With advertising revenue declining, the big social apps turn toward in-app purchases

The big social networks have so many users because they provide a service for free, and for awhile, did not even show ads. Their apps then became large ad networks, but their ability to get the right ads in front of the right users has dropped off with new privacy policies from Apple.

With Apple introducing its app tracking transparency (ATT) policies, the advertising market has shifted and other revenue streams are required to continue growing profits. Facebook, Instagram, TikTok, Twitter and Snapchat are still without paywalls but they now all offer products/services for charge via an in-app purchase (IAP), which Apple and Google get a cut of. Before we dive into each app, here are the highlights:

• Top social apps (TikTok, Facebook, Instagram, Snapchat, Twitter) combined have grown quarterly IAP revenue 91% since Apple introduced ATT.
  
• Snapchat+ is now averaging 20% more daily IAP revenue than Facebook.
  
• TikTok has generated $205 million more than Facebook, Instagram, Snapchat and Twitter combined, via IAP revenue, so far in 2023.

Snapchat
In July, Snapchat launched Snapchat+, offered for $3.99/month or $39.99/year. The product has provided the company with $25 million since launch. Apptopia estimates are what the company takes home after store fees are levied. 

We can get a feel for the initial retention of Snapchat+ subscriptions by checking the IAP revenue of the app on the 11th of every month. This seems to be when most people pay their monthly fee for the product. But over time things get muddy as more people join or pay for annual subscriptions on different days. What’s important to know is that while daily revenue was falling, it’s starting to grow again. Look at how Snapchat’s daily global IAP revenue compares with that of Facebook’s:

Facebook’s revenue is much more consistent and spikes higher, but when Snapchat+ launched, it very quickly had days where it spiked above that of Facebook. What’s eye catching is that Snapchat’s daily revenue has been above that of Facebook’s every day lately, starting on February 9th. Snapchat+ is now averaging 20% more daily in-app purchase revenue than Facebook. It’s possible this number grows as the company just announced the launch of “My AI,” a new chatbot leveraging OpenAI’s GPT tech, included in the Snapchat+ offering.

Twitter
Twitter Blue launched in November of last year at $8/month or $114.99/year. Paying for the subscription enables users to edit their tweets, use NFT profile pictures, get priority ranking in conversations and more. So far, Twitter has generated $2.5 million via IAPs since Twitter Blue’s launch.

Twitter revenue is growing but there is a larger disparity between its iOS revenue and its Android revenue than the other big social apps have. Twitter’s average monthly gap is 2,859%, Snapchat’s is 902%, Instagram’s is 293%, and Facebook’s is just 52%. 

Facebook & Instagram
Facebook’s IAPs are purchased by fans to pay their favorite creators for things like exclusive content. These IAPs launched in March 2018. The company did just launch Meta Verified but that revenue won’t be seen just yet so you’ll have to check back in soon. Instagram IAPs are essentially for the same thing and launched in the summer of 2020.

In 2022, Facebook generated $56 million via IAPs while Instagram only took in $3.6 million.

In Q4 2022, Instagram saved Meta from having a third consecutive quarter-over-quarter drop. Revenue for the social photo app has been growing consistently since June of last year. Even though the top social apps combined have grown quarterly IAP revenue 91% since Apple introduced ATT, Facebook has not been a driver of that stat, to say the least. The blue app has seen its app revenue drop by 33% over that time period.

TikTok
TikTok has had IAPs since its very beginning and its app revenue last year was a whopping $1.5 billion. It’s IAPs are similar to Facebook’s in that users pay for coins which can be used to tip and pay for things from their favorite creators.

TikTok’s app revenue has grown for seven consecutive quarters, with Q4 2022 being its largest quarter ever (+13.6% YoY). It shows other apps just getting into the IAP business that there is a very high ceiling. While some social apps like Discord and Yubo are no stranger to IAPs, others like Pinterest have yet to launch any.

Given that the iOS advertising landscape has shifted, Apple has sold consumers on the importance of privacy, and Google making similar changes soon, it is likely we see more social networking apps invest in growing their revenue via IAPs.