Bloomberg dropped an explosive-sounding report this week: Apple to Allow Outside App Stores in Overhaul Spurred by EU Laws (here's an alternative TechCrunch article, if you aren't a Bloomberg subscriber).
Most of the media is talking about this story like some sort of bombshell scoop, but it really shouldn't be a surprise — the bones of the the Digital Markets Act (the 'EU Laws' referenced here) have been an open secret for a while.
It's good to see progress on this, but I've said it before (more than once) and I'll say it again: this is the worst outcome for pretty much everyone involved. Yes, there are many issues with walled garden app stores, but there are also major benefits (no one really wants a return to the days of Windows 98, when an antivirus scanner was the only thing standing between your computer and total anarchy). The unwillingness shown by Apple and — to a somewhat lesser degree — Google towards engaging in any sort of thoughtful compromise is leading to 'product roadmap by regulation'. And since that is basically how we got into cookie consent banner hell with GDPR, I don't think anyone is going to be thrilled with the outcome this time either.
John Koetsier has a great piece on all the open questions around what this new, multi-store world would look like, but I think the key point is this: the primary driver here is pretty obviously a challenge to the 15-30% commission rate. And we already have a clear playbook — going back years — for how Apple and Google respond in these scenarios: they will give only the bare minimum in concessions necessary to comply with the literal letter of each new law.
These changes will be no different, which means we should expect them to come with UX requirements designed to make things as unappealing as possible…and some other way to collect an equivalent amount in fees. This is scorched earth, trench warfare, and the unfortunate thing is that it's just ultimately harming the broader mobile ecosystem.
PS, barring some unforeseen, apocalyptic event, this will be the final Mobile Growth News of 2022. Thanks for reading, for your thoughtful replies (I respond to all of them!), and for coming along for another year of mobile growth. Happy holidays, and see you all again in 2023!
On Monday, the team behind Basecamp officially launched Hey. This makes them the latest in a long list of companies attempting to ‘reinvent email’. And since it’s 2020, any email platform (especially one that costs $99/year) without native mobile apps is dead on arrival.
Of course, Basecamp would prefer not to pay an ‘App Store tax’ of $33/user to Apple each year, so they allow customers to access an existing subscription on mobile, but not purchase a new one.
This approach has been the status quo for many popular apps (Netflix, Dropbox, even the main Basecamp platform) on iOS for years, and Apple occasionally makes even more substantial exceptions. But something apparently went off the rails this time: after initially approving Hey v1.0, Apple blocked the v1.0.1 bug fix. Then they doubled down by claiming the original approval was a mistake, and threatening to remove the app completely.
Given the amount of press coverage, and in the context of the two EU anti-competition probes that coincidentally launched this week, I’d be quite surprised if something doesn’t ‘magically work out’ in this case. But the underlying conflict is going to keep simmering away for as long as the App Store business model involves taking a commission.
Apple will allow Dutch dating apps to use other payment options within existing apps
In related news, Apple finally blinked in its ongoing dispute with the Netherlands Authority for Consumers and Markets.
Brief recap:
The newest development: now Apple announced its plans no longer include requiring a completely separate app just for the Netherlands. Still unchanged: a required pre-payment warning modal (very similar to the example above), and a 27% commission rate with mandatory audit rights to Apple.
The ACM hasn't indicated yet whether it considers this satisfactory…so the drama continues for at least a little while longer.
Google will reduce Play Store cut to 15 percent for a developer’s first $1M in annual revenue
Google is responding to Apple's App Store Small Business Program, which reduces the App Store commission to 15% for select developers (with some fairly strict limits and caveats). However, Google is upping the ante in the process: their new Play Store program applies to the first $1 million in earnings for all developers.
This handily avoids the 'revenue cliff' problem some iOS developers face, where they suddenly find themselves out of the Small Business program and subject to a flat 30% fee for slightly exceeding the cutoff.
Both policies are obviously good news, but Google's seems simpler and less likely to lead to unpleasant surprises.
Apple Will Let Content Apps Like Netflix, Spotify Link to Their Websites to Sign Up Users
This has been hanging in the air ever since Apple's settlement with the Japan Fair Trade Commission last fall.
It sounds big on the surface, but read the details and you'll see Apple is basically playing the 'take my toys and go home' card. Per the documentation page, some of the restrictions required for an app to use this new option:
Also, Apple is requiring apps to show a scary-looking fullscreen warning to users before sending them to the website destination — you can see the mockup on this page, about half-way down.
Remember a few years ago, when Facebook made algorithm changes and publishers swore to get serious about revenue diversification?
Turns out many of those publishers ‘diversified’ right into the open arms of Amazon’s affiliate program, which announced this week that commission rates would be cut in half. Ouch.
This week, Apple released a couple of self-serve tools to help developers promote their apps.
They're…basic. But maybe a sign of more to come? After all, a robust array of tools integrated directly with the App Store could help justify that 30% commission rate…
Apple’s services growth is increasingly an advertising story
Apple’s Services business is on track to clear $100B in annual revenue. While we tend to think of Services as App Store fees and iCloud, roughly 40% of this revenue now comes from advertising, including Apple Ads and the enormous Google default search deal, estimated at $20B per year.
Apple’s multi-year privacy push did more than convince the market that iPhones are secure. It also changed how advertisers allocate their budgets. With less ability to track users across apps, more spend has shifted away from third-party networks and toward Apple’s own monetization surfaces. Apple is now one of the largest advertising companies in the world — without calling itself one.
At the same time, mounting legal pressure around App Store commission rules threaten the highest-margin portion of that Services stack. If even 20% of App Store transactions shift to external payments, Apple could lose ~$11.6B annually. That dynamic only increases the strategic importance of Apple Ads and on-device monetization going forward.
Global App Revenue Declined 5% Year-Over-Year to $31.6 Billion in Q3 2022
The data in this report is already interesting just at face value. But hidden below the surface here is a fascinating thread to pull on: non-gaming app revenue declined far less (12.7% vs. just 4.8%) than gaming apps.
And that's despite this report only considering in-app purchase revenue (i.e., things subject to the Apple/Google commission).
Apple and Google already separate apps and games out into different sections of the store, and there have been suggestions floating around for a while that this should be made even more official. It would certainly give them more flexibility to differentiate in policy enforcement.
tl;dr: state of ads in chatbots
Confused about the state of advertising in AI chatbots? Me too. I researched the latest, so you don’t have to:
