This Week in Apps - Japan Gets Serious

This Week in Apps is a short, no-fluff, round-up of interesting things that happened in the mobile industry. Here are our top highlights.

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U.S. Revenue Index (vs. 30 days ago)

Insights

1. Get Ready for a Revenue Drop Thanks to Japan’s Consumption Tax Soon

Next month, Apple and Google will begin collecting Japan's Consumption Tax from developer proceeds. You may not think this is a big deal, but for thousands of developers this means revenue will drop by 10% starting April 1st - and that's not a joke.

Now that I have your attention, let's talk about Japan's new-old tax on in-app purchases.

Back in 2015, Japan changed the Japanese Consumption Tax (JCT) to include digital downloads and in-app purchases. The tax was to be collected from all revenue generated in Japan, whether by a Japanese company or not.

If you're a developer and think, "have I ever paid taxes in Japan?" the answer is probably no. See, while the tax was mandatory, enforcing it for non-Japanese companies and individuals selling apps was nearly impossible, losing Japan hundreds of millions of dollars every year.

That's changing next month. If you're making money with your app or game in Japan, pay close attention.

Starting April 1st, Japan shifted the burden of collecting JCT to the App Store and Google Play directly, and both will automatically deduct the tax, 10% of all proceeds, and pass it directly to the government. So your revenue will dip 10% next month.

I was curious to see how much money we're looking at here so I used Explorer to sum up revenue from Japan and then filtered out apps and games made by non-Japanese developers. It's quite a bit more than I expected.

According to Appfigures estimates, Japanese consumers spent $1.2BM in February in the App Store and Google Play. Roughly half of that, $652M, was on apps published by non-Japanese companies. 10% of that means the Japanese government would have kept $65M of that as tax. It didn't because the new ruling goes into effect in April, but as revenue continues to grow this total will likely add up to more than a billion dollars in the next 12 months!

Games will take the biggest hit. According to our App Intelligence, the majority of revenue from Japan comes from games, who stand to lose around $42M per month. Entertainment, Books, Photo & Video, and Music round out the top five, but all of those are in the low single digits.

Should you increase your price? I expect many developers will increase the price of their apps in Japan by 10% to prevent revenue drop, but that may hurt more than it could help.

Not all categories can sustain big price increases, so doing so blindly could lose you more money than it'll save. It's early enough that you have time to compare your revenue to the competition and the market.

Want me to do a live stream to talk about pricing? Let me know.

2. Microsoft is Shutting Down Skype, but Demand is Still High

Skype's days are numbered. Microsoft has officially announced it'll pull the plug in May, steering users towards Teams instead, and I have so many questions. Mostly, is anyone still using Skype? And, what does this really mean for Microsoft's position in the hyper-competitive communication market?

Skype predates mobile apps, having launched in 2003 and going mobile as soon as the App Store and Google Play opened up. You'd expect that in 2025, so many years later, the app won't get (m)any downloads. After all, Zoom has changed the market for communication, right?

Wrong!

Although Skype's downloads are down 70% since 2018, Appfigures estimates show the OG Zoom saw 17M new downloads in 2024. And that's after years of being ignored and choked by Microsoft, which bought he company back in 2011.

That's more downloads than Slack, a platform many businesses think is the only solution to communicate, and an app that's actively being marketed.

So, why is Microsoft shutting Skype down now?

To compete with Zoom. Oh the irony. When Skype launched, it became the communication tool for many. The internet was fairly young and video chats weren't as common. Skype changed that and quickly became the communication tool for teams, companies, and even governments.

If you remember the 2000s you probably remember seeing Skype's logo on a live broadcast.

But those were the old days. These days, Zoom is the leader and Microsoft's Team platform isn't. It's second, at least in terms of downloads. According to Appfigures App Intelligence, Zoom was downloaded 126M times in 2024 from the App Store and Google Play while Team was downloaded 98M times.

It's not that big of a gap. Pushing Skype's users to Team would close that gap and potentially even turn the trend, and that's probably why Microsoft is shutting it down - to consolidate its user base and focus it on becoming the leader. And with more than 250M downloads since 2018, according to our estimates, Skype has the potential to make Teams the leader.

I'm not sure it will so I'll be watching the space to see where users go. It'll be an interesting opportunity for other competitors.

3. Data Show Apple Search Ads Might Be a Requirement To Grow on the App store

Apple Search Ads has become the go-to ad platform for many app makers. And not just the big guys, lots of indie developers are spending their hard-earned cash on ads in the App Store because it gets results.

Side note: Watch this to make sure you set your campaigns up properly.

The obvious question is obvious - is it necessary to use Apple Search Ads to compete in the App Store?

I analyzed the top 100 grossing apps in the US App Store using Appfigures Search Ads Insights to see who's using Apple Search Ads and who isn't. Last time I did this, I noticed apps were more likely to use ASA while games were not.

