M

What is Merchant of record?

Definition, examples, and more

Definition

The party legally responsible for processing payments, managing refunds, and handling tax compliance on behalf of the app. In most mobile apps, Apple or Google act as the merchant of record, while web-based apps often use Paddle, or similar providers.

How to Calculate

Net Revenue per Channel = Gross Revenue x (1 - MoR Fee %). App Store: $100,000 x 0.70 = $70,000 net. Web (Paddle): $25,000 x 0.92 = $23,000 net. Effective MoR cost = (Gross Revenue - Net Revenue) / Gross Revenue x 100.

Example

A fitness app sells subscriptions through the App Store (Apple as MoR, handles sales tax and refunds, takes 30% fee) and through their website (using Paddle as MoR, handles VAT collection and compliance globally, takes ~5-10% fee). The web channel generates 20% of revenue but keeps a significantly higher margin because of lower fees and full pricing control.

Why Merchant of record Matters

Your merchant of record determines your fee structure, refund policies, and tax compliance obligations. A news app was processing all subscriptions through the App Store (30% fee on year-one subscribers). By adding a web subscription option through Paddle (5% fee + payment processing), they offered the same $9.99 plan but kept $9.49 net per web subscriber vs $7.00 from Apple. Over 12 months, shifting 25% of new subscriptions to web added $180K in retained revenue.

Frequently Asked Questions

What does a merchant of record actually do?

The MoR handles: payment processing, refund management, sales tax/VAT collection and remittance, receipt generation, fraud prevention, and legal liability for the transaction. When Apple is your MoR, they handle all of this. When you use Stripe or Paddle for web subscriptions, they can serve as your MoR so you do not have to manage tax compliance in 190+ countries yourself.

Can I choose my own merchant of record for mobile subscriptions?

For digital goods on iOS, Apple is the required MoR. On Android, Google is the default, though alternative billing is now available in some regions (EU, Japan, India). For web-based subscriptions, you choose your MoR — popular options are Paddle, Stripe (with tax add-ons), and Chargebee. Many apps use multiple MoRs: Apple for App Store, Paddle for web.

Is it worth offering web subscriptions to avoid app store fees?

Often yes, especially if you can drive traffic to a web checkout. The savings are significant: keeping 92-95% of revenue (web) vs 70-85% (App Store). However, the App Store has higher conversion rates due to seamless Apple ID billing. The best strategy is offering both channels and letting users choose, while promoting web subscriptions in out-of-app contexts (email, social media, website).

Category
Subscription App Terminology
Related Area
Mobile App Growth & Monetization

More terms starting with “M

MAU ((monthly Active Users))

The number of unique users who engage with the app at least once in a 30-day period. MAU is a top-level engagement metric and often serves as the denominator in conversion rate or retention analysis.

MAU/DAU ratio

A metric that measures how often users return to the app by comparing Daily Active Users (DAU) to Monthly Active Users (MAU). A higher ratio (closer to 1.0) indicates stronger user stickiness and habitual usage. The usage patterns of your users will change based on the category and type of app. For example, social media and gaming apps expect a much higher MAU/DAU ratio. Apps that only make sense to use once a week or a few times a month shouldn't measure themselves the same as a game.

Mobile Measurement Partner (MMP)

A third-party tool - like Appsflyer, Branch, or Adjust - that attributes installs, measures campaign performance, and tracks in-app behavior across paid and organic channels. MMPs can be helpful for understanding CAC, LTV, and ROI in a privacy-compliant manner.

Monthly recurring revenue (MRR)

The predictable revenue generated from active subscribers on a monthly basis. MRR is a key metric for assessing growth, financial health, and the impact of marketing or retention initiatives in subscription-based apps.

Multi-platform

Describes apps or services that support user access and subscription syncing across multiple operating systems (e.g., iOS, Android, web). Multi-platform support improves user flexibility, increases perceived value, and helps reduce churn.

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