and then submitting tax payments to them. You'd have to keep adjusting IAP prices as tax rates adjust in each country and make sure you're collecting taxes on every sale. Sometimes all of this may have a cost associated with all this (lawyers, etc), but it's guaranteed to have a cost on your time.

Thankfully Stripe just announced they're going to be offering a service to become your merchant of record in many EU countries (hopefully expanding to Asia over time?). They'll handle tax compliance, fraud, bank disputes, and all the other "selling products directly to customers" BS that Apple shields us from.

We don't have any pricing on that service yet (it's in private preview at the moment, so those details are pending), but a similar service like Paddle charges 5% + $0.50 per transaction. On Slopes's yearly plan that equates to 6% of each sale. If you're a $9.99/yr kinda app, that's 10% per sale. If you charge monthly ... that $0.50 will add up quick.

We also don't know how Stripe will deal with chargebacks on our behalf, but Paddle has a $15 fee (+ the original transaction value) for every chargeback dispute lost. And you need to keep your chargeback rate at <0.65% of your sales volume per month or else Paddle may "make you make changes."

Transitive Properties

The biggest benefit I've always seen to relying on Apple for IAPs is that Apple's hard-earned trust gets extended into our products. I've long-argued that if we could measure the conversion rate difference between IAP checkouts and web checkouts, IAP would beat web by more than enough to make the 30% fee worth it (not to mention the long-tail of subscription renewals on those checkouts, at 15%, or if you're making < $1,000,000 USD/yr and in the small business program also at 15%).

Today, numbers are starting to come out from people who initially jumped on the alternative-payment checkout options strategy showing just that: a 25% - 45% drop in conversion rate between IAPs and web-based.

(Keep in mind that's without adjusting for the additional 3-6% you'd pay in fees for web checkouts. That's the conversion rate, not your effect on earnings %.)

(Also keep in mind, as the video of the checkout process on that page shows, this is likely as smooth as the flow can get. This does not have the scary screen Apple added in the EU about "leaving to an untrusted external payment platform.")

And it makes sense: customers don't know us. Why would they want to trust some random app with their credit card number (not to mention entering that information is work)? They have no idea if Slopes is going to make you call a 1-800 number and sit on hold for 20 minutes to cancel your subscription, or if Slopes is actually going to take all the steps needed to secure the credit card information and prevent leaks. In a world of increasing scams and PII leaks, people will pause to consider things like this.

Remember, your goal when trying to convert a sale is to try to cause as little friction as possible. Make the user think as little as possible. "Enter your credit card information for this random app to start your free trial" is hardly frictionless compared to IAPs.

Services like AirBnB / Uber / Netflix have no problem grabbing credit card information because the customers already want or even need those apps. A lot of us don't have that advantage, we aren't big brands with high intent-to-convert users where you can force that on them. Hopefully we have good word-of-mouth, and those new customers will likely convert at the recommendation of their friend. But for everyone else who is just stumbling on your app, they'll think twice, or abandon checkout due to sheer laziness. And that's what the numbers are showing.

(Aside: I'm a little worried to see that the answer to this problem is "offer a discount!" Sure, it works to bridge that conversion gap, but devaluing your product is not a long-term sustainable solution here.)

Earning Trust

All that said I don't think the answer is to give up on web payments; we just need to look at them through a different lens.

Today, we offer free trials to give our products a week to prove our value to the customer. We don't just say "we're worth it, trust us!" like we used to with paid-up-front apps, we take a week to show them. And it works! It's a lot easier to convert this way than it ever was with paid-up-front apps and a splashy marketing page.

We need to treat the movement to web payments the same way: you need to first earn their trust, then you have a chance of moving them to a payment provider you choose.

The way I'm looking at all this is that IAPs are the best way to gather your first payment from a customer, especially if you have a free trial. They'll provide the least friction and highest conversion rate. From there, after you earn a customer's trust over time, you can try to move them over to the web, likely from other flows like emails. Maybe you have a black friday sale with a one-time discount to move them over. Maybe a year after they first subscribe, you offer a one-time 15% renewal discount if they move to web. Maybe you leverge the web to try to win back people who have churned out, or people who abandoned checkout.

There's a lot to experiment with here, and a lot to learn, as an industry. Just like you needed to experiment with things like the best time to show your paywall, you'll have to experiment with when's the best time to try to move them to the web.

Here's the spicy takeaway for me, though. This might just let us answer the big question we've long been unable to answer with anything but speculation: it looks like Apple's IAP service is worth their 30% cut (and without a doubt worth the 15% on renewals & 15% small business program devs). And I don't see Apple lowering their cut due to "competitive pressure" in that situation, the numbers are working in their favor.

I am very curious how the next few months/years will play out.