Content
Stay up to date on the latest happenings in digital marketing
When Twitch cofounder Justin Kan references centuries-old railroad monopolies in a podcast on in-app payments, you know you’ve got something interesting going on. Having sold Twitch for almost a billion dollars (and multiple other startups over the past decade) he’s now building Stash, a direct-to-consumer mobile payments platform that lets games escape platform purchase fees and boost revenue by 30%.
For some older and very established games, as much as 80% of their revenue is off-platform, and therefore not subject to app store fees.
In fact, Stash believes that 50% of all in-app revenue will move to owned channels over the next few years.
I recently chatted with Kan as well as Archie Stonehill, who leads product at Stash, for the Growth Masterminds podcast.
Hit play and keep scrolling …
Railroads and mobile payments
So what do railroads and mobile payments have in common?
I’ll let Kan explain:
“What we’ve seen in the last 20 years around social and mobile is very parallel to what happened 150 years ago as America went through industrialization. You had this rise of these big robber baron monopolies and oligopolies around railroads and banking and I think at a certain point, the American people decided that that was too much concentration of power, and they created antitrust legislation to take power from the oligopolies.”
That’s where Stash comes in.
Stash builds D2C player experiences including web shops and desktop launchers that let game developers engage directly with players — sell directly through them — and retain more revenue. Stash offers tools like loyalty programs, matchmaking, and custom player experiences all intended to fit, mirror, and be a natural extension of your game.
In other words, avoiding the big in-app purchase monopolies.
What does owning mobile payments do for games?
What’s that do for game publishers?
More money in their pockets.
“It’s unsurprising for us to be getting 30% uplift on net revenue from direct channels, as well as a bunch of other non-direct financial benefits,” says Stonehill.
Stonehill doesn’t recommend games entirely drop in-app and on-platform payments, of course.
No matter how good your web shop is, it’s guaranteed to have more friction than a simple look-at-your-phone-and-click-twice to pay. So no one but the most granola-chewing anti-capitalist rebel die-hard is going to go to a web browser, navigate to a page, pick a product, add it to cart, check by entering the credit card, and then going back to the game for a 99-cent gem.
It’s your top players who provide most of your revenue anyways who will do this. And they’ll do it because you’ll give them a better deal than the on-platform mobile payment system.
You’ll still make more money for 4 reasons:
- You’ll pay 5% for the credit card transaction, not 30%
- People spend more when they get discounts
- You’ll develop a more loyal multi-platform customer who is actually your customer, not Apple’s or Google’s
- You’ll have multiple means of communicating with your customers off-platform (email, SMS) as well as on-platform (in-app messages, push notifications, etc.)
Top-performing games using these D2C monetization strategies can generate 30–50% of their revenue outside app stores, Stonehill says. And some older games with extremely loyal users see even higher percentages: up to 80%.
How is this legal/compliant/safe?
First off, laws have changed significantly, especially in Europe under the Digital Markets Act. The DMA designates both the App Store and Google Play as core platform services provided by gatekeepers, which means the EU requires Apple and Google to enable interoperability, third-party app stores, and much more.
In fact, I said as early as 2022 that the DMA would change app stores as we know them. We’re already seeing this: the Epic Games Store is being pre-installed on millions of smartphones from a major European mobile carrier.
In the United States, Epic Games v. Apple revolved around Apple’s App Store policies and its control over in-app payment systems, and the court ruled that anti-steering requirements in the App Review Guidelines violated California’s Unfair Competition Law. That ruling — which is under appeal — required Apple to allow developers to include links or buttons in their apps that direct users to external payment options, bypassing Apple’s in-app purchase system.
Similar things are happening in multiple other countries.
Where this all ends up, and how long it takes to achieve a final resolution, is anybody’s guess.
But those same actual Apple app guidelines themselves, as currently written, offer a method for game publishers to offer off-platform purchases for virtual objects in their games. The key rule is in guideline 3.1.3(b), which states that:
Apps that operate across multiple platforms may allow users to access content, subscriptions, or features they have acquired in your app on other platforms or your web site, including consumable items in multi-platform games, provided those items are also available as in-app purchases within the app.
Translation: multi-platform apps that offer services across different platforms (e.g., mobile, desktop, or consoles) can take payments on their other platforms and allow users to access that content within the app, provided they don’t link to or promote external payment options within the iOS app. Which is probably a big part of the reason why companies like Stash also offer mobile launchers for games so that they can be started and played on your Windows or Mac desktop machine, not just a smartphone.
Depending on how the Epic Games v. Apple case and others like it go, it could get even easier to offer multiple payment options, including right in your app.
Which, of course, is likely to be a key driver in boosting off-platform in-app purchase revenue to 50% of all in-app revenue.
Yep, there are some caveats
This doesn’t necessarily work for everyone and every genre.
“There are some genres that are much more suited for this than others,” Stonehill says.
First of all and unsurprisingly, you need to have in-app purchase revenue in order to save money on not paying app store fees. (Duh.)
But it also depends on the genre of your game.
“The genres where you’ve seen the most uptake are midcore and Casino, for sure,” he adds. “And within midcore you have RPG and Strategy, and to some extent Shooter as well, and then Casino and all derivations of Casino have been massive in this market. Monopoly has a phenomenal web store, for example … and then to some extent other genres like Puzzle or Simulation.”
How do you get to 80% revenue from your own store?
“Some games from major, major publishers are doing north of 50 or 60%, depending on the specific profile of that game,” Stonehill says. “Often if you have hyper whale monetization or you are a pretty old game with users who have been playing it for a very long time, who are very bought in, who are very regular spenders, you can get your numbers up to 70 or 80%.”
So it doesn’t work for everyone.
And the more established you are, the more engaged and loyal your players are, the better your odds of success.
Much more in the full podcast
As usual, check out the full podcast for much more, including:
- 00:00 Introduction and Historical Context
- 00:53 Introducing the Guests
- 01:24 Stash: Direct Consumer Player Experiences
- 03:22 Regulatory Changes and Market Impact
- 03:38 Justin’s Perspective on the Gaming Industry
- 06:41 Financial Benefits of Direct Channels
- 10:59 Future of the App Economy
- 16:58 Regulatory Developments and Legal Battles
- 20:21 Historical Parallels and Future Predictions
- 25:11 Closing Remarks and Future Updates