This doesn't seem to be the case any more.

My analysis showed that 80 of the top 100 grossing apps and games in the US App Store have used Apple Search Ads in the last 30 days, most within the last few days. And that 80% includes both apps and games.

I expected all/most apps to use ASA but not games, so to see Monopoly Go, Royal Match, Last War:Survival, Candy Crush, Pokemon Go, and almost every other game on the list using Apple Search Ads is a clear indication of just how relevant they are.

So, is it a necessity to use Apple Search Ads? Probably not, but it seems like a disadvantage.

Looking at the 20% that aren't using ASA, the pattern was fairly clear - They're all category leaders who spend more on branding elsewhere. A few are also feuding with Apple over fees which is probably why Disney+, Hulu, and Netflix aren't.

If you're not a category leaders I think the answer is clear - use Apple Search Ads, but make sure to do it right.

FYI - We just rolled out a new feature that shows you which apps pay to advertise on any keyword you choose using Apple Search Ads. Use it to identify competitors and to make sure you're spending your money wisely. I'll give an upgrade discount to the first 10 readers who want to try it out.

4. This is Where AI Shines (and Generates Millions)

AI is the hottest trend in mobile apps in the last year and that's not changing any time soon. For many developers, AI apps = thin wrappers or image generators, and even though those are the highest earners, they're not where new opportunities are.

The data shows, and I agree, that what will succeed in the future involves making tedious tasks simpler with AI.

Cal AI is one such example.

In case you aren't familiar, Cal AI makes tracking calories simple by using your camera and AI to turn pictures of your food into calorie counts. Having counted calories in the past, I know exactly how tedious it can be and love this "lazy" approach.

I'm not the only one.

According to our App Intelligence, consumers spent $2M in Cal AI in February, the app's biggest month of revenue since release, and 8% more than its January haul. Since its release, Appfigures estimates show Cal AI's users spent more than $10M on "lazy" calorie counting, and the trend isn't slowing down.

Cal AI's ARPI (average revenue per install) stand at $2.63 which isn't crazy high but is very decent and likely what enables the app to scale using paid ads. Appfigures Search Ads Insights data shows the app's Apple Search Ads campaign spanning more than 2.6K keywords in the US.

This is a great example of where I think AI will be most valuable, and profitable, in apps - as a way to enable users to be lazier. And I don't mean that in a bad way at all. Some tasks, like counting calories, are tedious. If AI can do it well it should. There are countless other areas where that's the case.

Don't waste your time on thin wrappers, spend it on looking for ways to make people lazier.

5. Short Drama Apps Are Taking Traditional Streamers' Growth

Streaming apps have gained popularity rapidly in the last few years, aided by covid lockdown and an initial abundance of exclusive content. Demand has since stabilized as popular names refined their offerings and found the content that works best for them.

It looked like things were stable, but for over a year now, a new type of competitor has been growing and slowly taking away growth.

This new type of competitor is none other than short drama apps, and the numbers show just how dramatic this shift is.

Since I started watching the Short Drama app market more than a year ago, everything has gone up - downloads are up, revenue is way up, and those two result in the number of competitors also going up. Some of those apps have even become common fixtures in the top apps lists across both stores.

I wanted to see if this growth is coming at the expense of traditional so I compared downloads of the leading streaming apps with downloads of the leading short drama apps going all the way back to the beginning of 2023, when short drama apps weren't popular.

This analysis is focused on the US because some streaming apps are only available in the US and it looks like short drama apps are focusing their growth here as well.

The data answered my question very quickly - Yes, short dramas are growing at the expense of traditional streaming apps.

According to our App intelligence, downloads of traditional streaming apps, including Netflix, Disney+, Peacock, Max, Paramount+, Hulu, and Amazon Prime Video, have collectively dropped 35% year over year in the US. Downloads of popular short drama apps, including DramaBox, ShortMax, GoodShort, NetShort, ReelShort, have grown 221% in the same period.

And we're not talking small numbers here. Appfigures data shows those traditional streamers got 7.4M new downloads in January while the short drama set got 5.6M - lower, but very close.

But while the downloads are getting scary close, revenue is still very different. Our estimates show consumers spent $423M on traditional streaming apps in the US but only $90M on short drama apps, and that doesn't include Netflix which isn't monetizing directly through its app.

Attention is mutually exclusive in this case so I expect that to change as more users get hooked on short drama apps and abandon traditional streaming apps. Unless traditional streamers find a way to hang on to viewers with content, just like how all of this started back in early 2020.

Content is still king.

App Intelligence for Everyone!

The insights in this report come right out of our App Intelligence platform, which offers access to download and revenue estimates, installed SDKs, and more! Learn more about the tools or schedule a demo with our team to get started.

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All figures included in this report are estimated. Unless specified otherwise, estimated revenue is always net, meaning it's the amount the developer earned after Apple and Google took their fee.