Apple’s app store and other digital marketplaces [pdf] | Hacker News Reader

Apple’s app store and other digital marketplaces [pdf]

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59 pointsmudil79 comments

Hacker News readers are a pretty biased sample of people -- they generally have direct interests in lowering commissions paid because they run businesses paying such commissions. And advocating that any platform provider is a monopoly restricting free exercise of selling goods. Often, the arguments will be phrased in terms of "should" or "fair" or "can't".

But this is the oldest position in the book and is a fight that comes naturally with commercial activity -- everyone wants to not have a middleman, and fight against it.

The question is, are you entitled legally to have some certain % charged to you? As a matter of "fairness"? Is a platform that controls access to a fraction of mobile device software sales an exclusionary monopoly? Has that prevented you from selling software elsewhere, or exercising your trade as a programmer? I personally (and I have no financial interests either way) think the issue is not as principled as some people make it out to be.

Good points. I think the thing that irks people is Apple's bullying. They just don't seem to be operating in good faith. For instance, from the report, here are Apple's "Anti-circumvention Policies":

>2. “Multiplatform Services: Apps that operate across multiple platforms may allow users to access content, subscriptions, or features they have acquired in your app on other platforms or your web site,... provided those items are also available as in-app purchases within the app. You must not directly or indirectly target iOS users to use a purchasing method other than in-app purchase, and your general communications about other purchasing methods must not discourage use of in-app purchase.”

Apple is dictating what I can tell my customers in "general communications" where Apple is not involved. That's not a free market, it's abusive. If a customer comes to my site from a search I should be able to say "Here are the purchase options. Please note that Apple takes 30% if you purchase through their store. If you purchase direct, our processing fees are only %2.5".

In that statement, I'm not making any judgement call on whether Apple is good or bad. I'm simply stating a verifiable fact. If the value proposition of Apple's store has benefits to the consumer then its merits should stand on their own.

For the record, I believe the App store offers many solid benefits to consumers. I'm just saying we should let the consumer decide if the benefits of the App store outweigh their other chosen criteria.

TL;DR Apple has no business inserting itself in my customer communications on my own website so long as I only state facts.

Edit: This is from the perspective of say, an eBook author or MacOS developer. I realize that iOS apps can only be purchased through Apple so the point there is moot.

Plenty of apps themselves do what you seem to be classifying as none of their business to intervene in.

Doordash or other delivery apps tell restaurants they can't hint to their customers to order outside of the app. In fact they monitor communications with restaurants to ensure it's not happening, which is pretty gross. Uber/Lyft don't allow drivers to see who's asking for a ride and then ask the customer to pay outside of the app. If you're an eBook platform app, are you going to allow authors to hawk their books with a first teaser sentence "feel free to buy this eBook from my personal site instead of on this app"?

I wouldn't say Apple is "inserting itself" into a transaction where it has no business. The app developer agreed that in offering the app, Apple's terms would be agreed to, and those include not offering or suggesting methods to circumvent the financial transaction that the app is directly relevant to.

My example was specifically about a customer coming to me directly as first point of contact, and not using Apple's platform or resources in any way [0]. I also mentioned nothing about price. I only mentioned communicating that the commission exists.

[0] Edit: I realize that my TL;DR above didn't capture this important nuance, I've updated it.

>Apple is dictating what I can tell my customers in "general communications" where Apple is not involved. That's not a free market, it's abusive. If a customer comes to my site from a search I should be able to say "Here are the purchase options. Please note that Apple takes 30% if you purchase through their store. If you purchase direct, our processing fees are only %2.5".

Everyone that argues against the rule that says you can't advertise in your apps ways to bypass the App Store for payment are basically arguing that they should be able to free ride on the platform, something discussed in this study.

>In addition, for their business model to be successful, digital marketplaces often have to rely on rules that prevent customers from free riding on their services. Free riding involves buyers and/or sellers avoiding fees after the platform has helped connect them, which means that the platform is not compensated for the successful match and the use of the platform’s technology, tools, and services to facilitate and promote valuable transactions between buyers and sellers. A review of the policies and rules of large app stores and online marketplaces that distribute physical goods and services — marketplaces for which the risk for free riding is particularly high — shows that digital marketplaces routinely forbid behaviors aimed at avoiding fees.

