Subscription Revenue

Monthly Recurring Revenue (MRR) is the predictable, normalized monthly revenue generated from all active subscriptions. MRR is calculated by summing the monthly-equivalent value of every active subscription — annual plans are divided by 12, weekly plans are multiplied by approximately 4.33, and monthly plans are counted at face value. MRR is the foundational financial metric for subscription app businesses because it provides a consistent, comparable measure of revenue trajectory regardless of billing cadence mix. MRR is typically broken down into component parts: New MRR (revenue from first-time subscribers), Expansion MRR (revenue from upgrades, upsells, or cross-sells), Contraction MRR (revenue lost from downgrades), Churned MRR (revenue lost from cancellations), and Reactivation MRR (revenue from previously churned subscribers who re-subscribe). Tracking these components separately reveals the underlying dynamics driving overall revenue growth or decline. A company with strong headline MRR growth but high churned MRR may be masking a retention problem with aggressive acquisition spending — an unsustainable pattern that component-level analysis makes visible.

Annual Recurring Revenue (ARR) is the total value of recurring subscription revenue normalized to a one-year period. For mobile subscription apps, ARR is calculated by multiplying Monthly Recurring Revenue (MRR) by 12, or by summing the annualized value of all active subscriptions. ARR is one of the most important metrics for subscription businesses because it provides a predictable baseline of revenue, making it essential for financial planning, investor reporting, and company valuation. Unlike total revenue, ARR excludes one-time purchases, refunds, and non-recurring fees, providing a cleaner view of the sustainable revenue engine. Growth-stage subscription apps track ARR trajectory closely, as consistent month-over-month ARR growth signals product-market fit and effective monetization strategy.

In-app subscriptions are a payment model in which users are charged on a recurring basis in exchange for access to premium content, exclusive features, or services. They are frequently used by developers as a way to monetize their apps by providing users with ad-free experiences or exclusive content.

The number of users who have signed up for a recurring payment plan to access premium or additional features within the app. These subscriptions typically involve monthly or yearly payments, and give users access to features that are not available to non-subscribers.

Gross revenue is the total amount of money generated from subscriptions and in-app purchases before any deductions. Net revenue is the amount remaining after subtracting platform commissions (Apple's or Google's 15–30% fee), refunds, chargebacks, and applicable taxes. For mobile subscription businesses, the distinction between gross and net revenue is critical for accurate financial planning and reporting. A subscription app generating $100,000 in gross monthly revenue might net only $70,000–$85,000 depending on its commission tier, refund rate, and revenue mix. When calculating unit economics like LTV and LTV:CAC ratio, using gross revenue inflates the apparent profitability of user acquisition. Investors and financial analysts expect to see net revenue figures when evaluating subscription businesses. Apps that route a portion of their subscriptions through web-based checkout (avoiding or reducing platform commissions) see a narrower gap between gross and net revenue on those transactions, which directly improves margins and makes previously unprofitable acquisition channels viable.