Online marketplaces like the App Store and Etsy allow businesses to flourish by giving them access to a huge, global audience. But these marketplaces are big businesses themselves, and in order to earn a profit, they take a cut of revenue from many of the other companies that use their space. It leads to a constant tension: apps like Tinder and Candy Crush wouldn’t be nearly the phenomena they are today without the App Store, but they have to constantly pay Apple for that privilege.
Apps are just one example of how digitizing small businesses has shifted the world we live and work in. There are membership platforms, like Patreon, that allow creatives to charge monthly payments in exchange for new videos, comics, essays, and more. Platforms like Twitch and YouTube allow creators to monetize their time through advertising revenue. And marketplaces like Etsy and Amazon allow people to sell an assortment of products directly to customers around the world.
The cut each platform takes varies significantly: Apple notoriously takes 30 percent of every digital in-app purchase; Twitch takes a 50 percent cut of subscription fees and a cut of advertising; eBay asks people to buy space and then pay a fee. Knowing just how much each platform takes is crucial to figuring out what’s best for your business, or for understanding how the businesses you’re shopping from make money. Here are the various fees each platform takes, divided into four categories: app stores, memberships, subscription services, and marketplaces.
App stores are where an enormous number of businesses operate. Whether you’re selling a line of jewelry on Etsy, creating a niche dating site, or spending oodles of money in Candy Crush to get the best in-game items, you’re reaching people who shop on their phones. Approximately 80 percent of Americans shop online, according to PixelUnion, and more than half of those shoppers use a mobile device like a phone or tablet.
Apple App Store: 30 percent standard commission on in-app purchases of digital goods; sales of physical products are exempt. Subscription commission falls to 15 percent after one year.
Google Play: 30 percent standard commission on in-app purchases of digital goods; sales of physical products are exempt. Subscription commission falls to 15 percent after one year.
Galaxy Store: 30 percent standard commission on in-app purchases, but it is reportedly negotiable.
Microsoft Store: 30 percent standard commission on all games, in-game purchases, purchases from business and education stores, or purchases on Windows 8 devices; 15 percent on everything else.
SOCIAL MEDIA PLATFORMS
A large portion of people shopping on their phones are doing so via social media platforms like Facebook and Instagram. With hyperfocused marketing, being on both Facebook and Instagram can be crucial to building an online business.
Facebook/Instagram, sales: Collects either 5 percent per shipment of products sold (one order can include multiple shipments if items are mailed separately), or a flat fee of 40 cents for shipments of $8.00 or less. This covers taxes, payment processing fees, and applies to all checkout transactions on both Facebook and Instagram. Facebook is currently waiving the selling fee for all orders shipping through the rest of 2020. Sellers retain all other revenue. Facebook includes this example on its website:
If the first shipment is $10.00 USD, we’ll deduct $0.50 for the selling fee.
If the second shipment is $6.00, we’ll deduct $0.40 for the flat fee.
TikTok: TikTok is introducing a merchandise shelf for creators in the coming weeks. The merch will be powered by Teespring, and creators will be able to set their own prices on top of the service’s fees. A basic T-shirt costs $10 (that’s what Teespring will keep), so creators who sell a shirt for $25 will keep $15.
The attention economy and the passion economy have collided in a way that makes monetizing time and fans easier than ever.
Patreon: There are three types of plans creators can enroll in, and each plan comes with a different cut.
Basic plan: Patreon takes 5 percent
Pro plan: Patreon takes 8 percent
Premium plan: Patreon takes 12 percent
The tiers are geared toward different types of creators and businesses. The pro tier lets a creator offer tiered memberships to fans, while the premium tier provides a dedicated contact at Patreon who can provide support.
Then, there are payment processing fees. For creators in the United States, Patreon takes 5 percent plus 10 cents for payments of $3 or less. Payments over $3 result in a 2.9 percent cut plus 30 cents.
OnlyFans: OnlyFans takes 20 percent of subscription fees and other earnings, like tips. Creators can set their subscription fees between $5 and $50 per month.