>In addition to the commission on paid apps and in-app purchases of digital content, services, and subscriptions, Apple imposes guidelines that govern the use of the App Store. Among those policies are rules about in-app purchases to prevent users and developers from free riding on Apple’s App Store services and investments. Apps cannot explicitly steer app users away from in-app purchases — for example, by providing external links that bypass the App Store.

That part is not going to be popular among developers, who understand that Apple "free rides" off of them too–without them there would be no platform. There are some "free" apps that are literally cornerstones of the iPhone, to the point where people might switch to a competitor if they didn't exist.

My example was about communications with customers who come to me without Apple's help. Such as on a website that I paid for, and the customer comes to me via a Google search ad (or good SEO) that I paid for.

Ultimately, a mobile app [0] will be purchased through Apple. Should they get a commission? Of course. But since they didn't provide the "discovery" or lead generation it should be much less.

[0] I'll use mobile apps in this particular example because it's less ambiguous.

How are we to determine who came from what source the customer came from? Offer them a choice to say, "I found this book on my own and just want to buy it here, discount = -10%"?

Referral links have been around since the late to mid 90's.

To me a core problem is that the market is segmented into a handful of oligopolies. People sometimes say "can't you sell your software elsewhere", and while I can sell a chair at another store, if somehow chairs had to be compatible with tables and somehow there were only like two or three kinds of table in the world and all of them had this weird chair restriction and it was all based on weird artificial interoperability barriers... I just don't think the people who thought through these laws--even the DMCA (which is all about this stuff and wants it... but only so far! it has explicit exclusions based on principled stances taken by congress that are now obsolete) and even the people at the EFF who try to fight it (based on my work with them and extensive discussions with some of their people on our shared projects)--considered what asymmetric encryption and tamper proof module digital rights management technology does to competition (where the case law and legislative intent had always been that these kinds of restrictions should not have much merit: see Sega v. Accolade as a landmark case, wherein Sega hadn't no right to try to lock Accolade off their platform _and everyone liked that and consisted their lack of such right to be important for competition_ and yet now you can build that lock out of encryption and no amount of reverse engineering is guaranteed to break it and all of the assumptions that "software interoperability" is even possible have been destroyed).

> And advocating that any platform provider is a monopoly restricting free exercise of selling goods.

It's not any platform, it's a platform which actually has a monopoly.

Amazon is a "platform" for selling boxed software but they haven't got a monopoly on it. You might make a few extra sales from being on Amazon than not, but even most of the sales you make through Amazon would only be diverted to Walmart or Best Buy or your own website if your software wasn't for sale on Amazon. If they insisted on paying you 30% less than competitors, you would make more by refusing them and then losing 10% of those sales while 90% of them get diverted to other distributors who take smaller cuts. Which in turn prevents them from doing that, because getting the normal distribution margin in a competitive market is better for Amazon than getting nothing.

That isn't true for Apple because there is no diverting those sales to a different distributor because there is no other distributor. You can sell a Windows app to the same customer with a Windows device through any number of distributors, but nobody but Apple distributes apps to iOS devices.

It will turn quite heavily on what is the market in which you assert a monopoly exists. There certainly are alternatives to someone developing mobile apps -- Android, others.

The more narrowly you define it, of course you can make anything seem like a monopoly. Whether that narrow market is truly what is in dispute, is the question.

But you should listen to Thiel's talk on this -- is a restaurant that is the only British food outlet on Main Street, Springfield a monopoly over the British restaurant industry on Main Street?

> is a restaurant that is the only British food outlet on Main Street, Springfield a monopoly over the British restaurant industry on Main Street?

Which brings you to the question of substitution. If the only British food outlet on Main Street, Springfield raises prices by just a modest amount, does that cause a significant number of customers to take their business elsewhere? If so, they haven't got a monopoly and the "elsewhere" is part of the same market, which in that case would presumably include restaurants serving different types of food or which are still in the same general vicinity.

