As ad revenue declines, social networks turn to in-app purchases

The big social networks have so many users because they provide services for free and didn’t even show ads for a while. Their apps then became major ad networks, but their ability to serve the right ads to the right users has declined with Apple’s new privacy policy.

With Apple’s introduction of its App Tracking Transparency (ATT) policy, the advertising market has changed and other revenues have been needed to keep profits growing. Facebook*, Instagram*, TikTok, Twitter, and Snapchat still don’t have paywalls, but they all now offer in-app purchases (IAP) products/services that Apple and Google get a cut out of.

Here are the highlights:

• The top social apps (TikTok, Facebook, Instagram, Snapchat, Twitter) combined have increased quarterly IAP revenue by 91% since Apple introduced ATT.
• Snapchat+ now generates an average of 20% more daily IAP revenue than Facebook.
• TikTok made $205 million more than Facebook, Instagram, Snapchat and Twitter combined from IAP revenue in 2023.

Snapchat

Last July, Snapchat launched Snapchat+ for $3.99/month or $39.99/year. Since its launch, the product has generated $25 million for the company. Apptopia’s score is what the company takes back after charging a percentage of the store.

Initially, it was possible to get an idea of ​​the initial retention of Snapchat+ subscriptions by checking in-app purchase revenue on the 11th of each month. On this day, most people paid a monthly fee for the product. But things got confusing over time as more people join or pay for an annual subscription on different days. It is important to know that although daily income fell at some point, then it began to rise again. See how Snapchat’s daily global IAP revenue compares to Facebook’s:

Facebook’s revenue is much more consistent and spikes higher, but when Snapchat+ first launched, it had days when it topped Facebook’s revenue. What stands out is that Snapchat’s daily revenue since February 9 has been higher than Facebook’s. Snapchat+ now generates an average of 20% more in-app purchase revenue than Facebook. That number is likely to rise as the company just announced the launch of “My AI”, a new chatbot using OpenAI GPT technology included in the Snapchat+ offering.

Twitter

Twitter Blue launched last November at $8/month or $114.99/year. A subscription fee allows users to edit their tweets, use NFT profile pictures, get priority in discussions, and more. So far, Twitter has made $2.5 million through IAP since the launch of Twitter Blue.

Twitter’s revenues are rising, but the difference between iOS and Android revenues is larger than other major social apps. Twitter has an average monthly gap of 2859%, Snapchat is 902%, Instagram is 293%, and Facebook is just 52%.

Facebook and Instagram

Facebook IAPs are bought by fans to pay their favorite creators for things like exclusive content. These IAPs were launched in March 2018. The company just launched Meta Verified, but this revenue is not visible yet. Instagram IAPs are essentially designed for the same thing and were launched in the summer of 2020.

In 2022, Facebook made $56 million through IAP, while Instagram only made $3.6 million.

In the fourth quarter of 2022, Instagram saved Meta from its third quarterly drop in a row. The photo app’s revenue has been steadily rising since last June. While the top social apps combined have increased quarterly IAP revenue by 91% since Apple introduced ATT, Facebook hasn’t been the driving force behind it, to say the least. The income of the largest social network during this period fell by 33%.

TikTok

TikTok has had IAPs since its inception and has generated a whopping $1.5 billion in app revenue last year. Its IAPs are similar to Facebook in that users pay for coins that can be used to tip and pay for things from their favorite creators.

TikTok’s revenue grew for seven consecutive quarters, with the fourth quarter of 2022 being the biggest quarter ever (+13.6% year-on-year). This shows that other applications just starting a business with IAP have a very high benchmark. While some social apps like Discord and Yubo are already using IAP, others like Pinterest haven’t even upvoted them yet.

With the iOS advertising landscape changing, Apple convincing consumers of the importance of privacy, and Google making similar changes soon , it’s likely that we’ll see more social media apps invest in increasing their revenue through IAP.