I like Apple App Store. It’s like a superstore or even a Costco for Apps, not so much in price but in the vast quantities of everything. There are millions of apps across countless categories. You could lose yourself in the virtual aisles.
Like most super systems, there’s a rich subsystem that powers it. In this case, it’s the vast network of developers who all build apps under Apple’s guidance (light) and rules (strict). One set of rules, though, has little to do with what apps do or most of how they work: it’s the transaction system.
iOS (and iPadOS) apps can all support up-front payment for the pleasure of using the app (you license, never own) and in-app purchases for unlocking additional features and subscription services. Early on, Apple set a rather aggressive 30% commission fee on all of this. Having no other avenue to the growing legion of iPhone owners, App Developers agreed to the terms and were mostly silent about it for years.
Bigger than all of us
Perhaps no one understood how this whole thing would scale and that eventually, 1.2 billion people would own iPhones and that virtually every one of them would use the App Store to download apps and start making payments through them and, ultimately, to Apple.
With App success, though, came grumblings about Apple’s fees and a dark realization that Apple made it impossible to operate any portion of your app business outside its virtual walls.
I know a lot of people believe that Fortnite parent Epic launched this battle, but that’s not true. There’s a decade-old case, Apple Inc. vs. Pepper, wherein Robert Pepper and some Apple customers sued Apple over its complete control of the app store. Pepper and company felt that the 30% commission had become a “tax” on consumers. Put another way, every time Apple charged a developer 30%, the developer passed that cost along to consumers. Apple won that case.
It’s been mostly winning the case against Epic, too. It even beat back on appeal (at least it’s in appeal right now) the ruling that would’ve allowed Epic and other developers to put links and buttons to external transaction pages, basically circumventing the Apple App Store payment system and that commission.
Now, though, the battle is fresh in people’s minds thanks to Twitter owner Elon Musk who believes he discovered a “secret 30% tax on everything you buy through their App Store. (opens in new tab)“
The tweet, prompted by Musk’s anger and fear that Apple might 1) Kick Twitter out of the App store because Twitter’s evolving content moderation policies and decision to invite back in unsavory characters on the platform might lead it to run afoul of Apple’s app store policies and 2) the reality that Twitter could not run its Twitter Blue program and $8-a-month subscription fee on iOS without paying Apple a 30% commission.
Mob mentality
Still, people took Musk at his word and started to treat this like news. Republican congresspeople came to Musk’s defense and some even threatened to open an investigation. Facebook’s Mark Zuckerberg took the opportunity to complain that Apple’s monopoly was unsustainable (opens in new tab). He forgets, of course, that Apple’s iPhone helped turn Facebook (later Meta) into a mobile advertising powerhouse. Apple is also the company that hurt Facebook the most when it introduced App tracking Transparency, which helped take a huge bite out of Meta advertising revenues (opens in new tab).
The reality is, Apple’s App Store control is imperfect and is, in a way, monopoly control of all iOS apps on the iPhone. But it’s not a monopoly in the marketplace. There is another platform, Android, that has almost twice the number of global customers. They don’t all own one brand of Android phone but, increasingly, they do get their apps from one source: Google Play.
You have options
Google’s Android did start out as the anti-Apple, with no single App store and many avenues for people to peddle fake and dangerous apps. That’s why we have the Google Play store now and, maybe, a little less Android Malware.
I’ve long worried about Apple being forced to allow people to download apps from other sources because I’m convinced that 50% of them would be riddled with malware.
App commissions, which are common across all platforms, including Android and Windows, are a slightly different story.
While it might’ve made sense for Apple to charge a flat 30% fee when the iPhone was young and the number of users could be counted in six figures, it was not fairly sustainable, especially not when so many developers earn far less than a king’s ransom each year.
Apple has, either because it had to or it understands that change is necessary, added a small business tier to the commission system. Developers making less than $1M a year pay 15% commission. I’d argue, though, that the time has come for many tiers and the option to negotiate.
This battle isn’t new and Apple is not the villain here. It built a big business on extraordinarily clear-cut rules. But the nature of mobile, online, advertising, and how apps make money has changed. Apple needs to adjust in kind and work with partners like Twitter and Epic to find fair and equitable ways of hosting their apps and helping them make money, while Apple makes some, too.
If you don’t own an iPhone where you can start perusing all those apps, check out our Best iPhones of 2022.
