Electronic store

The App Store is “an economic miracle” – but for Apple, not for developers

Apple and third-party developers have grown so far apart that it’s hard to tell when they’re talking about the same mobile app ecosystem.

For Apple, the iOS ecosystem works wonderfully. The company’s services revenue — the commissions it earns on in-app transactions and subscriptions — reached $19.5 billion in the fourth quarter of 2021, up a quarter from a year earlier ( which was already a high point, as 2020 over-indexed in e-commerce sales rather than merchants during the holidays).

“The App Store continues to be an economic miracle for developers around the world and a safe, trusted place for consumers to discover their favorite apps,” Apple CEO Tim Cook told investors ago. one week.

The App Store is certainly a miracle for Apple. The company’s profit margin on services revenue was 72.4%, up from previous quarters. Last year, an additional 165 million paid subscriptions were purchased through the App Store, for a total of 785 million paid subscriptions, although Apple does not disclose how many of these are for its own services (Apple TV+, Apple Music, Apple Arcade and Fitness+, to name a few) rather than third-party developers.

In 2021, Apple’s Services business earned $72 billion, making it a Fortune 50 company in its own right, Apple Chief Financial Officer Luca Maestri said during the earnings call. the company.

Developers, however, would take issue with Apple’s rose-tinted outlook on the App Store economy.

Think of Cook’s reference to the App Store as a place where users “discover their favorite apps.”

Apple’s description of its own user behavior is outdated, according to mobile industry analyst and consultant Eric Seufert.

“People go to the grocery store and browse. They go to Amazon and browse. Nobody goes to the App Store and browses around,” Seufert said during a RevenueCat virtual panel this month.

Ten years ago, when Apple was promoting an independent app, there was a big increase in new users, as people came to the App Store just to see what was new or interesting, a said David Barnard, developer advocate at RevenueCat, which also runs its own weather forecast. and time management app.

These days, app rankings can’t be climbed organically, as huge incumbents or Apple-owned services dominate the top of each category. A company should invest in a paid search strategy on the App Store, alongside additional mobile and programmatic investments, Seufert said. Even then, achieving sustainable profitability is rare.

Besides petrifying the top of App Store rankings, Apple’s AppTrackingTransparency (ATT) rules severely handicap any app’s potential track, said Thomas Petit, a mobile growth consultant on the same RevenueCat panel.

Apps that reached the few million users or reached ten million or more were used to set even higher bars, like 100 million potential users, when raising funds and setting company valuations, Petit said. These projections no longer seem realistic.

Without mobile growth marketing tools – like creating lookalike groups from your known users and aggressively targeting potential users based on Apple device ID tracking (which is no longer allowed without explicit consent) – independent app developers can no longer “unlock this effect” to grow by an order of magnitude, Petit says.

Seufert said any independent developer should focus on a web-based approach: entice potential app users to register and submit information on the web, before pushing them to the app as a user. already registered user. This gives the app more data about its user base that cannot be blocked by ATT.

He also pointed out that this growing data hole is not an Apple-only problem. Android offers more mobile growth marketing, but trails Apple in policies that address data privacy. Three years from now, Android will offer a similar privacy-focused environment that matches what Apple was just before ATT. The implication is that an ATT for Android will come soon after.

Apple is still the best and biggest show in town for mobile developers.

“Since launch, we’ve paid developers selling digital goods and services more than $260 billion, with 2021 setting a new record for their revenue,” Cook said.

But even that “we paid” line in Cook’s prepared remarks might irritate third-party developers frustrated with Apple. Developers consider payment between themselves and the user, with the developer paying Apple’s fees for being an intermediary.

From Apple’s perspective, the user pays Apple, which generously passes 70% or more off to the developer. An “economic miracle” that depends on your point of view.