The Boom In Non-Game App Revenue And What's Driving It – Olivia Moore, Andreessen Horowitz

David Barnard:

Welcome to the Sub Club Podcast, a show dedicated to the best practices for building and growing app businesses. We sit down with the entrepreneurs, investors, and builders behind the most successful apps in the world to learn from their successes and failures. Sub Club is brought to you by Revenue Cat, thousands of the world's best apps. Trust Revenue Cat to power in-app purchases, manage customers, and grow revenue across iOS, Android, and the web. You can learn more at revenuecat.com. Let's get into the show.

Hello, I'm your host, David Barnard. Today's conversation is shorter than usual and will be featured in Revenue Cat's state of Subscription apps report. Each episode in this series will explore one crucial topic and share actionable insights from top subscription app operators. With me today, Olivia Moore, AI partner at Andreessen Horowitz. On the podcast I talk with Olivia about the tailwinds driving a boom in non-game app revenue, how vibe coding and AI workflows are fueling growth in categories that have nothing to do with AI. And why people predicting the death of apps have never been more wrong. Hey Olivia, thanks so much for joining me on the podcast today.

Olivia Moore:

Thanks for having me.

David Barnard:

Super excited to have you of all people to talk about the state of subscription app economy and the app economy generally. You've been covering consumer for a while now at Andreessen Horowitz and constantly sharing great content on Twitter, on Andreessen Horowitz blog and been on podcasts and other stuff like that. So I thought you'd be the perfect person to get on to kind of talk about what's going on with apps in 2026, and there's just a lot going on. So why don't we start at the highest of high levels. Revenue was up last year, that's a good thing, right?

Olivia Moore:

Yeah, it's very exciting. I feel like I've been a consumer investor for a decade and now has been the most fun time to invest in consumer apps because so many things are actually working. I think the big stat that a lot of people are rightfully excited about is the fact that consumer application in-app purchases finally passed games, and a decade ago it was like six to one the other way. So it's been a really big and meaningful shift, which is very exciting to see, and AI has been a big, big component of that, which is not surprising.

David Barnard:

Yeah. One of the exciting things that I saw as well, is I would've guessed a larger percentage of the increase. So 21% year-over-year growth in non-game apps, which amounts to billions and billions of dollars. And so only three and a half billion of that according to Sensor Tower was attributed to generative AI. There was billions of increased revenue across movies and TV shows, billions in social media, billions in utilities. So it seemed like it was a pretty wide-ranging increase in revenue. It wasn't just concentrated in AI apps.

Olivia Moore:

Absolutely, yeah. And I think that reflects the fact that there's been a lot of discussion of vibe coding, but it's very true that building and marketing a product is just getting a lot more efficient. And you're also able to bake in more features to products that using AI that make consumers more willing to pay for them. Maybe another example of a category that's not technically AI that saw a ton of growth is short dramas. Both in downloads and in revenue, they're making hundreds of millions of dollars now. And I personally have met several startups that are largely using AI to either fully generate or edit these short dramas, and so then they can make them at much lower cost and spend more on marketing to distribute them. And it's a very fascinating dynamic.

David Barnard:

Yeah. The integration of AI and AI workflows into existing app is a fascinating aspect of this boom. But AI generative apps did make up a large share of that revenue. What do you think about that and how does that look going forward?

Olivia Moore:

I think they both made up a big and increasing share. I think AI in-app purchases were up something like 3X year over year, which is the most notable I think, of all the main categories. And yet, I think it's still so early. If you look at top 10 apps by saturation of every age group, like 18 to 25, 35 to 40, ChatGPT is the only AI app that cracks the top 10 for any age groups, which is crazy. And so I think we're just very early in the types of AI apps that are popping up on mobile in particular. All of the top ones are like ChatGPT, Claude, DALL-E, like these very general LLM assistants. And I think as it's become easier to productize the models and also to serve the models on mobile, we're going to see a big and exciting expansion in the types of AI products that are being delivered via phone.

David Barnard:

Yeah. And that's such a great point, and I'll just list them off because I did find this really fascinating is as you said, it feels like it's been the year of AI. That's what everybody's talking about. ChatGPT obviously had a banner year, but you go through and the top apps are YouTube, Instagram, Spotify, Amazon, Facebook, WhatsApp, Discord, which I think is new in the chart this year, Messenger, and then ChatGPT. And that's for male, and for female ChatGPT doesn't even make the top 10. So we are seeing people have been predicting the death of apps for more than a decade now. But 2026 was a banner year and it wasn't just AI driving it, which I think is especially fascinating.

Olivia Moore:

Totally. And I think it's a testament to how big and how mainstream so many of these other apps are that even if ChatGPT is on the top of the app store every single day and got the most downloads of last year, it's a big hurdle to climb to start to replace Google or something like that. But feels like we're seeing the glimmers of that starting to happen.

