Spotify, The Apple App Store and Why Progressive Web Apps Rule
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Spotify lashed out against Apple and the AppStore policies, namely the Apple tax. There are more claims, really venting about the app experience on iOS as well as conflict in competition.
They are not alone. BaseCamp generated buzz about Apple's AppStore practices when it's Hey.com app was rejected.
Collectively the Spotify claims point out major issues not only with Apple's AppStore, but mobile app store distribution issues.
Spotify has made a dedicated website to express their arguments call Time to Play Fair.
The store model is not favorable to the businesses developing native apps and many are questioning if they really need applications as more and more are migrating their client strategies to progressive web applications.
"In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience—essentially acting as both a player and referee to deliberately disadvantage other app developers." Daniel Ek
According to research done by the New York Times Ek and Spotify are not the only company hurt by Apple's App Store practices. The study shows that since Apple began placing its own apps in the App Store Apple has dominated many of the most popular search terms. What's worse is the search results have been stacked with Apple apps not related to the search intent.
But as Apple has become one of the largest competitors on a platform that it controls, suspicions that the company has been tipping the scales in its own favor are at the heart of antitrust complaints in the United States, Europe and Russia.
New York Times
Let me list Spotify's claims:
Apple released a response to Ek's claims, which of course denies everything.
"At its core, the App Store is a safe, secure platform where users can have faith in the apps they discover and the transactions they make. And developers, from first-time engineers to larger companies, can rest assured that everyone is playing by the same set of rules. " - Apple
I am not someone who knows the details of the interactions between Apple and Spotify. So I can't speak to the availability of the platform features and what payouts the services make to the artists.
I do know more and more application brands are phasing out their dependence on app stores and migrating to a PWA strategy. Netflix fired a brutal punch to Apple over Christmas when they pulled the ability for new subscriptions to use Apple as a payment service.
Netflix earned over $850M in subscriptions via the AppStore in 2018, generating between $130 and $260M for Apple. In fact subscription services like Netflix and Spotify generate a significant amount of AppStore revenue, approximately $3.7B from the top 10 apps to be fair.
The disagreement only heightens the appeal progressive web applications have, even on iOS, where support is still somewhat limited.
I am receiving an increasing number of inquiries about replacing native apps with PWAs. Many fear issues highlighted by Spotify's claims. Others have either suffered a '4.2.6' removal or denial.
The more I discuss the merits of progressive web applications over native apps with clients and potential clients I have formulated a simple way to determine if you should develop and ship a mobile app:
"Does your app help sell iPhones or generate significant store revenue for Apple?"
If your answer is yes then you should think about developing an app. Otherwise a progressive web app is probably your better choice.
If you are wondering, Spotify offers a progressive web application option. Why they don’t use this as there primary path to ‘install’ their experience I don’t know.
Traditionally brands were trained to think consumers want apps over web-based experiences.
This fails to account for current trends. The web has caught up to native applications in feature parity for just about everything. For a music-based application like Spotify all the pieces are in place to be a web-based experience that matches their current native application.
We also know that consumers are tired of mobile apps. Today no one downloads apps anymore. Sure there are app downloads, but by and large the fad has ended. Most app downloads are to new phones, ‘restoring’ a user’s existing apps.
Outside of frivolous games native apps have simply fallen out of favor by most.
For established brands, like Spotify, have a large base of customers using their existing app. It will be difficult to wean them off the native app to the PWA solution.
Ultimately this means they have to weigh the costs and benefits for maintaining native apps, with the AppStore tax against potential customer churn in changing their interface to the web.
Right now there are many large brands taking that journey. Uber, Lyft, Twitter and others are in the process of moving to a progressive web app solution. Most have PWAs with feature parity to their native apps. They typically have moved to a PWA as the client code base and use a hybrid wrapper like Cordova to put the solution in the store.
This is the problem when you chose to go the way of a closed solution, native apps over an open solution, web. While native apps certainly were popular years ago, that has run its course and now presents an impediment to growing a profitable business.
I can't speak for Spotify, but I would do exactly what Netflix did.
ApplePay is just one payment provider. The web has been monetized for 25+ years. I have built numerous sites with real-time credit card, ACH, PayPal and other payment providers.
Today the options have increased even more with cryptocurrencies and other more modern methods.
The Payment Request API make this integration and experience even easier. You can even make yourself a payment provider with the new Payment Handler API.
For the record Safari does support the Payment Request API and you can use ApplePay in the other browsers as well as Android Pay and Microsoft Pay.
The ability to receive money online are easier than ever, even on a website. Mobile apps do not have a monopoly on montetization.
And here is the thing, credit card transactions cost less than 3%, even for the more expensive providers. Generally the transaction fee is 1-2.5%.
This is much, much lower than the 30% Apple takes when someone buys a digital good or service through your app.
This is something I have never understood, why would any business be happy with a third party taking a 30% cut of their pre-tax revenues?
Apple's tax laws are 30% of all sales, except for subscriptions. The first year of a subscription has the 30% penalty, it then drops to 15%. The fee only applies to digital goods purchased through the app, not physical goods.
Does Apple really offer that much value? Could these businesses succeed through the web?
I say of course they could.
Paul Thurrott recently made a good point about IAP and Apple's policies after Apple blocked Hey.com's new app.
"This would be acceptable if Apple allowed app makers to use other IAP payment systems, which they do not, or if Apple even allowed app makers to just communicate that they could pay this fee on the Basecamp website. But they don’t even allow that. And that, of course, is where Hey 1.0.1 ran afoul of Apple’s incredibly tone-deaf policies: Basecamp had the temerity to put a note in its own app explaining that users could go to the web and pay there instead."
- Paul Thurrott
Apple and Google makes billions through their mobile app stores. There is no denying the revenue amounts.
Sensor Tower seems to be the consensus reporting service when it comes to app popularity and revenues. So I will use their numbers as examples.
Lets start with the subscription apps like Spotify, which by the way is not in the top 10, so I could not find actual revenue numbers.
I already shared the estimated $850M Netflix made last year. Here is a list of the top 10 subscription based services iOS revenues from 1/2018-11/2018 (so not including December revenues):
Notice how half of these apps are Chinese?
I should also not that Tinder has released a PWA which is getting great engagement. I expect them to start phasing out their app like other platforms soon.
Tinder is also the only non-media streaming app. If you look at the top dating apps the next 4 account for $235M.
These 10 apps account for about 10% of the overall AppStore revenues, which speaks volumes to me.
Note this list does not include the Major League Baseball package, which I also know drives millions in revenue each season. But the point is streaming subscription services account for a large percentage of Apple's revenue.
Mobile games account for 77% of app store revenues, about $55 billion. That leaves about $16.6 billion for other apps. A large chunk of that is subscription services.
For the record games account for the majority of app downloads too.
So if you are making a game, then mobile apps are probably a reasonable avenue.
A recent stat shared on CNBC says Apple claims to have generated $155 trillion USD in sales since AppStore creation. That is distributed among 23 million developers. This means the average developer has earned around $6700 over the last decade.
That is not much at all. Of course we know the bulk of the revenue was earned by the top 1% or so applications. We know very few apps are downloaded and even fewer used more than once. Hence 1% or fewer actually earn revenue.
Another argument Spotify makes against Apple is their distinct advantage over competition like Spotify, Pandora, Amazon Music, etc. These non-Apple services have to pay the Apple tax, and Apple does not. This means Apple is immediately more profitable than the competition can hope to be.
The other advantage is Apple can hold up their application updates, deployments and of course access to undocumented APIs. I can't say if Apple has restricted access to APIs or not, so I wont comment much on that. But I could see them doing this, others have in the past.
I do know Apple does create lots of frustration and friction for deploying apps to the store. This includes new applications and updates.
The 4.2.6 rule gives them free range to almost 'randomly' reject any app anytime they feel like doing so. Personally I think they made the rule intentionally vague so they could create artificial interference with apps they just don't like.
Of course Apple claims they create a safe, trusted environment for their customers, etc. The web is a safe place. One of the reasons web standards take so long to bake and implement is the fight for secure implementations. So I don't see any real 'security' advantage native apps have over the web.
Here's the thing...
Should you outsource the control of your app or your business to a third party like this? It is not always clear, but in most cases no. There is too much to risk.
What if they cut you off, without warning?
You're done.
And Apple does have a history of doing just that.
But they can also make it difficult for you to even deploy updates. I know I have spoken to numerous developers and companies since the AppStore was created lament the fact that even under perfect circumstances it takes 2 weeks to get an update deployed to fix a bug.
Blocking updates is another major aspect of Spotify's complaints. I know they are not alone, I talk to app owners all the time that express frustration with long update cycles and rejections. It is a trail of frustration for many.
On the web, you find a bug, fix it and deploy an update as fast as you can. That could literally be a couple of minutes to just under an hour if you have your ducks in a row, and it is not a major bug of course.
I know some sites update 1500 or more times a day. Try that with your native app.
Apple has stepped up its public response to Spotify by posting its own page on the controversy.
In this response Apple claims it owns the store and puts forth the effort to only have high quality apps that are safe and secure.
I have no issue with the notion of safe, secure and protecting privacy. The web has all that as well, so the AppStore has no advantage here.
The real problem lies in their ambiguous App Store Review Guidelines. Of course, in those guidelines they specific an app must be ‘app-like’. This is where they reserve judgement to kick any app they simple do not like.
In their principles and practices response Apple also proudly shares the fact they reject an average of 40,000 app submissions and updates each week. That is 40% of the weekly app submissions.
They also field over 1000 appeals for rejections or removals.
Compare this to the web which allows unlimited deployments a day. Some applications update as many as 1500 times a day.
Deploy a bug, it sucks, but I can quickly fix and redeploy. Sometimes these updates can deploy within minutes.
Good luck doing that with Apple in the way. Developers I speak with tell me they expect 2-4 weeks before bug deployments are actually released in the store.
Not to mention you are subject to the Apple censors to determine if your app is worthy of being presented to consumers. They really do not believe in consumer choice, it is their choice to determine what is best for the consumer.
On top of that they make it difficult to compete with the apps that ship with the iPhone and iPad.
I get why Spotify has filed a complaint. I don't like they decided to get a government entity involved to fight their battle.
They and other streaming services should be brave enough to follow Netlix's lead and just abandon app store payment as an option.
Spotify should also start an aggressive path toward becoming a progressive web application. I realize there may be a technical hurdle for now preventing a good mobile experience, but that can be overcome with some effort. This is one of the very, very few edge cases where an app is limited to native. 99% aren't.
The video streaming services don't really need native apps. So for now Netflix and other video streaming services have the freedom to migrate from their native apps and the restrictions imposed by the stores.
Audio services are still at a disadvantage until we get a supported API to allow audio to play after the lock screen engages.
This is a great opportunity and incentive for Spotify, Pandora, Audible, Stitcher and other audio services to join the W3C working groups and help define a specification to allow audio to play as a background service in the browser.
Spotify is not profitable at the moment and at a disadvantage on iOS because Apple does not have the 30% tax imposed on themselves.
But that is Apple's prerogative, it is their platform they can do what they want. By supporting a common standard on the web Spotify could move away from Apple's platform and maybe force Apple to add support for a great new capability.
