Sub Club by RevenueCat
Why Most Apps Hit a Revenue Ceiling (and How to Plan for It) — Patrick Falzon, The App Shop
Episode guests
Podcast summary created with Snipd AI
Quick takeaways
- Focus on finding the right market fit to avoid overcrowding and enable sustainable growth.
- Build portfolios of successful apps for risk diversification and steady revenue streams.
- Prioritize app clarity over additional features and consider launching complementary apps to maintain focus.
- Conduct price testing with precision using early retention patterns to model long-term subscriber impact.
Deep dives
Effect of Subscription App Business Experience at Mosaic and Beyond
Engaging in early app business transitions from paid to subscription models at Mosaic showcased growth potentials and operational insights. The shift to subscriptions drove phenomenal growth and expanded opportunities in app market strategies. Through managing acquisitions like iTranslate and Teltec, revenue growth was closely monitored, adapting to the evolving subscription industry dynamics.
Market Sizing and Strategic Portfolio Development for App Acquisitions
Strategic app acquisitions required deep analysis into market size and competition dynamics to ensure profitable portfolios. Focusing on app depth over breadth, acquisitions like RoboKiller hinged on market leader positions and distinct, sustainable value propositions. Avoiding overly competitive spaces like VPNs due to high customer acquisition costs, Mosaic aimed for markets where they could achieve significant market share and enduring value.
Retention Strategies and Considerations for Subscription App Growth
Understanding user retention's vital role in sustainable app growth, strategic planning considered cohort retention rates over extended periods. The challenges of hitting revenue ceilings in the $10-30 million range led to strategic focuses on cohort retention and expansion of user base for long-term growth stability. Despite potential growth constraints, the emphasis remained on cohort-based retention and building sustainable, long-term revenue models.
Tactical User Acquisition Insights and LTV Management in App Business Operations
User acquisition tactics and managing customer lifetime value involved intricate evaluations of pricing models, marketing channels, and churn rates. Price testing impacts on subscription renewals and retention rates necessitated cautious approach adjustments for short- and long-term profitability. Balancing short payback periods with sustained high LTV to CAC ratios required iterative testing and scenario sensitivity analysis to optimize customer acquisition strategies.
Strategic Approaches and Insights for App Business Exits and Acquisitions
Strategic exits and acquisitions in the app industry necessitated tailored approaches for financial and strategic buyers. Understanding potential buyer pools, product valuation metrics, and market dynamics influenced exit strategies towards private equity or strategic acquisitions. Emphasizing operational efficiency, product branding, and readiness for potential exits allowed for diversified growth opportunities and tailored outcomes in the competitive app market.
Understanding Future Performance Metrics for Subscriptions
When analyzing future performance metrics for subscriptions, several factors can serve as predictors to understand the impact of price changes and retention rates. Short-term subscriptions can be used to extrapolate the impact of price increases, while past retention rates from similar price adjustments can indicate future trends. Additionally, tracking metrics like trial-to-paid conversion rates can provide valuable insights into retention levels. However, early cancellation rates may not effectively predict churn, with engagement and key user actions serving as more reliable indicators.
Navigating Customer Acquisition Costs and Strategies
In managing customer acquisition costs and strategies, a balanced approach between organic and paid channels is crucial. By dividing the focus into blended and paid-only perspectives, companies can evaluate the profitability and growth potential of their acquisition efforts. Understanding the impact of marketing channels on both paid and organic growth is essential, with an emphasis on optimizing cost-per-install, cost-per-trial, or cost-per-subscriber metrics based on the specific monetization strategy. Moreover, conducting incremental analyses and testing creative variations can enhance the effectiveness of acquisition campaigns.
On the podcast: estimating the revenue potential of an app, crafting an exit strategy, and why LTV is such a terrible metric.
Top Takeaways:
🎯 Finding the right market fit – Not all apps have billion-dollar potential, and chasing massive markets often means competing with big players. Instead, focus on markets where your app has room to stand out. By positioning yourself in a "Goldilocks zone"—big enough to scale but niche enough to avoid overcrowding—you’ll lay the groundwork for sustainable growth.
📈 Portfolios over all-in strategies – Instead of putting all your effort into scaling one app, building a portfolio of smaller, successful apps can diversify risk and drive steady revenue. Portfolios give you the flexibility to test new ideas and spread your earnings across multiple use cases, avoiding the pitfalls of over-concentrating on one product.
🔍 When to expand features or create a new app – Apps with focused, singular value propositions tend to attract and retain users better than those overloaded with features. Before adding more functionality, ask: Does this align with the app’s core mission? If not, consider launching a complementary app to avoid cluttering your existing product.
🧪 Price testing without regrets – Effective price testing requires patience and precision. Run small tests, and use early retention patterns—such as trial-to-paid or monthly renewal rates—to model the impact on long-term subscribers. Always prepare for possible retention dips by planning worst-case scenarios to protect your bottom line.
✍🏻 Set up for a strategic exit – If acquisition is your goal, build your app to be buyer-ready. Private equity and strategic acquirers look for apps with clean operations, predictable revenue, and scalable systems. Crafting a clear differentiation and avoiding operational mess increases your chances of attracting high-value offers and makes the process smoother.
About Patrick Falzon
👨💼 Co-founder of The App Shop, Patrick helps app developers build sustainable portfolios, optimize monetization, and prepare for strategic exits.
📈 With extensive experience in app monetization and growth strategies, Patrick is focused on creating streamlined user experiences while identifying opportunities for sustainable scaling and market differentiation.
💡 “A big market is great only if you can take a substantial or specific share of that market. If it’s so competitive that you can’t garner any market share, it’s not actually valuable to you."
👋 Patrick on LinkedIn
Resources
The App Shop website
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Episode Highlights
[1:41] The story begins: Patrick’s career evolution — from investing in to operating at Mosaic Group.
[7:59] A stand-out app: Why RoboKiller, an app for blocking spam calls and texts, stood out in Mosaic’s portfolio.
[9:07] Evaluating market size: Mosaic’s framework for assessing an app’s revenue potential balances market depth with competition and user demand.
[14:20] Tough markets to crack: Mosaic avoided saturated app categories (like VPNs and personal finance), due to high acquisition costs and competitive pressure.
[19:36] Depth vs. breadth: How Mosaic decided whether to enhance existing apps or create new ones.
[25:52] Portfolio strategies: Building a diverse portfolio of smaller apps, instead of scaling a single app, can reduce risk and increase sustainable revenue.
[32:14] LTV pitfalls: Patrick stresses the importance of capping LTV projections and focusing on shorter payback periods to make realistic growth decisions.
[39:20] Exit strategy: Aligning operational processes, profitability, and a clean setup improves the chances of a successful app exit.
[49:12] Retain to sustain: Why user retention metrics are key to building durable, long-term revenue.
[1:01:05] Good press: How Mosaic leveraged proprietary data to secure media coverage, boosting RoboKiller’s organic growth and user trust.
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