Twitter’s well publicized spat with Apple has highlighted an unpleasant reality for any business that operates an app: Apple and Google both enjoy a costly app duopoly.
The 30 Percent Tax
Twitter owner Elon Musk recently accused Apple of trying to destroy Twitter partly by putting Apple’s Twitter advertising on pause and partly by threatening to remove Twitter from the Apple app store.
Both parties apparently resolved their building tensions. Apple is advertising on Twitter, and Twitter remains on the App Store. Perhaps all is well between Apple and Twitter now. But not all is well for any organization, including Twitter, that needs the App Store to do business on Apple’s iOS operating system, which, of course, includes iPhone users.
The App Store provides access to more than 1.5 billion devices. It’s a top way for people to get the Twitter app and any app. What many journalists accurately reported in their coverage of the Twitter/Apple skirmish is that businesses on the App Store must pay Apple a 30 percent commission on all transactions processed via Apple, known as in-app purchases. As The New York Times noted,
Mr. Musk’s App Store allegation resurrects a potent charge against Apple: that it has used access to millions of iPhone and iPad devices as a cudgel to extract more money from app makers. A key part of Mr. Musk’s plans for Twitter is collecting more revenue from subscriptions — but under Apple’s policies, up to 30 percent of those sales from iPhone users would go to Apple itself.
The commission applies to all app developers who make more than $1 million through the App Store on an annual basis. For small developers who make less than the $1 million threshold, Apple has cut its fees to 15 percent through the Small Business Developer Program.
The commission also applies to “sales of ‘boosts’ for posts in a social media app,” meaning boosted content (i.e., posts that becomes amplified for a fee) on Facebook and Instagram.
Apple is not alone. Google also offers its own in-app billing system that charges a 30 percent commission or service fee for any payment made for an app or in-app payments or subscriptions. In 2021, Google began to enforce this requirement. After withering backlash, Google said it would cut the fee to 15 percent earned by a developer through their app on Play Store in a year and the 30 percent commission will apply for the revenue earned beyond $1 million.
Apple and Google effectively hold a duopoly. No business can bypass that duopoly; trying to process payments outside the App Store or Google Play would result in being kicked off both. (However, it should be noted that reportedly Elon Musk is figuring out how to design a closed payments system for Twitter.)
In the United Kingdom, the Competition and Markets Authority is launching an investigation that is taking aim at this duopoly. In the United States, reportedly the Justice Department is investigating Apple, and Epic Games has gone so far as to fight Apple legally.
But the wheels of justice may turn too slowly for the businesses that are operating under the thumb of Apple and Google. What steps can they take? Here are a few suggestions:
- As with any tax, it’s important to budget accordingly. If you have not done so already, adjust you advertising and marketing plans to take into account the 30 percent commission. (We can help you with that.)
- Boost your advertising and marketing to attract more sales. (We can help you with that, too.)
- Make your voice known, as Twitter, Coinbase, and Spotify are doing. True, few businesses have the reach and visibility of those companies, but going on record leaves electronic breadcrumbs that increase the pressure on the duopoly, however slightly. Remember, backlash caused Google to back down on its fees as noted above.
Meanwhile, True Interactive continues to work with our clients to maximize the value of every dollar they spend via mobile advertising. Contact us to learn how we can help you.
Photo by Rami Al-zayat on Unsplash
