Apple’s App Store Report, TikTok Spinoff

Apple’s App Store Report
In advance of next week’s congressional hearing on Antitrust, a report was released by Analysis Group in collaboration with Apple showcasing how Apple’s app store commission rates are the industry norm.

There is a lot to unpack around this, and it is worth emphasizing this is not a black and white issue. The best way to approach this topic intellectually is to see both sides of the argument. Apple has a valid position, as outlined in this report showcasing how their rates for the app store are in line with the vast majority of other app stores. Note these charts from the report.

While these charts tell the story of all marketplaces employing the same fees, there are some nuances to point out. I thought the inclusion of video game stores was interesting. Video games are one category that has largely always been a market distributed by marketplaces. Historically when you purchased a video game, you went into a retail store, and that retail store took a lot more than 30%. With game consoles, the game stores are entirely locked to the platform. Meaning you can’t go out to the general web and download a game for your Xbox or Playstation. In many ways, console game stores are the most similar foundationally to Apple’s iOS app store, which makes those comparisons, perhaps, the most relevant.

I make that point because one of the pushbacks I got via Twitter yesterday when I tweeted both those charts was that with Apple’s app store, you could only get apps from the app store, and Apple is strict on requiring you use in-app-purchases for those apps. The point was to say that Google allows you more flexibility in going outside the app store to purchase an app, and you can get around giving Google the 30% if a developer so chooses.

As I’ve articulated before, Apple simply would do good to be more clear about how a developer can allow a customer to sign up for an account, and purchase a subscription, etc., from their website and then download the app and log-in to their account thus taking they payment directly. Apple allows this for a range of solutions, but as the ordeal with Hey revealed, it is unclear how a developer gets their app approved when they are charging that subscription outside of Apple’s app store to avoid the 30% fee. Transparency here will help, but this is one of those areas I said is not black and white.

App stores have their value, and no one will disagree that those who provide these app market place solutions should be compensated. There are benefits to software developers and consumers in terms of ease of discovery, security, privacy, and ease of friction for commerce. App stores aren’t going away, but the question of how they should evolve in economic practice is the heart of this discussion.

Another point that was thrown at me in my Twitter discussion was that just because others use the same economic model of app store commission, does not mean that Apple is stuck abiding by them if it is not the best thing for developers. The point was more that maybe Apple could be a better leader here and set a new bar about App Store practices rather than just say it’s ok we do it because everyone else does as well. I resonate with this point because I think Apple should be a leader with the App Store, not just one who follows the same practices of everyone else. There has to be some common ground here, and I’d love to see Apple find it.

The other thing that struck me was the Mac app store, in many ways, is much more flexible. For the Mac, you are not restricted to just the Mac App Store to get apps. You can download apps from developers and companies themselves, sign up and pay for software and subscriptions directly to that developer or company. So the question that then sticks out in my mind is, why is Apple living by a double standard? If all their arguments are true of the iOS app store, then why are they not the same with the Mac app store? Then this thinking led me to another question. When Apple moves its Macs to Arm, will the iOS app store policies then come to Mac?

This is going to be a critical story to watch, and I think Apple has to find the common ground I mentioned especially if they want this new world of Mac apps to thrive, and be attractive to devs, as they switch to their silicon solutions in Mac and away from Intel.

I’m very excited about Monday’s congressional hearing honestly because it will be fascinating to see what the big tech CEOs say.

TikTok Spinoff
TikTok is reportedly exploring some options to avoid any potential ban on the app.

Bytedance, TikTok’s owner, is exploring selling a majority stake in TikTok to a company with US interests or spinning it off as a separate US-based company. Both scenarios and scenarios within those scenarios are interesting. A full sale of TikTok would be tricky as the list of buyers would be small. Snap likely couldn’t afford it. Facebook would not be allowed to buy it, and maybe Google could make a play. Private investors could make a play as well, but the dollar amount would be out of reach for many in the private world I’d think.

If Bytedance believed they could spin the company off and still have some control and say in the company but also have it appease US concerns over the company, then that route makes the most sense, in my opinion.

In the big picture, the thing about TikTok that is worth bearing in mind is how the most successful Chinese app to come to the US was built by a conglomerate from China, not a startup, or smaller company. Assuming other Chinese apps will attempt to come to the US, one can assume this may be the template China uses going forward. For that to happen, how TikTok handles this situation will likely help determine the strategy used by Chinese companies in the west. For that reason, I view this as important to watch to see if TikTok/Bytedance can navigate these waters successfully. If not, it may serve as a barrier that deters Chinese companies from even trying to break into the West. Which also may be a goal of the current administration.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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