Why BaseCamp & Hey.com are Wrong About the Apple App Store

Apple AppStore Rules & PWAs
Apple AppStore Rules & PWAs

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.

And then more noise was raised when BaseCamp's new Hey.com messaging application had its first update blocked.

In fact Apple said the Hey.com app should have never been approved in the first place.

BaseCamp's David Heinemeier Hansson (@DHH) went to social media to draw attention to the rejection.

@DHH Expressing Frustration @ Apple
@DHH Expressing Frustration @ Apple

And while he has justification for his outrage he is wrong.

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.

I disagree with the later statement. Smartphones, computers, etc are not a utility, they are just tools in today's life style. Apple is a designer brand with high prices.

Can government change Apple policies? Apple is a private platform and consumers that pay to use their hardware agree to their terms of use.

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.

So businesses know the gamble going into the environment.

After listening to The VergeCast inteview with Hanson and Rhode Island Congressman Cicilline the main point emphasized was the lack of free choice. Choice for both businesses providing applications and the consumer.

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.

Businesses have the freedom to chose their payment processor(s), update cycle and marketing.

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.

To make matters worse, Apple applies those fees to some apps and not others. For example physical goods and services are not charged. So Amazon does not pay this tax when you place an order.

Netflix is Classified as a Reader App
Netflix is Classified as a Reader App

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'.

If Hey.com removes their private communication protocol and switches to traditional email protocols (SMTP and POP), it could be a reader app. Of course this guts Hey.com from its key point of differentiation.

Apple's Hey.com Rejection Letter
Apple's Hey.com Rejection Letter

Beyond the in app payment tax there are additional regulations Apple uses to determine who is in the store and who is rejected.

This is where Apple uses subjective rules to determine 'what is app-like'. They have also been accused of blocking competitors like Spotify from shipping updates. Apple has also forbid Spotify from offering similar capabilities as Apple's own applications.

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 show host mentioned hundreds of app developers reaching out with similar stories to BaseCamp. Many of those fear retaliation from Apple for sharing their stories.

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.

There is an alternative that rewards businesses and consumers, the web. Specifically, progressive web applications. Or as Apple refers to them Homescreen Web Apps.

In fact this is the original application path Apple wanted businesses to pursue. For some reason Apple fan boys cried for a native solution.

Apple thought about it and said sure. But you will pay dearly and abide by our tight restrictions. And of course the fan boys rejoiced.

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:

  1. $519 Billion in 'commercial activity'
  2. $61 Billion in Digital Goods (30% Tax)
  3. $45 Billion in advertising
  4. $413 Billion in Physical Goods & Services (0% Tax)
  5. 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:

"The Web 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. This can be done without any third party interference and overhead. A true free market."

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.

Modern Web Capabilities
Modern Web Capabilities

The difference is the web is a free market. A market where business can determine their prices, chose their payment providers and how often their applications are updated.

Consumers can chose who they want to use on the web. Website traffic is much higher than native app uses, especially when you factor out social media apps.

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.

As for security, browsers provide a safe sandbox. They do the additional work Apple likes to brag they provide to developers.

Marketers can directly promote their application through linking. When the consumer visits the website they could have all the application code installed without the app store. It is a frictionless experience.

From there, a brand can earn consumer trust and a place on the homescreen.

PWAs are cheaper to develop, distribute and they consume about 1-5% of the diskspace a similar native app requires.

Takeaways

To be frank I have never liked the app store model. Free markets and free choice are more my thing. History tells us free markets work and closed, centrally closed economies fail.

You can review how well the Soviet Block worked out.

I feel for BaseCamp, I do. But give up on the native app path. Make sure your existing web interface is a good progressive web app and you can end-run around Apple.

Other businesses should follow suit.

BaseCamp can look at what Microsoft has done with Outlook. It is a PWA and I am using it everyday. There are minor differences, but they are UI changes, not from a lack of API support.

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:

  1. Should a business wait until government regulators try to do something about Apple policies?
  2. Charge Apple users more
  3. If you can accomplish your app interface as a PWA then do so, and most likely you can

There are many complaints recently filed by well known brands. I thought about mentioning them here. But honestly there are too many. I already wrote an article about Spotify's issues.

But they are not alone. Thousands of small businesses have been crushed by Apple's store policies. The 4.2.6 section releases Apple from any real strict guidelines. They get to pick and chose.

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.

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