Apple runs App Store with 78% profit margin, according to court testimony | Hacker News Reader

Apple runs App Store with 78% profit margin, according to court testimony

9to5mac.com

84 pointsclairity47 comments

Not trying to defend Apple but this was said by an “expert” hired by Epic and neither 9to5 or Bloomberg have any data associated with this claim. While I’m sure the profit is nice and cushy, I have a feeling this number is like “the average server cost is X and Apple probably needs Y of these. With their revenue, they’re making more than 78%!” Which isn’t exactly how you calculated profit margin…

According to this, Apple's services business had a gross margin of 63% in 2019 [0]. The 78% figure from the court testimony may not be perfectly accurate but I can't imagine its margins are lower than than something like Apple Music.

[0] https://www.investopedia.com/apple-s-5-most-profitable-lines...

At least the other site ending in *pedia has a list of sources.

I don‘t know anything about investopedia, but I see a lot of numbers and not one source for any of the numbers at all. Not going to trust it.

If you'd like to refute it, you're free to look at Apple's own financials.

Software companies have high gross margins because the measure excludes the cost of developing and maintaining the software.

So Autodesk's gross margins are 90%, Adobe's are 86%, etc. When you see numbers like that, it should tell you that you are not capturing the expenses of the company in that metric, rather than concluding the company is earning fantatiscally high profits.

With Apple, the investment is in the platform, which includes everything from designing their own chips to writing their own OS and exposing and maintaining APIs for third party apps to use, as well the development costs of the infrastructure behind the app-store itself. None of those costs appear in a gross margin calculation.

Not saying that Apple should or should not fall under anti-monopoly laws or that we shouldn't change our monopoly laws away from the current consumer harm focus towards more of an innovation-harm focus, but discussions of gross margin are highly misleading when assessing the expenses paid by software companies -- as is the cited article.

I would have guessed that the profit margin would have been around 90 percent for the App Store.

Why?

Many companies have the revenue of Apple. Few have the profits. Something has to have a high profit margin somewhere.

Their profits aren’t close to 78%, they make more profit than other companies because they aren’t perpetually doing race to the bottom pricing. Every machine and device they sell is a high end (in market sense) for that category of device and so has high end margins.

Apple wouldn’t replace my shitty butterfly macbook pro keyboard.

I went to windows, not that Microsoft is any better but at least its a Pc. although it seems walled gardens are everywhere nowadays.

In short, Apple is a monopoly. Anti competitive. Market abuser.

So 75-78% basically in short - its probably up there.

Breakem up. And Google, and Facebook and Amazon.

And watch the techno, economic engine start like it did when Bell was split.

force them to implement proper PWA and there your have it. There is no need for another monopolized, censorized, filled with fake reviews downloads etc store. And allow other browsers. MS bundled IE with Windows < Chrome on IOS is a Safari wrapper

That is only half of story though. Adding a PWA to your HomeScreen is still troublesome. People should be able to scan a QR Code and have that Apps "installed".

Except Apple already made that move with QRCode App within their App Store. Further destroying PWA chances of succeeding.

I'm 90% sure that App Clips are not supposed to be a replacement for PWAs. You still have to build an entire app for the App Store, then figure out how much of it you can fit in 10MB to ship as an App Clip.

PWAs don't work on iOS because of Web Push being spammy, and there are easy solutions to that problem (namely, not allowing Web Push until the app is added to the Home Screen), but Apple doesn't think that is enough.

I mean App Clip is a replacement to QRCode App as a concept in UX, not the tech. And Apple will gain an unfair advantage now they have take this step before PWA were even ( if ever ) available.

Yes I agree Web Push is certainly a solvable problem. I have always maintain vast majority of Apps doesn't need to be a native app, some sort of decent Web Front End with sprinkle of Native functionality will do. Like most Web Forum, Stores' Front End etc. These business's App doesn't need Apple's curation and gatekeeping.

Please never do that. PWA are 99.999% spam. See Firefox’s research on the topic. I hate every time I visit a new site and there’s some dumb pop up on my browser asking me to enable push notifications. Sometimes I miss click and end up having to go through the annoying process of removing them.

Fortunately, Apple cares about its users and won’t enable a feature that is only abused for spam.

Weird, I am using Chrome on Android and 99.999% of the time I don't see a popup asking me to enable push notifications.

What websites are you visiting?

Chrome is a different. Chrome shows you some notifications only after you visited it couple of times or was on site couple of minutes.

I like to think of it as bad implementations and people not considering the user experience.

Sometimes you just have project managers or clients who want it like that regardless of how awful it is. In that scenario I think it's the developer's responsibility to give push back. It's why I don't get asked about implementing pop-ups on homepages.

PWAs are just push notifications, it’s an entire app system. Home Screen, offline functionality, intents to share with other apps/the web, seamless updates, etc etc etc. Not to mention that the push permission problem is easily solved, indeed is _already_ solved by Google in Chrome. A lot of it is actually an improvement on APIs like AppCache that Apple originally implemented for iOS web apps!

