Back in April 2020 (which feels like 20 years ago now), everyone was rightly focused on the pandemic going on, and it completely dominated the news cycle. Something that seemingly slipped a bit through the cracks was Google’s decision to follow Apple’s lead and tackle shady app subscriptions on the Google Play Store. This very much needed policy change focuses on “building user trust through more transparent subscriptions”. Shady and predatory app monetization strategies have long plagued both app stores. While it’s great that Google and Apple are taking steps to address this, does it indicate a symptom of a bigger issue?
As a consumer you should at the bare minimum know if you are required to pay for a service or product and the amount required. In this article, we will look at some of the shady practices that twisted the word ‘free’ to mean anything but in the mobile world. But before we do that, we need to understand the different ways apps and services monetize themselves. Normally the distinction is separated as Paid, Freemium, and Free. But since these descriptions are too general let’s take a look at more in-depth differences and how companies mix and match these different app monetization strategies.
Common app monetization strategies
Remember in the old days where you would pay for a product and that meant you owned that product for good? The basic idea of a paid app is that a fee is required upfront to download the app and access it. Paid apps could include in-app purchases, but the main functions of the app are available after the initial payment. Paid apps still exist but pale in comparison to the revenues generated by so-called ‘free’ apps. According to Sensor Tower, Minecraft is the only ‘paid’ app you would find regularly in the top 100 grossing apps on the App Store. This says more about Minecraft being the phenomenon it is rather than about paid apps.
Free with in-app purchases
Going into the ‘free’ or ‘freemium’ category there are different ways to generate revenue. A very popular choice is offering the app for free and including optional in-app purchases that serve a variety of functions. This includes the hearts you buy on Candy Crush to continue playing instead of waiting or the cosmetic skins for your character on Fortnite. This is also how most e-commerce apps and services work. Whether you are buying a product through an app or paying for any particular service like a ride-share is done with in-app purchases.
Another popular option for companies that want a more stable income stream is the ‘free’ with a subscription model. Subscriptions are popular all across the software industry (SaaS), you may also be familiar with its cousin, licenses. The basic idea is that you pay an amount that subscribes you to a service covering a certain amount of time. If payments aren’t met then you lose access to parts or the full service. An example of popular free with subscription apps are streaming platforms (Spotify, Netflix, Disney+, Hulu, etc.). Some give you a free version usually full of ads (covered in the next type) and you pay a subscription to gain access or full access to the app.
Free with ads
Popularized by websites long before mobile apps. Ads help generate revenue for a developer to be able to offer their app for free. While the direction has been moving away from ads due to users generally disliking them, they still remain a very popular option. Many companies have ads even in subscription models and paid upfront apps.
A lot of apps are tied to existing services or banks for example and have no need to generate revenue from the app. And there are just free apps out there that seemingly don’t cost anything, you know, like Google…
It should be noted that these types are not mutually exclusive and many apps try mixing and matching different ways to generate revenue.
The true cost of shady app monetization strategies
It’s natural that developers and companies are looking for different ways to generate revenue, so where does the problem lie? To best answer the question we need to take a look at the issues consumers face and how the different ways apps monetize themselves lead to them.
One of the biggest issues that consumers face is being misled, this was alluded to at the beginning of the article as a result of the policy changes by Google and Apple. Simply put misleading a consumer involves false, misleading, or deceptive information in regards to the app and the app monetization.
Apps have gotten very creative with how they can mislead consumers in order to squeeze as much money out of them. An app can mislead slightly by saying an app costs $8/month and charge a lump sum of $60 for the entire year for example. Or a common method used by scammy apps is charging consumers absurd subscriptions automatically at the end of a free trial. Permissions and agreements to pay are hidden in fine prints with pop-up ads spamming users to pay all of which leads to users not knowing what they agree to.
There are a lot of different ways apps can go about this, and these apps can generate millions of dollars as a result. Worst of all their ratings can seemingly be high on the App Store and still be advertised as a completely free app.
Problematic by design
With the rise of mobile apps and especially mobile games, developers could no longer reasonably charge $60 out of the gate. Coming up with different ways to generate money led to the rise of ‘microtransactions’ or ‘in-app purchases’ as it is officially called. These microtransactions are as the name indicates small monetary purchases. Using the example above of buying lives to keep playing a game such as Candy Crush led to a change in game design.
These companies want to squeeze as much money as possible from their consumers and therefore fundamentally changed how these mobile games work. A game focuses on being as addictive as possible and letting the user play as much as they want early on. After a certain point where the game is confident enough that the user is hooked, they start gating content in a shady way.
One of the biggest culprits is the X lives per day mechanic. Where if you were to lose a couple of times (which you are likely to do as games are designed to get exponentially more difficult) you would be forced to wait until you can play again. At that point, the game provides a second option of paying a small amount of money to keep playing and make things easier. This problematic game design preys on its users being addicted by nickel and diming them to get as much money as possible out of them. When games optimize for this, it results in users not being able to make meaningful progress without paying under the guise that they lack the skills (when that isn’t the case).
Costing something other than money
Despite the shady practices and misleading involved in the previous examples, as a consumer, you will be at least aware of what the app costs you even if it is after the fact. You may or may not have heard the phrase: “if you aren’t paying for the product you are the product”. This leads to the biggest offenders which are the apps that are free but cost you something other than money. In most cases, the cost of you using a free app is your data.
Pay-for-data schemes are a huge threat to consumer rights and privacy. The main problem is they are so common that they’re almost impossible to avoid. Even apps that are seemingly harmless like Pokemon Go are one of the biggest culprits. And unlike shady subscriptions, it is much less likely that Google and Apple are willing to put a stop to it. The fact of the matter is that your Smartphones are data-collecting machines designed to benefit the likes of Google and Apple first and foremost so it is unlikely that they are the ones that will put a stop to it.
What to do?
It is not reasonable that anyone will stop using smartphones or apps anything soon. It’s important to find different ways to tackle the constantly misleading and predatory practices companies do or how to avoid them as one of these companies.
As a consumer
Here are a couple of suggestions that definitely don’t solve the problem, but might save you or someone you know from being scammed one day.
- Read the fine print. No one likes to read the fine print and that’s what these companies count on.
- Go through the actual reviews. Don’t settle for the rating on the outside, there are a lot of like-minded users that would’ve already assessed the monetary practices of the app.
- Unsubscribe the second you no longer want to use an app, don’t just delete it.
- Use VPN apps and any other data protection tools at your disposal.
As a mobile developer
If you are a part of a mobile team or developing an app and want to avoid these bad app monetization strategies here are a couple of suggestions:
- Communication is key. Being very upfront and clear with your users can solve almost all issues.
- Listen to user feedback and iterate on your revenue streams to adapt to a constantly changing market.
- Make sure all your security is up to standard. If users are expected to trust you with their private information and money then you need to ensure the security of both.