David Barnard:

I wanted to talk next about what you see as the tailwinds of this AI boom. And one of the things that I specifically wanted to discuss is that it feels like, and maybe you'll have some more data or some data to back it up, but it feels like people paying 20 bucks a month for ChatGPT and getting a lot of value out of it, has kind of opened the pocketbooks a little that people are more willing to spend. What do you think on that front?

Olivia Moore:

It's absolutely something that we're seeing. So I mentioned I've been a consumer investor for a while. Anytime pre 2023, unless you were building a marketplace, the idea that you would want to or be able to monetize your users in the first five or 10 years was pretty crazy. The users were the product, you would make money by serving them ads. There were some examples of great subscription companies like aCom or Duolingo, but to be honest, they were kind of few and far between pre AI. Consumers were just not willing to pay directly for products. We've seen that completely change. And to your point, it's not just the $60 a year anymore, which feels like it was kind of the preset pre AI consumer subscription. I think ChatGPT anchored a lot of people on $20 a month if not more. And when you incorporate usage based pricing, you can have whales on consumer apps that are paying hundreds of dollars if not thousands of dollars a month, which is something we've never seen before.

David Barnard:

Yeah. It seems like more and more apps are experimenting with higher tiers, with hybrid monetization. And then even ChatGPT itself just introduced ads, so hybrid monetization is a big part of this growth as well is that you are seeing more consumers willing to pay. But we're finding better ways to monetize those users who are willing to pay, better meet the demand curve and back to good old ads to monetize those who aren't willing to pay. So it does seem like the revenue potential is pretty broad base and it's not just subscriptions, it's not just ads, it's a pretty healthy mix.

Olivia Moore:

Yes. This is a topic I'm fascinated by, which is that as an econ major, we are getting closer to being able to perfectly price segment users and hypothetically narrow consumer surplus and increase the value that these products could capture. Ads versus subscriptions is one example. I tweeted the other week about Grindr now has a several hundred dollars a month for an AI that swipes and makes matches for you. Is the average user going to pay for that? No, not at all, but 1% of users will, and you're now able as an app to capture so much more value from what you provide than what was possible pre AI, because you're essentially serving not just the product anymore. But you can serve outcomes if people are willing to pay for them

David Barnard:

Right. And specifically on price, and you kind of already touched on it, but anything else to dive into related to just the increase average revenue per user, the increase in spending?

Olivia Moore:

We actually pulled data on the top 50, 100 AI applications. We publish a list of these every six months, and what we found is that these companies are monetizing at two times the average revenue per user, if not higher than the pre-AI complements. The fact that they're monetizing it all so early is exciting. We looked at proprietary data across the first 18, 20 months of gen AI pitches, and consumer businesses are ramping revenue faster than enterprise businesses, which I think has never before been true in probably the history of software. And I think reflects kind of the size of the opportunity now.

David Barnard:

As an investor, how are you looking at this? Obviously for something to be venture investable, it needs to have the potential to be a multi-billion dollar outcome or does it... You can correct me if you're thinking about it differently, but then how do you think about the investability of these consumer apps? Because we are seeing apps get to 10 million super quick, 20 million super quick, but are they going to go from 20 million to 200 million to 600 million to be these next Duolingos or Life 360 or these other big publicly traded subscription apps?

Olivia Moore:

This is something we think a lot about and I think there's a couple layers to it. One would be this concept of what I call giving away dollars for pennies, which would be that a lot of startups now are achieving really fast growth by essentially subsidizing the model costs, the end consumer. So giving away Nano Banana Pro for free, things like that. And you can get very fast growth that way. To me, it's almost similar to the on-demand economy like Uber, DoorDash, a trillion other apps, most of those the unit economics catch up to you eventually. In some cases you're able to achieve escape velocity almost and then make users profitable. But I think you have to be quite, quite good at marketing and distribution and really lock users into the product if you're going to grow that way. The other element that we think about a lot is what the big labs and model companies are doing and what the incumbents are doing.

And how does that impact you as a standalone consumer product. We're seeing Claude go extremely hard on Prosumer, ChatGPT launching their own health product, trying to own more of their own app store. Gemini is doing all the personal intelligence stuff, and so we think a lot about where those companies have the right to win versus where an independent startup can build something much more opinionated and almost verticalized, and retain and monetize users that way.

David Barnard:

Yeah. What do you think about durability of use cases? It does feel like we've seen a lot of consumer apps launch, get a lot of attention. Maybe BeReal would be a good example, they really blew up. They seemed like it was going to be the next Snapchat or Facebook or whatever, and then the kind of novelty of that wore off. So how do you think about looking for those more durable use cases?

