We talk about the “App Economy”, but don’t often analyze it as such. And that’s a shame. As I’ve said many times before, Apple shapes the App Store economy (and the app economy more broadly) in ways similar to how governments shape economies, and in turn influence the global economy, through tax law and other policies.
Restaurants seem to be a favorite analogy of armchair App Store economists, so let’s run with that. “90% of restaurants fail, why should it be any different for apps?” Well, first of all, that 90% figure is untrue, it’s more like 60%. The failure rate of new restaurants is high, as is the failure rate of most business ventures, including apps. But the failure rate in and of itself isn’t especially interesting or informative (and even if it were, we don’t have authoritative stats on the failure rate of apps).
It’s obviously not a perfect analogy, but I think there are some interesting comparisons to be made between the economic and regulatory circumstances surrounding restaurants as compared to apps. Both businesses are highly regulated (at least on iOS, less so on Android), but the implications of those regulations on business decisions are quite different.
Restaurants must be built and operated to certain health and safety standards, but those standards are clearly documented and all restaurants are generally held to the same standards. Restaurants are routinely denied building permits and/or liquor licenses, but that happens very early in the process, not days before the grand opening after construction has been completed, staff trained, supplies delivered, etc.
Here, in contrast, is an excerpt from the App Store Review Guidelines:
We will reject Apps for any content or behavior that we believe is over the line. What line, you ask? Well, as a Supreme Court Justice once said, “I’ll know it when I see it”. And we think that you will also know it when you cross it.
Any potential restaurateur or investor would balk at language like that being official government policy that could be capriciously enforced at any time before or after a restaurant has opened its doors.
Restaurant policy has evolved over the years not just to protect the public, but also to create the a healthy balance of economic incentives to encourage a vibrant restaurant scene, which in turn raises the tax base and influences other aspects of a local economy. Even today, restaurant policy is regularly revisited and new exceptions are created to adjust to the current economic conditions and needs/wants of citizens.
Food trucks are a great example of how restaurant policy has shifted to provide new business opportunities for restaurateurs and more options for citizens. The investment needed to open a food truck is generally quite a bit less than is needed to open a “brick and mortar” restaurant, which reduces risk and encourages experimentation. Some cities banned food trucks because they clearly violated existing health and safety standards, and rightly so. But many forward-thinking cities adjusted existing policies and/or created new policies to allow for food trucks while still addressing health and safety concerns.
For years, developers have petitioned Apple to allow paid updates and timed trials, and to change other App Store policies. But Apple has made very few meaningful changes to the sorts of policies that would empower developers to experiment with new business models, build more innovative apps, and better assess and manage business risk.
It may not seem as though Apple’s policies have in any way slowed investment in bringing new apps to the App Store, but I can tell you from personal experience that app review policies and so many other things within Apple’s control do absolutely shape the App Store economy. And that’s precisely the point of much of what I’ve written about since the inception of the App Store. The success or failure of any one app is not Apple’s fault, but it behooves Apple to pay close attention to the App Store economy and use policy levers to shape that economy in ways that best align with Apple’s stated goal of delighting customers and its ultimate goal of profitability.
To be clear, Apple has far more levers to pull in shaping the App Store economy than most people think. Here are some of the big ones:
- Hardware - The Apple Watch and new Apple TV as well as hardware changes to existing devices (larger screens, better cameras, motion coprocessor, Touch ID, etc) have clearly shaped the way developers look at opportunities for building and updating apps.
- Programming Languages - In the long run, Swift will likely empower even more developers to more quickly build better apps.
- Frameworks - Every framework Apple opens up to, or hides from, its developers, and even the specifics of how those frameworks function, impacts what developers are able to build and how they build it.
- Tooling - It may seem far fetched, but the capabilities of Xcode shape the App Store economy. By pushing interface builder and auto layout, Apple has encouraged developers to build universal apps and made it more cumbersome to build separate iPad/iPhone apps. Bugs, crashes, and other deficiences of Xcode likely cost developers millions of hours of productivity each year, which has obvious implications for the App Store economy.
- App Review Policies - Need I say more?
- The App Store - While seemingly trivial, every tiny detail of the App Store dramatically shapes the App Store economy. Changing the “FREE” button to “GET” changes the psychology of… ahem… getting an app. The App Store search algorithm dramatically shapes the success of many apps. And so on…
- App Store Editorial - Which apps Apple does and doesn’t feature sends a clear message to developers about what Apple values and wants to see in the App Store.
- Apple Marketing - The way Apple positions its devices and in turn the apps on those devices shapes the App Store economy.
While it might be easy to write off this post as the ramblings of a disgruntled App Store failure who thinks Apple should bend to the whims of indie developers, that couldn’t be further from the truth. I’ve shipped (and failed to ship) quite a few apps on the App Store. Some were hugely successful, others not so much. I’m one of only a handful of people who has, since the very begining of the App Store, made a living (a good one at that) solely on iOS apps. I don’t think Apple should blindly implement every suggestion made by developers, but I do think the overall success of the App Store has blinded Apple to the need for various course corrections over the years. Apple’s incentives will never perfectly align with developers’, but finding a way to better align incentives will point the App Store back toward a more optimal trajectory.
(Disclaimer: I’m not an economist, nor have I spent much time learning about restaurant economics. I likely made some errors in my caricature of the restaurant business, but I think my greater points still stand.)