App Revenue Is Booming and It's Not Just AI Apps – Olivia Moore, Andreessen Horowitz

0:00Much has been said about the era of the like 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 like kind of a crazy metric that we haven't seen before. We're also just so early. I don't think we've yet seen what the cloud code for marketers and product people and sales people 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

0:32the things that humans can uniquely do like generating ideas and spending time with customers and all of that. 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 talked 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

1:11of apps have never been more wrong. Hey Olivia, thanks so much for joining me on the podcast today. Thanks for having me. Super excited to have you of all people to talk about the state of subscription app economy and the app economy generally. You know, 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. Um 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

1:47don't we start at the at the highest of high levels? You know, revenue was up last year, that's a good thing, right? 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 are rightfully excited about is the fact that consumer application in-app purchases finally passed games. And like 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

2:17to see. Um and AI has been like a big big component of that which is not surprising. Yeah, one of the exciting things that I saw as well is that I would have guessed a larger percentage of the increase, the 21% year-over-year growth in non-game apps, which again amounts to like billions and billions of dollars. And so only 3 and 1/2 billion of that according to Sensor Tower was attributed to

2:42generative AI. There was billions of increased revenue across movie 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. Absolutely, yeah. And I think that reflects the fact that like you know, there's been a lot of discussion of vibe coding, but it's very true that like 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

3:15consumers 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. Um both in downloads and in revenue, they're making, you know, 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 and it's a very

3:42fascinating dynamic. Yeah, the integration of AI and AI workflows into existing apps is a fascinating aspect of this boom. But I mean AI-generative apps did make up a large share of that revenue. What do you think about that? And and how does that look going forward? 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 is the most notable, I think, of all the main categories. Like, and yet, I think it's still so early. Like, if you look at top 10 apps by saturation of every age group, like, you know, 18 to 25, 35 to

4:2240, 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 like 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 just serve the models on mobile, we're going to see like a a big and exciting expansion in the types of AI products that that are being

4:51delivered via phone. Yeah, and that's such a great point. And and I'll just list them off because I did find this really fascinating is that as you said, you know, 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

5:16then ChatGPT. Um and that's for male. And for female, ChatGPT doesn't even make the top 10. So, we are seeing a you know, 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

5:33fascinating. 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 last year, like, it's a 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

5:52starting to happen. I wanted to talk next about what you see as the tailwinds of this AI boom. And one of the things that that I specifically wanted to discuss is that it feels like, and maybe you'll have some more anecdota 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

6:20What do you think on that front? It's absolutely something that we're seeing. So, I mentioned I've been a consumer investor for a while. Anytime building a marketplace, like the idea that you would want to or be able to monetize your users in the first five or 10 years was pretty crazy. Like, the users were the product. You would make money by serving them ads. There were some examples of great subscription companies like Acombra or Duolingo, but to be honest, they were kind of few and far between pre-AI. Like, consumers were just not willing to pay directly for products. We've seen that completely change. And to your point, it's not just

6:57the $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, you know, hundreds of dollars, if not thousands of dollars a month, which is

7:16something we've never seen before. 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, this, you know, 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, you know, back to good old ads to monetize those who aren't willing to pay. So, it does seem like there the revenue potential is pretty broad-based and it's not just subscriptions. It's not just ads. It's it's a a pretty

7:52healthy mix. 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 like 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 like Grinder now has like a several hundred dollars a month for an AI that like swipes and makes matches for you. Is the average user going to pay for that? No, not at all, but like 1% of users will and you're now able as an app to capture like so much more value from what you

8:25provide than than what was possible pre-AI cuz you're essentially serving not just the product anymore, but you can serve outcomes if people are willing to pay for them. Right. And 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

8:43user, the increase in spending. We actually pulled data kind of on the top, you know, 50 100 AI applications. We publish a list of these every 6 months and and what we found is that these companies are monetizing at two times the average revenue per user if not higher than like the pre-AI complements. And they're, you know, the fact that they're monetizing at all so early is is exciting. We looked at kind of proprietary data across the first, you know, 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

9:24think reflects kind of the the size of the opportunity now. As an investor, how are you looking at this? You know, obviously for something to be venture investable, it needs to have the potential to be a multi-billion dollar outcome. Or does it? I mean, you can correct me if if you're thinking about it differently, but then how do you think about the investability of these consumer apps? You cuz 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 like next Duolingo's or Life360 or these

