Why iOS 14 & In-app Purchases are Killing In-App Ads

Is it really time to wave in-app ads goodbye? Let’s explore the major changes that Apple has made in iOS 14 and how those changes will drive app marketers’ and app developers’ decisions. So without any further ado, follow us into the rabbit hole that is iOS14 — we are hoping to uncover some insights that can really make a difference when it comes to app profitability.

We previously discussed how iOS 14 IDFA opt-in is going to push advertisers to buy more web traffic (and much less in-app traffic). This is going to siphon out developers’ revenue that is normally generated by in-app ads. And top it off, this is not the only reason for the reduction in revenue. Thanks to in-app purchases (IAPs), app developers are generating more and more profit from those users who want to buy the full version of the app in question, which will end up removing the displayed ads.

According to an October 2nd Business of Apps article,

“There was a 11% drop in ad revenues during H1 2020 while in-app purchase revenues rose 15%”.

This money is making developers focus more and more on IAPs while ignoring the money they get from ads. The article continues…

“Of the top 250 iOS apps, 94% use subscription models.”

This of course is generally good for final users, as they will experience less intrusive ads and are gaining a better user experience overall from the app itself. On the hand, app developers will try to push more & more the users to activate premium paying features in order to gain back lost revenue.

Realistically we should look at this transition as something that is overall relatively positive considering the alternatives. In essence, what is technically better? A clumsy and usually also frustrating user experience on an app caused by an over-abundance of ads, or paying a few extra bucks a month to get full/premium access to an app that provides something useful?

The polar opposite often happens on many websites. There is a flourishing ecosystem that uses ads as the one and only source of revenue. The lack of a valid, feasible alternative has forced website publishers to create revenue streams strictly from ads. This has generated websites so full of intrusive ads that, before being able to read an article, you literally have to spend some time closing the ads. User experience is definitely not great, but as fas as we know this is still the best way to monetise the web ecosystem.

As almost all of us are aware, other solutions involve annoying paywalls, which usually end up feeling more like irritating blockades to our surfing of the web than opportunities to gain access to better content and /or user experience. People will often simply turn away and just not come back to the website so it’s imperative to strike a balance in revenue-making techniques that don’t annoy their users. The New York Times website is a very powerful alternative to this model, as they pioneered a paywall that works both for the company and for the final users (i.e. it’s not perceived as bad by most users).

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The ultimate solution is always to provide users with tangible value added, that they will be willing and happy to pay extra money for (even the medical industry has figured this out about apps). People hate feeling like the content they are trying to access is being held hostage, or like they are being robbed of their well-earned money. In today’s totally over-saturated world of apps, ads, and visual stimulation, it gets harder and harder to gain true users and followers (i.e. paying users) using rich content and smart marketing. It therefore becomes critical to identify that key value proposition that will attract the right people to you, and also retain them. People are becoming more and more willing to pay for subscription services if they truly provide them the value that they are looking for.

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