Microsoft bartered that asset not to increase demand for a revenue-generating product, but rather to suppress the distribution and diminish the attractiveness of technology that Microsoft saw as a potential threat to its monopoly power.
—US vs Microsoft, 1999
This quote describes Apple in 2021 as it did Microsoft in 1999.
On June 7th, Apple had its World Wide Developer’s Conference Keynote. The name is a misnomer; the conference, as a whole is developer focused. However the Keynote is almost always consumer focused. The odd thing this time was how hostile it was to people and organizations who are paying Apple 30% rent for App Store. There are private APIs, preferential treatment to their own apps, trying to be a gatekeeper for email, and wiping out of a whole categories of apps. Tim Cook is trying to do to weather apps, email marketing, and app install ads what Bill Gates did to Netscape. The last one is interesting, because Apple’s own ad spend has already increased by 4% since the privacy expanding iOS 14.5 update
Apple is leveraging its market position to destroy competition, like Microsoft in the 90s. Like Microsoft, Apple is also loosing track of its strength.
Not a platform
I was in charge of Facebook Platform. We trumpeted it out like it was some hot shit big deal. And I remember when we raised money from Bill Gates, 3 or 4 months after — like our funding history was $5M, $83 M, $500M, and then $15B. When that 15B happened a few months after Facebook Platform and Gates said something along the lines of, “That’s a crock of shit. This isn’t a platform. A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform.”
—Chamath Palahapithya
During the Same keynote, Apple revealed that Developers have been paid $200 Billion since the launch of the service in 2008. Assuming everyone has to pay the 30% rent[1], that makes Apple’s cut somewhere around $85 Billion. A back-of-the-envelope analysis would suggest that, using the Bill Gates standard, App Store is indeed a ‘platform’. App Publishers have earned far more than Apple, and while 85 Billion is a huge number, over 13 years, it is loose change for Apple.
However, if we compare the costs of developing, maintaining, publishing and marketing the app, and compare to the marginal cost Apple has for operating the App Store, the analysis weakens. The value of the Here’s Marco Arment, creator of Overcast, last month.
Apple’s leaders continue to deny developers of two obvious truths:
– That our apps provide substantial value to iOS beyond the purchase commissions collected by Apple.
– That any portion of our customers came to our apps from our own marketing or reputation, rather than the App Store.
For Apple to continue to deny these is dishonest, factually wrong, and extremely insulting — not only to our efforts, but to the intelligence of all Apple developers and customers.
The App Store is a rentier economy, by many accounts. It does not add value, but extracts it.
Monopoly
Last Year, during my 30 blogs in 30 days series, I wrote about how Apple plans to make money off its services business:
Now how do you make money from original content worth billions and ad tech without creepy tracking? You can’t. This gambit has backfired. Kind of. Apple can’t start engaging in Facebook and Google like tracking tech because that would destroy their brand equity, while they can’t compete with Google and Facebook without resorting to targeted ads.
The solution: Instead of ‘lowering’ yourself to the competition’s level, you make things incredible difficult for them. Apple is doing just that.
This was more accurate now than when I wrote it. In the fact, in the time between the last post and this one, The App store has been hit with one scandal over another over another. The Epic lawsuit has revealed more info, about how Apple sees the developers in their ‘eco system’, whatever that means anymore.
Now if you are any other regular company, this would not be a problem. In fact, if you are any other division of Apple, this would not be a problem. But App Store is a monopoly; there is no way to buy or sell software for iPhone, and its red-headed step-sister iPad. Apple controls the market completely. So when they try to create a competing app and give it special permissions, it is essentially using its market position to stifle competition. And it also does not do what it claims to do; protect users from Malware.
The Frog’s Dilemma
Microsoft did more than just ship Internet Explorer is free. It strong armed PC vendors that had special deals to ship Netscape into reneging on that deal. Apple does not need to strong arm anyone. They can just remove your app from the App store, or just not approve any of your updates. This did not happen overnight.
Apple did not start the App Store as an iron fisted despot. It was considered a new gold rush. But the cracks started happening soon. Ever since iCloud, Apple’s sole differentiating factor for their services has been the special permissions and APIs they get on iOS. They are building their competitive advantage through monopolization of the platform, rather than compete on the merits of their products. This is exactly what Microsoft did in the Gates years. To the point where it destroyed Windows software marketplace. I foresee something similar for the App Store, unless Apple changes course.
When Apple ships a camera feature to Facetime or when Apple only allows it own notes app to be used anywhere on an iPad, it is creating a barrier for its App Store market. It might sell more iPhones today, but what incentives do developers have if they will be sherlocked, in the future? When Apple buys Dark Sky, kills the API and integrates features into its own app, it is no different than Microsoft destroying Novell by disabling NDS. You might point out that Windows is still the dominant OS on Desktops, but do you know any one excited to produce software for it outside of games? And even that was a result of Valve swimming against the tide with Steam. Apple would not even have the option of a Valve saving them when because you can’t create alternative marketplaces.
US Law puts too much importance on ‘consumer harm’ when prosecuting monopolies. In that sense, Apple’s monopoly is not bad; customers are getting privacy and ‘better prices’, as much as that can be ascertained. However, in a free market, consumer harm can be considered harm to the market it self. So does Apples market harm the market itself? That is a post for another day.
[1] I understand that the cut is different for subscriptions and other circumstances. So the true number might be lower.