10:00other big publicly traded subscription apps? 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 like giving away dollars for a pennies, which would be that a lot of startups now are achieving really fast growth by essentially subsidizing the model costs to the end consumer. So, like giving away nano banana pro nano

10:21banana pro for free, things like that. And you can get very fast growth that way. To me, it's almost similar to like 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 like escape velocity almost, and then make make users profitable, but I think you have to be quite quite good at like 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

10:55incumbents are doing and like 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, you know, 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 kind of retain and and

11:24monetize users that way. Yeah, what do you what do you think about durability of use cases? I mean, it It feel like we've we've a lot of consumer apps kind of launch, get a lot of attention, you know, maybe Be Real would be a good example. You know, they really blew up. They seemed like it was going to be the next, you know, Snapchat or Facebook or whatever, and then that

11:45the kind of novelty of that wore off. So, how do you think about looking for those more durable use cases? Uh Sam Altman actually said something interesting on the the OpenAI town hall a couple weeks ago, which is someone asked him like, are you going to kill my startup? And he was basically like, look, like if you as a company are happy when the models improve, like you're safe and that's like a great place to be. And I think that's a function of we're looking for products that are not just like thin features that that can capture like transitory opportunities because if it's if that's the case and

12:18if it's an obviously good idea, everyone is going to do it and like 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 used this word before, but like 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 like a broad-based LLM platform will do. I think one example, like we invested in Gamma, which does AI for presentations and slide decks. Like, yes, you can do decks within ChatGPT, Claude, other products

12:54now, but they're never going to be a first-class citizen in the way they are for Gamma and there's kind of like a real opportunity to to retain users in that way. 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 a 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. You know, I think there are also opportunities there for those existing very durable use cases that apps that have been, you know, popular. What's a mental health

13:33coach 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 kind of having to support those existing use cases, but maybe the next big kind of mental health app will be that kind of fresh perspective with AI at the

13:51foundation of it. Yeah, I totally agree. I think mental health is a great example because there are many consumer services like, you know, therapy, coaching, language learning, fitness training where previously like 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 like skeuomorphic to the pre-AI service. So, it was like 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

14:2760-minute session format is it doesn't work or is not compelling or doesn't fit into their life. And so, AI is now like allowing you to reimagine how to build a different experience or how to let the consumer build their own experience actually to like deliver products that they they haven't found compelling enough to to use or pay for before. Yeah, that's a great point. The last thing I want to touch on was AI as an

14:53accelerant for everything. I mean, from product development to marketing to product discovery, it does feel like smaller teams can move faster and then 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? Yeah, that's exactly the case. I mean, we're investors in Cursor and like seeing the usage on that product grow and talking to engineers and um seeing kind of how their day changes now, even like, you know, product people, marketing people are scoping things out on lovable and getting like a a spec or a new idea approved in like a

15:31day where previously they would have to loop in a bunch of engineers and it would take weeks. So, I think like much has been said about the era of the like 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 like kind of a crazy metric that we haven't seen before. Um, and again, like we're also just so early. Like Claude code has come to developers, but like we I don't think we've yet seen what the Claude code for marketers and product people

16:05and sales people and 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, like generating ideas and spending time with customers and all of that. It's going to be wild to see what the next I mean, even like the next six months, but much less the next year and next five years. And then you're you're in a position where you're having to make bets that will hopefully pay off in

16:32five to 10 years. Um, so it's it's 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? I would say for me, like, you know, this is kind of my job, so I have an unfair advantage, but like the best thing that you can do to build intuition on these products is just to use them. Um, and I think the quality of consumer AI apps on on mobile is just so much better and more sophisticated than they were six

17:02months ago. Maybe to like name a few for people to try if they're interested that I think are doing compelling things. We're investors in Wabi, which allows you to spin up your own mini apps, which is very cool, and use those created by others. Um, 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 will see what happens when

17:25you 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 to stay on top of what's going on is just to to use the products cuz things are changing so fast. Can folks pitch you or Andreessen Horowitz? How does How does that work? How How should people get in touch if they think they are building the next

17:43big consumer app? I'm at um Omore Tweets on Twitter. I'm fairly I'm on there all day, so hopefully I'm pretty reachable and would love to hear from anyone building a consumer AI product. Awesome. Well, thank you so much for joining me. This is a lot of fun. Thank you. [music] Thanks so much for listening. If you have a minute, please leave a

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