So what's the substitute for the App Store? If they raised prices, could developers switch to Google Play instead? Well, no. Developers need both at once because they each reach different customers. If Apple charged too much a developer might abandon the iOS market entirely and use only Google Play instead of using both, but none of that business from the App Store could get moved to Google Play because those customers don't have Android devices and Google Play doesn't distribute iOS apps. They would just have to lose all of that business, not substitute Google Play for the App Store by moving the customers over there.

Compare this to where you stop selling your boxed software to Amazon but continue selling it to Walmart and Best Buy. Most of the people who would have bought your software on Amazon still want it, so they just buy it from some other place. The same customers. Your iOS customers can't do that because nobody else distributes apps for their devices.

Also notice that they did this on purpose. Suppose the owner of the only "British food outlet on Main Street, Springfield" is also a landlord who owns 20% of the land in the city. They don't have a monopoly on land, but then what they do is build a wall around the portion of the city they own, so that it's a two hour drive around the wall to get out of their domain. Then the competing restaurants that had been "one street over" are on the other side of the wall, which puts them in a different market (can't substitute them anymore), so now they've got a restaurant monopoly.

With a world wide market share of about 20% and being absent from many countries where Android, or classical feature phones rule, hardly makes it a monopoly by letter of law.

You're assuming Android apps and iOS apps are the same market. Which they might be if they both ran on both kinds of devices and you could distribute iOS apps via Google Play or Amazon, but that isn't the case.

It's like having a regional monopoly. Even if Google has 80% of the world market, if no one but Apple has a store in California, they have a monopoly in California. If you (or any of your customers) live where they have a monopoly (i.e. have an iOS device) then no other app distributor is reasonably available.

Obviously they could change that by not restricting iOS users from using other app distributors. They separated iOS app distribution into its own market explicitly and on purpose, but that's still what it is. "Windows app distribution" might be its own market but Microsoft has no monopoly on it.

I am assuming that 99% of people on HN with opinions have zero understanding about law and how it applies to each jurisdiction across the globe.

Like your comment proves by the way.

You're implying that it's wrong even though the economics of it are right and the sane legal systems are going look at the economics of it.

I am implying that anyone that is clueless about law has no place calling Apple whatever they feel like, just because it doesn't fit their world view.

You still haven't given any argument for how they don't have a monopoly on iOS app distribution, or why iOS app distribution and Android app distribution should be considered the same market when they don't run on the same devices, the set of customers is effectively 100% non-overlapping, and they can't in any meaningful way be substituted for one another when a developer would still need both to reach the entire "market" if the market was defined to include customers on both platforms.

You don't get to define what is a monopoly to fit your world view.

The market is mobile phone devices and each device owner is free to set their own rules on their devices.

Apple is just a big supermarket chain, and like any supermarket chain gets to choose what comes on the shelves, don't like it? Go to another digital supermarket and get a law book for your jurisdiction.

world wide market share is immaterial as such decisions are not taken at global level. In US it has ~50% market which makes it dominant enough.

Which still might not be enough legal basis, and when it does, it is specific for one country among 195 acknowledged countries.

> Hacker News readers are a pretty biased sample of people

That's a vacuous statement. Is anyone working at Apple or benefiting from Apple's monopolies any less biased? The essential question is rather if such behavior is fundamentally anti competitive and contrary to the spirit of the law.

Why was Microsoft's installing Internet Explorer on their own OS a cardinal sin worthy of punishment, while Apple is getting away with behavior far worse than Microsoft's, yet it goes unpunished, so they get encouraged to behave even worse. I guess it's all about proper lobbying nowadays.

As a consumer of mobile apps, I'm generally farther removed from the argument, and not going to benefit from the decision either way. Are you going to be charging me less if Apple gave a discount on your app commissions?

App developers are highly likely to claim that the platform is monopolistic because they would benefit from such a decision. And argue from a "principle" point of view, when really all it is is a price dispute.

> Are you going to be charging me less if Apple gave a discount on your app commissions?

Not necessarily, but developers will have a higher margin, which will allow them to continue developing their apps and increase their quality, because they don't have to waste their time thinking about X ways to increase their tiny margins of the product, so they can survive for a little bit longer.

>App developers are highly likely to claim that the platform is monopolistic because they would benefit from such a decision.