Olivia Moore:

Sam Waltman actually said something interesting on the OpenAI Town Hall a couple of weeks ago, which is someone asked him, "Are you going to kill my startup?" And he was basically like, "Look, if you as a company are happy when the models improve, you're safe." And that's a great place to be. And I think that's a function of we're looking for products that are not just thin features that can capture transitory opportunities, because if that's the case and if it's an obviously good idea, everyone is going to do it and you're going to get price competed down, it's going to be hard to acquire users. So I think to that point, we're looking for teams that are extremely, I've used this word before, but opinionated about a specific use case and will build out and productize the models in a way that it's much more compelling, easy to use, more effective than what a broad-based LLM platform will do.

I think one example, we invested in Gamma, which does AI for presentations and slide decks. Like yes, you can do decks within ChatGPT, Claude, other products now, but they're never going to be a first class citizen in the way they are for Gamma. And there's kind of a real opportunity to retain users in that way.

David Barnard:

Yeah. I also think there are lots of opportunities in solving existing use cases with the fresh perspective of where we're at with technology in 2026. What's from the ground up rethink of what a personal trainer could be as a fitness app instead of bolting an AI experience onto an existing fitness app? I think there are also opportunities there for those existing very durable use cases. The apps that have been popular, what's a mental health coach app in this era that Calm was to the last era? And I don't know that Calm's going to be the one to crack that with their kind of legacy app and having to support those existing use cases. But maybe the next big mental health app will be that kind of fresh perspective with AI at the foundation of it.

Olivia Moore:

Yeah, I totally agree. I think mental health is a great example because there are many consumer services like therapy coaching, language learning, fitness training, where previously the price point and the level of access was inaccessible for most people. And the first version of AI takes we saw on that were very skeuomorphic to the pre-AI service. So it was therapy session, but it cost $10 because it's run by a voice agent for 60 minutes. And I think in fact, what we're learning is like, yes, a lot of people don't do therapy because of cost or access. But for a lot of them, the 60-minute session format doesn't work or is not compelling or doesn't fit into their life. And so AI is now allowing you to reimagine how to build a different experience or how to let the consumer build their own experience actually, to deliver products that they haven't found compelling enough to use or pay for before.

David Barnard:

Yeah, that's a great point. The last thing I wanted to touch on was AI as an accelerant for everything. From product development to marketing to product discovery, it does feel like smaller teams can move faster and existing teams that have proven out some level of product market fit can double down on that and just move faster. What are you seeing there?

Olivia Moore:

Yeah, that's exactly the case. We're investors in Cursor and seeing the usage on that product grow and talking to engineers and seeing how their day changes now, even product people, marketing people are scoping things out on lovable. And getting a spec or a new idea approved in a day where previously they would have to loop in a bunch of engineers and it would take weeks. So I think much has been said about the era of the one person, one billion dollar company, and honestly I think we're not too far from it. We've seen and invested in companies that are doing a million plus in ARR per employee, which is just kind of a crazy metric that we haven't seen before. And again, we're also just so early, Claude Code has come to developers. But I don't think we've yet seen what the Claude code for marketers and product people and salespeople and all of that looks like.

And so I actually think things are just going to continue to get more efficient from here. And it's going to free up humans to spend their time on the things that humans can uniquely do, generating ideas and spending time with customers and all of that.

David Barnard:

It's going to be while to see what even the next six months, but much less the next year and next five years. And then you're in a position where you're having to make bets that will hopefully pay off in five to 10 years. So it is fascinating to hear your perspective kind of living in the future and thinking about these things. Thanks so much for joining me. Anything you want to share as we wrap up? Anything our audience can do for you?

Olivia Moore:

I would say for me, this is kind of my job, so I have an unfair advantage. But the best thing that you can do to build intuition on these products is just to use them. And I think the quality of consumer AI apps on mobile is just so much better and more sophisticated than they were six months ago. Maybe to name a few for people to try if they're interested that I think are doing compelling things. More investors in Wabi, which allows you to spin up your own mini apps, which is very cool, and use those created by others. There's also apps like Gizmo and Sakai where you can build little games on a TikTok-like feed, which is very cool. And then I think we're also seeing, and we'll see what happens when you can text AI now, not within an app. So products like Poke and Tasklet that do that. So yeah, I think the best way to stay on top of what's going on is just to use the products because things are changing so fast.

David Barnard:

Can folks pitch you or Andreessen Horowitz? How does that work? How should people get in touch if they think they are building the next big consumer app?

Olivia Moore:

I'm @Omoore tweets on Twitter. I'm on there all day. So hopefully I'm pretty reachable and would love to hear from anyone building a consumer AI product.

David Barnard:

Awesome. Well, thank you so much for joining me. This was a lot of fun.

Olivia Moore:

Thank you.

David Barnard:

Thanks so much for listening. If you have a minute, please leave a review in your favorite podcast player. You can also stop by chat.subclub.com to join our private community.