The Apple v Epic lawsuit is ongoing (recap: Fortnite tried to enable in-app purchases without going through the App Store framework, and got kicked off the platform by Apple in response), and it's bringing to light some very interesting details.
This thread is FULL of fascinating scoops, but the clear theme is that Epic wants to demonstrate that the App Store's benefits aren't worth Apple's 30% commission.
Anti-monopoly verdicts coming fast, years too late
A federal court ruled Google’s AdX (Exchange) and DFP (SSP) created a monopoly and will seek to require selling off their third party advertising Network business. This ruling might have been a big deal 20 years ago when users spent most of their time on the open web and Google made 46% of their ad revenue came through the third party Network (source paywall) but as online usage has moved to logged-in “Content Fortresses”, the Network business has degraded in performance (and margin). Today Google makes closer to 10% from this business. Google will still appeal, but it’s probably a moot point.
This comes at the same time the DoJ is trying to force Google to sell off Chrome four years after they succeeded in a court claim Google has a search monopoly.
Chasing another bold verdict in the very same courtroom — also years too late — the Federal Trade Commission is (FTC) revisiting its 2019 revisitation of its 2012 approval of Facebook’s acquisition of Instagram. Even though Zuck has offered the court a cool billion to settle, the case is projected to fail, in the words of Ben Thompson: “The government is making a case from the late 2010s, using evidence from the early 2010s, that Meta is a monopoly in the 2020s, and thus should have to divest acquisitions made over a decade ago.”
Amazon and Apple aren't immune to the punitive scrutiny.
That said the FTC is making some helpful rulings that are right on time: such as forcing Airbnb to display full prices (looking at you $250 cleaning fee) and dinging Uber for falsely claiming “savings of $25 a month” for subscriptions to Uber One, then telling users to contact customer service to cancel, but giving them no way to do so.
Apple's EU App Store changes...won't change a thing
You may have heard of the EU’s Digital Markets Act which require large online platforms to “behave in a fair way.” Well, to no one’s surprise, Apple’s much-anticipated response to the DMA was to materially change EU App Store policy changes-- in a press release "dripping with disdain"-- but, spoiler alert: they aren’t likely to materially impact the economic status quo for app developers.
I've summarized the changes in a post and there are certainly savings to be had versus the standard store commission rates – back of the envelope, I calculate north of $600MM savings using publicly available Spotify financials.
However, most think app developers will stick with the status quo. Beyond the sheer technical complexity; the process will add hurdles in end-user adoption; notable administrative overhead--including, getting a million dollars of credit with Apple; and, most importantly, opting into these changes requires the upfront burden of paying Apple for all app downloads and future updates. Clearly, it’s a financial risk that few businesses can tolerate.
Eric Seufert also has an excellent ongoing editorial on the changes in his three-part series "Heads I win, tails you lose."
Last week, Apple published a report done by Analysis Group, an international economics consulting firm, under the headline 'Report finds third-party apps see global success on the App Store'.
The Apple press release and the report itself are worth discussing separately: the former is full of carefully-polished PR points, but the latter is a legitimately interesting whitepaper with a lot of fascinating industry data.
Setting aside PR spin, it's probably best to take this analysis at face value for exactly what it shows: in certain markets and for certain verticals, users prefer apps not made by Apple. Nothing more, nothing less.
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.
