Above Avalon: Attacking the App Store

https://www.aboveavalon.com/notes/2020/9/10/attacking-the-app-store

Apple competitors have turned to guerrilla warfare tactics to wage a battle against Apple and the App Store. Based on what is being written and said about the App Store, one would think we have an entered a tech dystopia in which 27 million iOS developers and a billion Apple users are being taken advantage of by Tim Cook and his allegiance to Wall Street.

What had been valid criticism aimed at the App Store has descended into calls to burn everything down and replace it with anti-consumer and anti-developer alternatives. The writing is on the wall. Apple is pulling away from the competition, and the App Store is considered the best (and last) chance for competitors to reshape the mobile industry to their liking.

App Store

We have never seen anything like the App Store, a curated marketplace where a billion users can access 1.7 million apps. Apple established an easy, safe, private, and convenient way for consumers to personalize nearly 1.3 billion iPhones and iPads with third-party applications. Approximately 500 million people visit the App Store each week - a remarkable figure that speaks to how the App Store continues to connect with consumers on a global basis. In FY2019, App Store revenue was an estimated $53 billion. Apple’s share of that revenue came out to an estimated $14 billion. (Apple generates much less when it comes to App Store profit.)

Some have tried to say that there was a viable, safe, cost efficient, and overall compelling form of software distribution to the mass market prior to the existence of the App Store. There’s one problem with such a claim: The mass market didn’t consume software prior to the App Store. In 2008, the year the App Store launched, only 20% of people even had access to the internet.

There are a number of reasons why the iPhone installed base is eight times larger than the Mac installed base, and the App Store is high on the list.

Evolving Criticism

The App Store is not perfect. A small, but vocal, segment of the iOS developer community (now 27 million strong) has spent years raising concerns and issues regarding the App Store, and in particular, app review and the way Apple enforces App Store guidelines.

However, over the past 18 months, App Store criticism began to take on a dramatically different look and feel as multi-nationals entered the fray. In just the past few months, Facebook, Microsoft, Airbnb, and Epic Games have raised concerns about the App Store.

Spotify was one of the early App Store opponents. The company took what now looks like a delicate approach to raising specific issues with the App Store and what it deemed to be anticompetitive behavior on Apple’s part. While the company was grasping at straws with most of its claims, a few concerns had merit.

Microsoft decided to go behind Apple’s back to secretly get U.S. lawmakers to investigate the App Store on monopolistic grounds. Airbnb ran to the New York Times to air its grievance about wanting a special deal from Apple so it didn’t need to follow long-standing App Store guidelines.

However, it was Epic Games’ attack against Apple that marked a turning point in App Store criticism. Epic relied on a different kind of strategy:

  1. Breaking App Store guidelines willingly and blatantly. We have never seen a company actually take pride in breaking App Store guidelines. Epic made sure everyone knew it was breaking App Store rules by offering a virtual currency as an in-app purchase without going through Apple payment.
  2. Leveraging users and press to its advantage. Instead of making the battle be between two companies, Epic weaponized its user and fan base in an attempt to wage an uprising against Apple. In this pursuit, Epic also tried to use the press more than any other company that came before it in going after the App Store.

These corporations are ultimately after the same goal – to weaken Apple’s ironclad grip over the App Store. While many independent developers are simply focused on finding financial sustainability for their families, the multi-nationals are more interested in pulling iOS from under Apple’s control in order to gain power at the expense of Apple.

Why the App Store?

Apple is pulling away from the competition like never before. A revised product strategy (pull to push), and a broader consumer technology landscape that is swinging and missing on bet after bet, are the two primary factors behind Apple’s momentum. However, the App Store plays a vital role in setting Apple devices apart from the competition.

Accordingly, the App Store may seem like an unusual target for Apple competitors. The digital storefront is very popular with users (based on usage trends) and developers. (Most developers don’t pay Apple anything beyond a nominal developer fee to transact business through the App Store.)

No one is questioning the App Store’s success or popularity. Instead, competitors see a way to turn that success into a weakness. Due to extensive lobbying efforts, most of which were driven by Apple competitors, governments and regulatory bodies from around the world are investigating the claim that Apple is relying on monopolistic behavior to achieve App Store success.

Competitors see these regulatory investigations as a potential vulnerability in Apple’s armor. Breaking up or watering down the App Store would allow competitors to leverage the iOS ecosystem to their advantage. In essence, Apple would lose control over app distribution in its own ecosystem. Competitors would no longer be subject to revenue share arrangements with Apple. In addition, they would be able to establish their own digital storefronts to go direct to customers.

Guerrilla Warfare

Companies like Epic don't want there to be a genuine debate about the App Store. If the debate were to boil down to one’s experience using the App Store, Epic and other App Store critics would lose.

However, the goal is to change the narrative and position the App Store as being fundamentally broken with the only remedy being alternative app stores free from Apple oversight. This sentiment is summarized in the following tweet from Epic Games founder and CEO Tim Sweeney:

“At the most basic level, we’re fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly.”

We are witnessing a guerrilla war that is being waged by Apple’s competitors. This campaign includes companies and CEOs trying to win the moral high ground by appealing to consumers’ and developers’ emotions. Other goals include trying to distract and tire Apple with relentless App Store attacks coming from all directions and using the press to do much of the heavy anti-App Store lifting.

