According to data from Statista, Android has an 86.2% share of the smartphone market, compared to 13.8% for iOS. What’s interesting to note, however, is that Apple attracts more customers who are happy to pay a premium for their device and indeed the software they use: whilst $47.9 billion was spent on the Google Play Store in 2021, $85.1 billion was spent on the Apple App Store, despite its much smaller market penetration.
With consumers increasingly receptive to in-app purchases and premium content on their devices, the chances are that you’ll want to tap into the market and build an app that could generate additional revenue for your business. Before you do, it’s worth taking a look at the App Store Small Business Program and understanding how you could benefit from it.
What is the App Store Small Business Program?
In an effort to increase fairness and create a level playing field in the developer world, Apple announced in 2020 that it would drop its App Store commission percentage from 30% to 15% for small businesses earning under $1 million from the App Store each year. The news came at the same time as the company faced a number of antitrust lawsuits in the United States, with many companies and developers claiming Apple’s 30% cut was uncompetitive.
Google announced a similar program in 2021.
For developers and brands that surpass the $1 million threshold in a calendar year, Apple will apply the standard commission rate of 30% to all future sales in the App Store, including sales of new apps, subscriptions, and one-off in-app purchases. Apple says that if proceeds fall below $1 million in a future calendar year, they can apply for the reduced commission rate again. In order to take advantage of the program, developers must be Account Holders in the Apple Developer Program, review and accept the latest Paid Apps agreement and, if working with a developer, list all of their Associated Developer Accounts for transparency.
App Store Small Business Program statistics
- The App Store Small Business Program is designed to significantly cut the amount of commission small businesses must pay to Apple when growing their brand on the App Store, but it’s good to see many businesses reach the threshold. According to one report from SensorTower, almost 1,000 app publishers earned $1 million for the first time in 2021, demonstrating the growth in consumer appetite for quality apps.
- Productivity apps have seen the biggest growth in recent years, with 21 publishers in the Productivity category reaching the $1 million net revenue milestone for the first time in 2021. 6% of all publishers with $1 million+ revenues have a productivity app.
- Across the Google Play Store, the Apple Store and other app markets, revenue is expected to top an eye-watering $935 billion by 2023 – truly impressive growth.
- New EU regulation could force Apple to allow third-party app stores on iOS, a move which could change the way we promote apps forever. As the App Store is a serious revenue generator for Apple the company will likely fight back, but it’s an important development to follow and could unlock new opportunities for businesses looking to reach more users and reduce their reliance on Apple and its unpopular “app tax”.
- Apple is also facing legal challenges over the way it handles payments on the App Store. In the Netherlands, for example, dating apps must be allowed to accept third-party in-app payment providers by law. Apple has allowed this but is taking a 27% cut of revenues. There are a number of ways to bypass App Store payment fees when selling goods and services inside an app, but some go against Apple’s terms.
How to benefit from the App Store Small Business Program
Whether you’ve already got an app on the Apple App Store or you’re building one, you’ll be able to take advantage of the App Store Small Business Program until you generate $1 million in revenue per year.
According to one 2020 study, the apps in the top 200 apps on the App Store earn around $82,500 each day but on average, apps in the top 800 earn around $3,000 per day, which is just over $1,000,000 per year.
If you want to maximise the benefits of the App Store Small Business Program, you should keep a close eye on your revenues from the App Store and consider offering some features and functionality away from the App Store, perhaps on a web app, to reduce your reliance on the platform and encourage consumers to pay using your preferred payment methods.
If you’re looking for help building an app for the Apple App Store or the Google Play Store, reach out to the award-winning software developers at Zudu. Give us a call on 01382 690 080 and be sure to check out some of our recent case studies for some app inspiration.