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Apple and the App Store Problem

Apple and the App Store Problem
By Newsletter • Issue #2 • View online
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Apple has a problem.
Making it worse is the fact that its problem happens to be one of its most important businesses–the App Store.
When you think about it, the App Store really is one of the most interesting inventions of the past 25 years. Tim Cook called it an “economic miracle.” Setting aside the hyperbole, it’s actually kind of true.
It’s hard to remember that before the App Store existed, your iPhone came pre-loaded with 16 apps, and that was it. For anything else, you had to access it on a website.
But, the App Store’s sphere of influence isn’t limited to the iPhone. Buying software of any kind was very different. There was a time it meant you would go to a store like CompUSA or BestBuy, and find a box on a shelf. The box would be full of disks, and when you got home, you’d load those disks onto your computer on at a time.
Then came the internet, which meant you could order those boxes to be delivered to your front door. Or, even better, you could download software directly to your computer.
Except, for a long time–for most people, anyway–the internet was slow (for many it still is, but that’s an entirely different problem). Downloading software took a long time, and it wasn’t a great experience. You had to type in your credit card information into a website, which was a problem of its own.
You kind of had to really want the software to get out your credit card and type the numbers into the website of a company you may have never heard of. Sure, if it was Microsoft or Adobe, no big deal. But what about for a game your kid wanted you to buy from some new developer?
That’s really where the “economic miracle” comes in.
The problem Apple solved with the App Store was to introduce simplicity and trust to the process of downloading apps. I think you could argue Apple actually solved this problem earlier with the iTunes Store, which allowed you to download music, and later Movies and TV Shows. It was that platform that really made the App Store possible, if not in a technical sense, then at least conceptually.
Apple, with the iTunes Store, had hundreds of millions of customers’ payment information stored, allowing each of them to download music with a simple tap.
In that sense, the App Store solved the problem of distribution. It eliminated basically all of the friction of distributing apps, it just did it for software developed for a device you carry in your pocket.
There were millions of people with iPhones, most of whom already had an iTunes account with their payment information on file. Pair that with developers eager to build things that users would be willing to pay a few dollars for, and you can see what Cook was talking about.
It’s easy to get side-tracked anytime someone calls something they built a “miracle.” In this case, I don’t know if it’s a miracle, or just an ordinary juggernaut. The App Store now represents $500 billion worth of annual economic benefit for developers, for which Apple takes a 15 or 30% cut.
And that, my friends, is where the real problem starts–at least for Apple. The App Store is no longer a “miracle.” Yet, Apple continues to look at it as if it were just born and should be seen for the transformational platform that it was when Steve Jobs introduced it in 2008.
Developers, however, don’t see it that way. It’s simply business as usual. And, it’s a very big business with lots of stakeholders.
When you create a platform that creates incredible economic opportunity for people, there will inevitably come a point when those same people will start to want more. They’ll also start to question whether the level of control you exert is reasonable or justified.
Clearly, Apple and its developer community don’t agree on that point, and that’s a problem.

Apple Refuses to go to Congress, Sort Of
It appears Congress has an opinion on the matter as well. In a letter addressed to Tim Cook, Senators Amy Klobuchar and Mike Lee take issue with the fact that Apple has refused to “provide a witness to testify in a timely manner before the Senate Judiciary Committee’s Subcommittee on Competition Policy, Antitrust, and Consumer Rights at a hearing to examine the competition issues raised by app stores.”
One of the things that has always struck me about Apple is that the people inside company often seem to be totally unaware of how people outside the company view their actions–especially in relation to the App Store. This is a perfect example. It isn’t a good look.
Especially considering that the company has had plenty to say on the matter. As the letter points out:
Earlier this year, Apple provided witnesses to testify before the North Dakota Senate and the Arizona House of Representatives to oppose state bills that would regulate the very same conduct that the Subcommittee intends to explore. You testified before the House Antitrust Subcommittee regarding these same issues last year. And on the exact day Apple informed the Subcommittee that it would not provide a witness for an April hearing, the New York Times released a podcast interview in which you discuss competition issues relating to Apple’s App Store, including Apple’s pending litigation with Epic Games.
Sure, it’s true that answering questions before Congress is almost never going to go well for any CEO. The people asking the questions aren’t usually interested in learning anything, but making a point while a camera is pointed in their direction.
Still, when Congress calls you out over something, it doesn’t earn you any goodwill to simply not show up. Especially when Congress is already considering dramatic changes to antitrust law that could directly affect your business.
Apple’s decision also drew scorn on Twitter, most notably from frequent critic and Basecamp co-founder, David Heinemeier Hansson:
Tim Cook is too busy to appear before the United States Senate to answer for Apple’s App Store abuses. Funny how he always seemed to have time to appear as Trump’s little helper at any photo op! Democracy, schmocrazy!
Now it appears Apple will send Kyle Andeer, the company’s chief compliance officer, to appear before the committee’s hearing. According to a letter that reviewed by Bloomberg, the company wasn’t trying to get out of appearing, but was looking to have it rescheduled.
“We have deep respect for your role and process on these matters and, as we told your staff, we are willing to participate in a hearing in the subcommittee,” Apple said in the letter. “We simply sought alternative dates in light of upcoming matters that have been scheduled for some time and that touch on similar issues.”
It seems like those “upcoming matters” are related to the lawsuit between Apple and Epic, which is expected to go to trial in early May. The bottom line is that Apple definitely should send someone, and that someone should be Tim Cook.
iOS 14.5 update and your privacy
Finally, since we’re talking about Apple and app and the App Store, there’s one other thing worth mentioning–iOS 14.5. I don’t usually write about point updates to software, but I think it’s possible that this one might be the most important update to iOS since the introduction of the App Store in 2008.
It’s also caused, by far, the most controversy. Mostly, that’s because Facebook isn’t happy with the changes and how they are likely to affect its bottom line.
Facebook’s biggest concern is that developers will now have to ask permission before they’re able to track users–an important piece of what makes the social media giant’s “personalized ads” so effective.
I wrote about the overall changes, including one that is a complete game-changer, and likely to have a much more direct impact on your daily life: the ability to unlock your iPhone with your Apple Watch.
Apple's iOS 14.5 Is Imminent. What It Means for Your iPhone and Your Privacy
Related stories you might like:
Apple refuses request to testify for Senate app store hearing
The App Store is Apple's most valuable asset, but also its biggest liability
The App Store has a fake-app problem. Here's how Apple should crack down on one of its most lucrative businesses.
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