Apple is highly likely to claim that the platform is not monopolistic because they would benefit from such a decision. See? the statement can be easily inverted, again it's a vacuous statement. Is their behavior anti competitive and in violation of the spirit of the law? That's the essential question.

They also don't have to waste their time doing sales infrastructure, like many J2ME and Symbian developers used to do.

> Why was Microsoft's installing Internet Explorer on their own OS a cardinal sin worthy of punishment

It probably wasn't, which is why the government didn't follow through with the breakup of Microsoft.

Shortly after the government claimed that Microsoft was a monopoly that could not be competed with, Microsoft was outcompeted in a number of areas that the regulators never anticipated, including Google Chrome taking over the browser market, as well as other areas Microsoft directly competed in such as search and smartphones.

It makes you wonder, how can a company be an unassailable monopoly yet get its butt kicked by other companies competing in the same market?

The DOJ sued Microsoft in the mid 1990s. Chrome came out in 2008.

The courts ruled that Microsoft should be broken up in 2000, and the case was settled without a breakup about a year later. The cases in the early 1990s were not even about the web browser, which did not exist yet -- they were about Windows licensing agreements from the 1980s.

So again, Chrome was released in 2008, seven years after the settlement. There was no ready alternative to Explorer at the time of the settlement.

This is a fine bit of research, but exclusivity should be the first question--the high-order bit. There has been essentially no market discovery of prices because of exclusivity.

Since 1992, there has been "free" distribution online for software (e.g., Quake launched this way in 1993), and makers of software were able to find their own distribution models without retail in the middle. This is also how the entire web happened, when Netscape Navigator launched in 1994.

To compare pricing in mobile app stores to things like brick and mortar boxed software is a mistake. It ignores the internet entirely, and how the industry worked for the 15 years before the iPhone launched. There are much more price-efficient models than this.

As the report shows, all of the major stores charge 30%, not just Apple, even when the store has no exclusivity.

Apple App Store charges 30%, and it's the only way to publish a native app on iOS, but the Google Play Store charges 30%, too, and Android supports sideloading. The Windows Store and Steam both charge 30%, too, even though it's trivial to download games for Windows from any web site.

It would be reasonable to guess that Apple would exploit its market position to charge higher rates than the Google Play Store or Steam, but that hasn't happened, and it doesn't seem like it's ever going to happen.

I'm no legal strategist, but I would take the position that even if Apple's store charged double or triple what others do, that is not the standard by which what is legal should be measured.

Apple (or any platform) provides a service for people / companies to voluntarily develop software to offer to the users of that platform. What cut they take is an agreement entered into based on people's assessment of the costs and benefits provided, and people are free to decline it and take their efforts elsewhere. Their terms for their platform are not hindering people from competing and offering services on another platform. Each developer is free to make his/her own judgement about whether that commission is tolerable and desired, for the value created.

If the agreement if free and voluntary, Apple could set any price it desires. You, in your own business are free to (and probably generally also try to) set the maximum price you desire. By some similar logic, all apps should charge the same price to be seen as fair. What principle says that one platform's price has to be in line with others? It's what your offering can justify, and what people are willing to pay, with free choice.

I wasn't making an argument that Apple isn't doing anything illegal, but I think it's not credible to argue as @herf did that "there has been no market discovery of prices due to exclusivity."

The market for Android and Windows app stores has settled on exactly the same rates as iOS apps, which is exactly same rate as game-console platforms that have only one exclusive store. 30%, across the board.

Android alone is sufficient evidence that sideloading doesn't force the dominant app store (Google) to lower its rates to compete.

Oh, sorry, I wasn't speaking in the form of direct "you", I was just piggybacking on your comment to state a parallel point.

> The Windows Store and Steam both charge 30%, too...

That's probably the easiest way to discredit this report, their Windows Store numbers are wrong if they're claiming all sales are charged 30%. Microsoft only charge 5% for a sale referred from another website, and only 15% for a sale that originated in the store:

https://blogs.windows.com/windowsdeveloper/2018/05/07/a-new-...

Google seems to already be out in front of the likely ramifications. I got a Google survey last week asking opinions on spinning the Play Store off as a separate non-Google owned company, how much I would pay to use the Play Store, and opinions on competing sideloaded stores (eg Epic Games Store, Amazon)

The thing is that you can easily avoid paying those cuts to these stores while still distributing your program on that platform. It is much more difficult to sideload an app to an iphone. You can not expect the average user to sign the app they downloaded every few days so they can keep using it. Hell, even the Android system policy favours Google way too much in my opinion and there you "only" have to toggle one switch.

Windows Store is not 30%, it's 15% or 5% depending on whether the user used the Windows Store search or a link from the developer's website.

From TFA:

* 30% on games

* 30% on all sales in Business and Education stores

* 30% for Windows 8 devices

* 15% otherwise

Doom is 1993. Quake is 1996.

Games consoles platform owners controlling access to their platforms to third party software predate the internet by decades. There is nothing whatever new about the model of commercially licensing access to a platform to software vendors, it’s almost as old as the consumer computer industry.

I think this is mostly a response to David Cicilline's comment that Apple's 30% is "highway robbery" [1]. It compares it to other marketplace take rates showing that Apple's 30% isn't "highway robbery", but also that Apple does much more to earn their 30% than say GrubHub given that iOS apps rely heavily on Apple tools and technologies to create and distribute apps.

[1] https://www.theverge.com/2020/6/18/21295778/apple-app-store-...

Don't Microsoft and Google create these tools too? They don't explicitly stop you from installing content from outside of their stores. I can easily install any APK on an android phone and any EXE on a Windows computer (maybe a bad example, because Mac).

When I say "tools and technologies" I'm not referring to just Xcode but all the SDKs and APIs as well.

Don't Google and MS provide those then?

The Windows SDKs and APIs are free to use and the documentation is freely available. Microsoft has many free tools to help write code for Windows platforms.

That said, the MSDN has never been free. The software used for development and testing are only available with annual subscriptions. This include all Windows operating systems; applications such as Excel, SQL Server, and Exchange; cloud services such as Azure and Windows Store; and the venerable Visual Studio (not VSC). The old MSDN has morphed into Visual Studio subscriptions at several levels. I pay $800 for the Professional level.

If you want access to dev releases, etc you need to pay Apple too. So to me, the comment I responded to doesn't seem like a good argument for the 30% cut when comparing to actual competitors:

> Apple does much more to earn their 30% than say GrubHub given that iOS apps rely heavily on Apple tools and technologies to create and distribute apps.

Google does it, although it is a bit debatable given that most stuff on Android is actually based on stuff developed by others. Java, Kotlin, InteliJ/Clion, Gradle,Linux,..., that Google cleverly packs together into Android.

Microsoft provides the Community edition, which is only free for small business up to 5 developers or specific cap of revenue, beyond that you must buy the professional/enterprise/architect edition, or an MSDN yearly license.

Do developers have a reasonable choice other than to use Apple tools? You can't even compile an iOS app on a server-class operating system and instead have to overpay for low-spec Macs for CI.

It's not practical to cross-compile an iOS app on Linux (or a macOS app, for that matter), but it's not an App Store policy to forbid you. Apple just hasn't shipped any software or documentation to let you do it.

Is it your view that Apple has an ethical responsibility to ship cross-compilation build tools for Linux? (Is that because it's unethical to ship a closed-source operating system with a closed-source build tool?)

I'm not sure what you mean by "not practical". It is definitely possible for macOS apps, and it seems to be possible for iOS apps too.

I have worked on an open source game, we cross compile for macOS on Linux without any Apple hardware.

As far as I understand - or have been told, this violates some Apple license terms.

Surely building a binary that links against their SDK, as long as your are not using their toolchain, must be fine?

It's possible, but it's cheaper and easier to just use a Mac, and the resulting builds will typically work better.

For example, does your open-source game notarize your macOS builds? It's easy in Xcode, PITA on Linux, and if you don't, your game is difficult to launch on macOS 10.15 Catalina.

It's contractually forbidden.

If you know the right people, you can get access to complete toolchains built in secret for compiling iOS apps on Linux. It's a lot of engineering work but not technically impossible. But it's all very hush-hush because going up against Apple in court is terrifying.