Nearly every article written about Apple’s latest App Store controversy and battle inevitably includes paragraphs of boilerplate language regarding the App Store’s growing list of regulatory issues around the world. Meanwhile, no space is dedicated to the holes and hypocrisy found in competitors’ claims and allegations against the App Store. This is a classic example of a PR guerrilla warfare tactic utilized by competitors in an attempt to sway the discussion and public opinion.

There are then companies running to the press to paint Apple as the evil behemoth going after small business owners during the pandemic. Facebook, Airbnb, and ClassPass have relied on such shady tactics to attack Apple. Portraying Apple as a small business killer is a new low.

True Intentions

To a certain extent, companies like Epic have been successful in quelling App Store debate. Allegations that Apple is milking developers in order to drive revenue and profit growth are passed around with no supporting evidence or numbers. (My financial estimates for App Store profitability on both a net and gross basis are found here.) Pointing out that the App Store isn’t as profitable as consensus assumes is now met with backlash. None of this was the case just 12 months ago.

The lack of perspective coming from customers is also glaring. Consumers, not Apple, are the group who ultimately ends up supporting tens of millions of developers financially. However, most of the commentary written about the App Store has come from the perspective of competitors with pending lawsuits against Apple.

Hijacking what had been a genuine debate regarding the App Store’s treatment of independent developers in order to prop up their own ambition, companies like Epic are revealing their true intentions. These companies aren’t going after the App Store with the interest of independent developers or users in mind. Advocating for an alternative app store is not pro-developer or pro-consumer. Instead, it’s just a way for these companies to make more money.

Monopolies

At the heart of Epic’s fight against the App Store is the need to have both developers and users on its side. There is a simple reason for such a goal. Epic’s underlying arguments against Apple regarding antitrust are fundamentally weak.

In a 62-page lawsuit filed against Apple, Epic alleges the company holds a monopoly in iOS app distribution and iOS in-app payment processing. There is one problem with such claims: Apple doesn’t have monopolies in any particular product device category. Meanwhile, claiming Apple has a monopoly on what goes on in the App Store is equivalent to claiming Apple has a monopoly on a premium experience.

In what is an ironic twist, Epic ends up demonstrating Apple’s lack of a monopoly in mobile gaming and app distribution. According to Epic, two-thirds of Fortnite users play the game on non-Apple hardware. If Apple held a monopoly on mobile app distribution, Apple’s decision to remove Fortnite from the App Store would have been a lights out moment for the game. Gamers have alternatives if they want to use them.

Need for Debate

It’s time for these guerrilla warfare tactics against the App Store to be called out in an effort to have a genuine debate about the App Store. Such a debate is sorely needed. It wouldn’t be about revenue share percentages, alternative app stores, or items like sideloading. Instead, the discussion is found with how Apple should balance customer and developer interests.

Some iOS developers feel like Apple is treating them like second-class citizens in its ecosystem. These developers want to know why Apple doesn’t go out of its way to make sure they are making as much money as possible. Instead, they feel they are being constantly attacked by App Store review. It’s a valid concern that Apple needs to take seriously.

Are we seeing Apple erring more on the side of customers to the determinant of developers? It may be an uncomfortable question to ask within Apple, but it deserves to be investigated.

Apple positions its customers, not profit, as the guiding light for everything it does. This customer-first focus extends to the App Store as well. Management’s actions with the App Store can be traced to ensuring the store’s viability and vitality. Both are critical for maintaining the App Store as a benefit for consumers. If users are content and happy, developers end up benefitting as well. The two go hand in hand.

There are three things that can help keep the customer versus developer dynamic found with the App Store in proper balance:

1) Allow increased in-app communication between developers and customers. Letting developers communicate more freely with users in apps stands to be a positive development for both parties. Allowing developers to include language like “visit our website for additional ways of buying our service” wouldn’t hurt customers and would be viewed positively for developers. Odds are good that we will see Apple make some changes on this front given the European Commission’s review of App Store practices.

2) Give developers more say over App Store guideline enforcement. App Store guidelines can be thought of as laws with no direct mechanism (like voting) for getting revised or rewritten. The ability to bring cases before some kind of review panel would be a step in the right direction. If there were something like the Supreme Court for App Store guidelines, a panel of Apple executives could determine if certain App Store guidelines would end up harming the broader ecosystem. Last month, Apple announced something along this lines.

3) Come up with the next App Store. By spending time now coming up with tomorrow’s App Store, Apple can benefit both developers and customers. The lack of attention given to this topic is telling. While Apple competitors are eager to replace the App Store with their own mobile app stores, the entire app dynamic loses its relevancy when thinking about wearables. We are going to need a complete rethink of apps as we proceed further into the wearables era.

Dragged Through the Mud

It’s difficult to envision any other product or feature other than the App Store that has done more in bringing such a wide variety of innovation to a billion users. It’s not an understatement to say that the App Store changed the world and is still doing so today.

By painting Apple as a monopolistic giant relying on App Store “tolls” and “taxes” to surpass a two trillion dollar market cap, competitors are dragging the App Store through the mud. Revenue share percentages and angst over App Store guidelines end up being distractions for what is ultimately a classic case of wanting more power. With Apple pulling away from the competition like never before, it’s not a mystery as to why competitors see urgency.

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