“a feature that is only abused for spam” is a wild misreading of PWAs. It’s true that they aren’t used too widely today but that’s _because_ Apple refuses to support it. I think it was a huge strategic misfire to create this PWA “brand” as it allows everyone to throw the baby out with the bathwater. The vast majority of the APIs involved make sense.

Above should start “PWAs aren’t”, d’oh…

> I hate every time I visit a new site and there’s some dumb pop up on my browser asking me to enable push notifications.

So just don't click 'Allow'. Why should the manufacturer have to intervene here?

... because I don't want the obnoxious "let me spam you" dialog to occur at all.

A feature that's primary use case is spam, is a user hostile feature that has no business being in a browser.

That’s a UX issue with your preferred browser.

How about just let the user run whatever he likes on the phone he paid for? PWAs are unnecessarily complicated to mandate by law. Much easier is general stuff like your pocket supercomputer should be able to run arbitrary software.

Allowing companies like Facebook, Google and Epic to skip App Store will end up with users having less choice, not more really.

Right now you can choose an open platform, where Google, Facebook and Epic do what they want, or a closed platform that forces them to play by certain rules regarding privacy and whatnot.

The moment you allow direct installs of the apps, all the big players will remove themselves from the store and prepare a versions with looser privacy standards (FB & Google), or ones that show you popups for other stuff and use processing power in the background (Epic).

>Allowing…will end up with users having less choice, not more really

Yeah, also war is peace and ignorance is strength.

People should be allowed to make “bad” decisions, if they can’t it’s not really freedom.

This type of quote is getting to be a version of that "everything digresses to calling people nazi" rule.

Anyway, you're presuming that people would have a choice

The only reason Facebook and Google are going to have to get permission to not track you on iOS is the App Store. If they could circumvent the App Store you bet they would and the first thing to go would be those pesky privacy protections.

I don't want to give my CC info to a half dozen different companies with worse data security records than Apple, but suddenly every app will require me to install another "App Store", so suddenly my choices become "share my info with dozens of companies that can sell it" vs "don't install any software"

That's such a great choice you've given me.

> Allowing companies like Facebook, Google and Epic to skip App Store will end up with users having less choice, not more really.

No, deliberately saying the opposite of reality does not make it so. More freedom will result in people being able to enjoy more freedom.

That is a shallow way of looking at the issue.

Giving more freedon to monopolists like Google or Facebook will result in less freedom to people that have to rely on those monopolies.

In case of IE with Windows, that situation was different because Windows had a monopoly. In case of Apple, you have similar devices available from other producers with a different OS, and cheaper at that.

Personally, a part of the reason I pay premium for Apple's devices is that I want a platform that is locked down, and one company that makes sure that all the others adhere to certain privacy and security standards.

… said a spokesman for Epic.

I.e. this is complete bullshit.

> This figure comes from a court testimony from an Epic Games expert witness Ned Barnes.

So much for "the fee is needed to maintain the App store"

Maybe they should be held responsible for the scam apps they let through then. Seems like they can afford it right?

I feel the same. They charge so much to maintain the app store’s ecosystem and that’s fine as long as they take some form of responsibility.

Well they do a much much better job than Android when it comes to keeping garbage apps out of its marketplace.

The Google Play store is absolutely terrible.

Honestly I thought it would be higher

That's crazy. Apple should be split into multiple independent companies and their workers should be given multi million dollar bonuses. Workers should be getting 78% of profits.

Why?

Surely that must have been sarcasm.

1. I can dig splitting up big tech companies, that can make sense in some form. 2. But why should workers get 78% of profits? Since when is that a sensible thing to do for a company?

If Apple can have 78% margin, why workers cannot?

Because free market is predicated on a business setting its margin to whatever works, aka the delta between what customers are willing to pay for the products and what it costs to run the business (salaries included).

Workers get paid based on market price for their work plus some premium for skill, depends on the worker. Why should a company pay more than what workers demand? How would that make sense as a strategy? Why not use the money to expand the company instead? Or pay the shareholders?

I know I'm playing devil's advocate here, but otherwise we're looking at socialism at best, weird charity at worst.

it's odd that you'd prescribe value-based pricing for a company but not for labor (where you prescribe cost-plus pricing). in a set of fair markets, we'd expect both to be value-based.

moreover, we'd expect competition to drive down profits to an appropriate risk-adjusted level, and worker pay to be more equitable with (and perhaps higher than) shareholders and executive managers. the latter is because worker risk is typically concentrated in their (often single) employer, whereas shareholders (and executives) are typically more diversified and less exposed to the risks of a given firm.

They could have. Apple is a publicly traded company.

A hypothetical margin based on “expert” testimony paid for by one of the parties, and only applying to one portion of the business.

It also fails entirely to account for capital expenditure, because that doesn’t get reflected in margins.

Seriously, look at how much capital expenditure is involved in the big data centers made by any of the FAANG companies, and realize that those aren’t reflected in margins.

Profit that isn’t distributed to outside entities is what allows corporations to buy manufacturing capacity in advance.

Distributing all profit to workers means a company doesn’t get to have savings for hard times, doesn’t get to make investments in new technology, build giant round spaceship buildings, etc

Gross Margin =! Operating Margin

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