Developers can now direct users in-app to pay for subscriptions outside of the App Store, but the road is not smooth, and there are some pitfalls.
Apple in the US now has to allow developers in the App Store to direct users to their own websites, or other third-party payment systems. While its conclusion seems exaggerated so far, The Information, claims that there is a gold rush as developers seize the change to avoid paying what they call an Apple tax.
“We work so hard to build this product, giving value to customers, and then Apple takes away 30% of our subscriptions,” Otter CEO Sam Liang said. “It’s completely insane.”
Call it insane if you like, call it an Apple Tax if that makes you feel better, but this is really nothing more than wanting a free ride. Let’s ask Laing when we can expect to put ads for AppleInsider on his Otter.ai transcription website for free.
It’s also not clear if they call the difference between what they get from, say, Microsoft in the Xbox Store, a Microsoft tax. Or for folks selling boxed software or gift cards at WalMart a retail tax.
Apparently the makers of Cameo, which lets users buy personalized messages from celebrities, worked until 2 A.M. one night to get alternative payment options ready. Let’s ask them what hit their bottom line would take if there were no celebrities using iPhones, and no starstruck fans either.
In fact, by this logic, it’s insane that fans would pay Cameo anything when they could just go straight to these celebrities. Except of course, other than in photo lines jammed with fans and paparazzi, fans can’t do this easily or privately without the iPhone and the App Store that Apple makes.
And Otter’s CEO is complaining about having to pay more and more to Apple, but what that means is his business is growing because of the App Store.
This is not a matter of perspective. There is no other company in the world that is required to give away a business it has grown, in a market that it literally created.
There is no other business in the world that is expected to run a global business providing a store to more than two billion active users, and do it for free.
Certainly Stripe won’t perform payment processing for free. Reportedly, the company has been approaching app developers since the App Store mandated change, and offering to take over setting up these payment options.
It’s only going to charge a 30 cent fee and a 2.9% cut of every transaction. That is unquestionably lower than Apple’s 15% or 30%, but it isn’t free.
There’s also the question of just what Stripe or other payment processing firms count as part of their deal. Apple manages support, for example, and payment processing firms are not going to do any marketing for developers.
Apple created today’s app market
If you were a developer before Apple launched the App Store, its top-level 30% fee is laughably small. With no costs of producing physical media, no boxes, no paying stores to stock your app, no transport costs whatsoever, you’re retaining 70% of your retail fee.
And you’re able to sell worldwide, which was unthinkable just a few years ago. Today it’s easy, except for when it isn’t — Apple handles all of the international tax requirements so you don’t have to.
It isn’t insane that there is a cost to doing business. Instead it’s insulting that CEOs think we’ll swallow this and instead of paying Apple our money, run to pay them instead.
Even The Information does accept that there are developers who are hesitating about third-party app stores, and it’s partly because of user resistance. Reportedly, an unspecified percentage of users who click an external payment link will not complete the transaction because of the extra steps this requires.
Apple would argue that it’s also that users can trust it, where they may not know exactly who they are paying if they use alternative systems. They certainly have less security over any personal credit details being sold on.
There’s also a fear that Apple will punish such apps by burying them in the App Store, or simply never featuring them in its various highlight features or promotions. If that doesn’t tell developers that Apple is how they get customers, nothing will.
What happens next
Separate research says users would need a big discount if they were to be persuaded to move subscriptions out of Apple’s App Store payment system. Some developers are doing exactly that, with yoga app Down Dog using discounts to incentivize users to move.
Down Dog already had an existing online payment option, but says it had been getting 70% of new subscribers paying via Apple. Now it’s already down to 30%.
So it’s working for some developers and consequently, all developers want the same rise in income — and to keep all of the benefits of being on the App Store.
That’s not entirely fair, since there are developers who instead argue that Apple should just reduce its fees. Maybe there’s an argument to be made there, or maybe it’s just a hope for at least a cheaper ride instead of a free one.
Developers need Apple and Apple needs developers. App companies can’t expect Apple to support their businesses with only the hope that they might sell a few more iPhones to pay for it.
Note that Apple has tried to stop this through an appeal to pause the injunction that has forced external linking on it, but it has failed.
