Why BaseCamp & Hey.com are Wrong About the Apple App Store
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The shine around Apple's app store closed application ecosystem is fading.
Last year Spotify filed a lawsuit in the EU against App Store policies. Last week the EU filed an anti-trust lawsuit for those same practices.
While not official yet, the US House Antitrust sub-committee will be investigating Apple's Appstore practices. To be fair, the committee has subpoenaed multiple technology leaders to testify on the topic.
Why?
Apple's iOS is a private platform. Often referred to as a walled garden. They do get to make the rules.
They own everything from the hardware to the software that runs on the hardware.
They make the rules, not the free market.
On CNBC Kara Swisher called app stores toll booths. She also thinks Apple is a utility and should be regulated like the electric company.
Business, or developers as Apple refers to them, also pay to play. Apple clearly publishes the rules. Even if they change from time to time, so does your credit card agreement.
My other impression was the lack of broad vision. And they are not alone, I think most still have a narrow vision of what is possible and available today.
The web is the avenue of choice on all platforms.
It provides everything Apple emphasizes you are paying for with the 30% tax, security and marketing/distribution. Except the web is more or less free.
Why Hey.com Was Rejected
The Hey.com service can only be purchased through Hey.com and not in app using Apple's payment service.
Why is this a big deal?
Apple charges a whopping 30% tax on all digital transactions.
This compares to the normal 1.5-3% most credit card merchant account providers charge.
This is on top of the $99 fee Apple charges for the privilege of developing an application for their platform.
Other services like Netflix have removed the ability to sign up in iOS Applications. They are allowed to operate, along with other apps like Audible and Kindle. They are classified as 'content readers'.
It's unfortunate that businesses still feel they need to bow to Apple's legislation. It not only hurts business, it hurts consumers.
Several brands have raised public objections to Apple's policies. Match.com recently stated:
"Apple is a partner, but also a dominant platform whose actions force the vast majority of consumers to pay more for third-party apps that Apple arbitrarily defines as ‘digital services"
Notice how they mentioned consumers pay more. This is common in business when taxes are raised or regulations increased. This is the cost of doing business and passed along to the consumer.
It is common with many apps in the iOS Appstore. There is often a 30% premium for the same service purchased through a website.
Basecamp's CEO, Jason Fried penned a response to Apple's actions.
"this isn’t just about money. Money grabs the headlines, but there’s a far more elemental story here. It's about the absence of choice, and how Apple forcibly inserts themselves between your company and your customer."
Again, iOS is a private platform, except for the web. There you are only limited by Safari's limitations. And honestly there is not much that separates the web from native today.
The web removes that intimidation factor and puts the business and consumer in control.
The Appstore Reality
Apple is the only native app game in town on Apple products. Google and Microsoft have followed their model with their own app stores on Android and Windows. They are not the only way to distribute software on those platforms.
Android has multiple app store options. Most Windows software is available for direct download and installation.
For consumers app stores were popular a decade ago. But that changed in the summer of 2015 when consumers more or less stopped downloading new apps.
Today the bulk of native app usage is limited to Facebook's brands, other social media and some games.
Most apps never enjoy a download and most garner more than a handful of downloads.
Now we get into how much money can you make in Apple's Appstore. David Heinemeier Hansson highlighted a recent study Apple commissioned about last year's revenue:
"The study reveals that the *direct payments made to developers from Apple* are only a fraction of the vast total when sales from other sources, such as physical goods and services, are calculated. Because Apple only receives a commission from the billings associated with digital goods and services, more than 85 percent of the $519 billion total accrues solely to third-party developers and businesses of all sizes."
The direct payments made to developers from Apple' stands out to me. It reveals their view of the world, you work for Apple.
The Apple sponsored study shares the following stats:
- $519 Billion in 'commercial activity'
- $61 Billion in Digital Goods (30% Tax)
- $45 Billion in advertising
- $413 Billion in Physical Goods & Services (0% Tax)
- 54% of Revenue was China
The first item, commercial activity, means they give themselves credit for generating revenue for businesses. This is an 'as if you could do it without us' statement.
If you look at the numbers and assume the 15-30% tax rate, Apple took between $15-30 billion last year. This is 5-10% of their overall revenue. The majority of their profit is tied to the high margins on their hardware.
They also say these are 'conservative numbers'.
The report also included an obligatory quote from Tim Cook:
"The App Store is a place where innovators and dreamers can bring their ideas to life, and users can find safe and trusted tools to make their lives better,"
Progressive Web Applications allow us to adjust Tim's statement to the following:
What Are Progressive Web Apps?
PWAs are websites, but the spirit of the name is to provide app-like experiences. Microsoft and Google are leading the way with their browsers and business policies.
The reality is the web platform offers similar capabilities as native applications. There are a few edge cases where APIs are not available, but 99% of the time there is little distinction.
Most social media platforms are migrating to PWAs now to avoid native application issues. Twitter and Pinterest being the leaders.
Search engines, Google and Bing, provide discoverability. They also filter out spammy and phishing pages, similar to the way app stores keep bad apps out.
Takeaways
You can review how well the Soviet Block worked out.
Other businesses should follow suit.
I know the EU and the US Judiciary will make a show around Apple. They want the press. And they may suggest some regulations or maybe even fine Apple.
Those actions are good for some press. But iOS is a private platform, I think it will be difficult for their actions to matter.
What will work is for brands to abandon the stores. Move to the web where they are in control of their destiny.
Until then these are your options:
- Should a business wait until government regulators try to do something about Apple policies?
- Charge Apple users more
- If you can accomplish your app interface as a PWA then do so, and most likely you can
These businesses are rejected and removed from the store all the time. Many have contacted me about developing a progressive web application instead.
It is a viable path and one that gives you the maximum profit and freedom.