Substack: 10 percent of subscription fees. Substack, one of the bigger newsletter platforms, lets people choose how much they want to charge per month or year. Substack has a tool to help calculate revenue based on different monthly fee options. (There is also a completely free tier that’s great for marketing purposes.)
Twitch: A creator can start making money from ads, subscriptions, and donations once they become a Twitch affiliate, which takes a certain amount of streaming and followers.
Twitch typically takes 50 percent of subscription fees. On top of subscriber fees, streamers also earn ad revenue — usually around $3.50 for every 1,000 views of an ad on their channel. For both subscriptions and advertising, bigger streamers may get better deals.
Twitch also offers streamers a way to be paid via donations using a virtual currency called bits. Twitch takes a 29 percent cut from donations, so for every $1.40 worth of bits a streamer receives, the streamer only keeps $1. Streamers frequently accept donations through third-party payment platforms, too. Twitch doesn’t take a cut of these, but the platforms themselves may come with their own deductions for payment processing.
YouTube memberships: YouTube’s main form of payment for creators is AdSense. YouTube takes 45 percent of revenue from ads, giving creators 55 percent, according to Variety. YouTube has also started rolling out memberships, however, which are additional monthly plans that run between $1 and $100 in the United States. YouTube takes 30 percent of those membership fees.
Facebook Memberships: Facebook has a couple of membership-type services. There are subscription groups where administrators can charge a fee for people to join. Facebook wasn’t taking a cut of membership fees as of 2018; the company didn’t respond to a request for comment on whether that’s still the case. If people sign up for the groups via iOS or Android, Apple and Google do take a 30 percent cut.
Then there are fan subscriptions, which allow fans to support creators through a subscription/membership service. Facebook normally takes a 30 percent cut each month, but beginning in August 2020, through August 2021, Facebook won’t take a cut for transactions made via web browsers. (Apple and Google will take their typical cut on mobile.)
Digital marketplaces for physical goods are at the core of online shopping. Many of us use Amazon on a daily or weekly basis, or peruse eBay at work to keep an eye on the latest auctions. Large businesses can be built on these platforms, but they’re complicated to navigate.
Amazon: Amazon is a complicated one. First, businesses can choose between using a professional selling plan, which costs $39.99 a month, or an individual seller’s plan, which has no monthly fee. Those on the professional tier do not have to pay a sales fee on items sold, while those on an individual seller’s plan pay $1 per sale.
Amazon then takes a commission on each sale, including shipping fees. This fee depends on what the item is, typically ranging from 8 to 20 percent. There’s also a $1.80 closing fee for products listed under media categories, including books, DVDs, music, game consoles, game accessories, and more.
Etsy: Etsy charges a small 20-cent fee for people to list each item for sale. Then, for every product sold, Etsy takes a 5 percent transaction fee, and a payment processing fee that’s generally between 3 and 4 percent.
eBay: Generally speaking, eBay sellers might pay a small fee to list a product, and then a 10 to 12 percent fee on the sale price.
Fees can vary significantly depending on product category and listing type, though. eBay also offers paid premium store features that can reduce fees. It’s a fairly complicated series of options — you can get a sense of some possibilities for paying stores from this chart.
From a single developer to a huge studio, being on Steam or in the PlayStation store is a big deal for distribution. These giant marketplaces are also key businesses for the companies that run them, often meaning steep fees on sales.
Steam: Steam takes 30 percent of all sales made for the first $10 million sold. That cut becomes 25 percent when a developer sells between $10 million and $50 million. For every sale after the first $50 million, Steam only takes a 20 percent cut.
Epic: Epic takes 12 percent of the revenue from all games sold, giving developers 88 percent. Epic CEO Tim Sweeney tweeted that of the 12 percent Epic collects, the company nets about 5 percent as profit.
PlayStation: Sony is reported to take a 30 percent cut from games sold in the PlayStation Store, though the split isn’t publicly disclosed.
Xbox: Microsoft takes a 30 percent cut from all games and in-game purchases sold through the console’s store under its standard developer agreement.