The App Store rules are right here. https://developer.apple.com/app-store/review/guidelines/ There's nothing in here about cross-compiling.

macOS's license terms forbid running it on non-Apple hardware (even in a VM), and Xcode's license terms only permit running it on macOS, but people can and do compile iOS and macOS builds on open-source operating systems in a purely open-source reverse-engineered stack.

It's just more practical to use a Mac for CI than it is to reverse-engineer the iOS toolchain.

That's not what at least one lawyer has told me, though lawyers tend to be a pretty cautious bunch.

As I said, you've got to know the right people to get access to the stuff I'm talking about. (There are also other conditions, such as you can't be a current or former Apple employee.)

No, but the market wouldn't even exist if not for Apple creating it. iOS apps by its nature depend on Apple's technology. It isn't the same as restaurants or hotels that acquire customers through GrubHub or Booking.

I'm pretty sure if Apple hadn't created the modern smartphone someone else would have, and they'd probably have been less controlling and overall better than Apple too. The structural conditions for smartphones existed, Apple (and Google) just happened to be in the right place at the right time.

There were other smartphones at that time that were just as good if not better. Mr Jobs did something no one else did. He attached a good data plan to it. At that time think along the lines of 20-50 dollars for a couple of megabytes per month. The iPhone basically had unlimited he insisted upon it AT&T was the only one who did it because they wanted that on their network. That was the real game changer. Google about a year later did the same thing.

I was already enjoying a nice dataplan in Europe with Symbian phones.

>I'm pretty sure if Apple hadn't created the modern smartphone someone else would have

Whether they would have or not is beside my point. The app marketplace for Apple's platforms is inextricably tied to their technology. A restaurant and a hotel don't have the same relationship with the platform that a macOS or iOS app do.

Whether the app store is "inextricably tied" to Apple's platforms is beside my point. The state could simply force Apple to allow other app stores, or to write into law a maximum profit margin (similar to profit caps on the health insurance industry in Obamacare), or require worker representatives on the board of directors, or so many other things to keep one of the largest firms in the world in check.

Your point was that smartphones would have existed without Apple making the iPhone but it doesn't make any sense as a response to what I said. I'm not making an argument about market definitions that would concern an antitrust regulator or court, but the nature of the relationship between the platform and sellers being materially different with Apple than GrubHub. And thus who does more work to actually earn their take rate.

I don’t see why that matters. Outside health and safety or merchantability, do we really want anyone dictating what features software can or cannot have, and how they may or may not be implemented? There is no requirement on Apple, or any other manufacturer to have an App Store at all, or to facilitate the installation of software from potentially competing firms, or any regulations requiring how they may or may not go about doing it. It’s not obvious to me that’s a route we really need to go down.

Yes, of course I want society to have a greater degree of democratic control over massive trusts like Apple!

And do you think Microsoft or Blackberry or whoever else would have done it better?

Probably not Microsoft or Blackberry, but in a society oriented in a more worker-friendly direction there would have been better outcomes in terms of freedoms than what Apple has produced.

It's also almost certainly setting up for an anti-trust fight over the app-store. See Apple v Pepper from last year allowing a suit to go forward about the App Store and lot of other anti-trust news against the tech sector in general.

Apple is trying to show regulators that they're not the only ones taking a platform-wide 30% rake.

The anti trust case can’t come soon enough. Apple is definitely taking advantage of its position, the fact that they also ‘help’ developers remove many reviews where users complain of price proves that costs are pushed to end users which is not good.they get them deleted so there is no evidence for anyone to say it’s a problem. Well played.

When you're comparing your client to Ticketmaster you are in trouble. You're out of touch: go work for a politician that needs a few Mooks.

Exactly. They also managed to compare themselves (favorably) to high end auction houses like Christies. What a bizarre comparison.

whats more interesting is how much Apple paid for this report.

I don’t see how that is more interesting when the data in the report is accurate. So I don’t think they made stuff up in the report. The data is pretty much public.

If you torture the data long enough it will confess to anything.

That's an excellent and funny way to say it, makes me chuckle, I will add it to my brain archive if you don't mind.

Data can both be accurate and biased...

Who's footing the bill is relevant to the later

How much did they pay for this report? It doesn’t seem to mention that

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