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MOBILE APPLICATION DEVELOPMENT · HUGH KIMURA · MARCH 2014

Everything Developers Need To Know About App Store Transaction Costs

How developers can figure out their transaction costs for Google Play and iTunes.

One thing that you need to take into account when deciding on a business model for your app are the costs that are involved and the actual profit that you will get every time someone buys your paid app or pays for an in-app purchase. This should be part of the research process that you do before developing an app.

This post will give you a complete picture of the transaction costs that are involved when you create an app for Google Play or iTunes. If you have a free app that only monetizes with ads, then this post will not apply to you, but you still may want to read it if you want to implement an upfront cost or in-app purchases in the future.

Google Play

lt="Google Play fees

Google takes a flat 30% of all app sales and in-app purchases. If you have a paid app, be aware that you can change the price at any time, but if you change that price to free, you cannot start charging for it again. The only solution is to create another version and charge for it. This isn't a transaction cost per se, but it can end up costing you time and money if you do not know about it.

Google Play customers can get a refund on an app purchase within 15 minutes of downloading. In this case, you don't lose any money, the entire transaction is simply reversed. Your transaction fee will also be refunded in the case of a chargeback.

If they do not do it within that timeframe, Google instructs buyers to contact the developer directly. To keep customers happy, you will probably have to refund the full price of the app. Since you got 70% of the transaction, but are refunding 100% of the transaction, you obviously don't want to be doing that too often.

To protect yourself, you should publish policies that clearly state how you will handle these situations. Of course, making a quality app also goes a long way to keeping your refunds low.

This refund policy does not apply to in-app purchases however. In this case, the refund is at the sole discretion of the developer. Again, you should establish clear refund policies, should this issue arise.

Although Google's transaction costs are very straightforward, their refund policy can be tough on developers. Knowing this, you should factor in a certain percentage of your revenue to account for refunds until you get a good idea of your refund rate.

iTunes

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Like Google, Apple also takes 30% of app sales and in-app purchases. No surprises there. They also charge 30% of any iAd revenue that your app generates.

They treat refunds much differently however. Apple sells apps and in-app purchases on an "as-is" basis and will only refund money on a purchase if the app does not work or you are not able to download it.

This is much more developer friendly, but if Apple does issue a refund on your app, they still keep the 30% transaction cost, so that is something that you should be aware of. As long as you have tested your app properly and it works as advertised, you shouldn't have too much of a problem with refunds and eating the transaction costs.

Other Costs

Now let's take a look at costs that apply to any app store that you sell your apps in. If you sell your app in other countries, currency fluctuations that go against you can end up costing you money.

To hedge this risk, Google automatically converts the price of your app to other currencies, based on the current exchange rate. You can also manually override pricing in individual countries.

Apple's pricing structure is based on tiers and they follow a similar policy when converting your home currency into other currencies. However, if you would like to set your own pricing in other countries, you can also use their alternate price tiers.

lt="The Apple price tiers for apps

Also be sure to take into account taxes when figuring out your revenue. This can vary greatly by state and country.

Conclusion

So that is what you need to know about transaction costs when selling an iOS or Android app on iTunes or Google Play. There are a few other things that you have to take into account beyond just the app store cut and we hope that this post will prevent you from being caught off guard.

Did we miss anything? Let us know in the comments below...


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Hugh Kimura

Written by: Hugh Kimura, Head of Content

Date: March 2014

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