Taking a Cut

Last night we saw a story break about (gasp!) Apple no longer approving apps that use the Dropbox SDK. The reason: if a user digs around enough they could find a link on Dropbox’s site that allows them to sign up and (double gasp!) pay for Dropbox.

Shocking, I know.

Of course, as Federico Viticci explains, this is not only blown out of proportion, but nothing new:

Apple’s 11.13 rule isn’t new, and before we dabble in speculation about Apple wanting to “kill Dropbox”, I suggest we wait.

I, for one, am not particularly concerned about this fiasco, but it did raise and interesting thought about Apple’s insistence on taking their cut of everything they can: is what Apple is doing good for anyone other than Apple?

There’s a few sides to this: developers, Apple, bloggers/media, and consumers. Let’s tackle each separately.

Developers

For developers, whose service does not rely on iOS, this is quite an annoying and often deal-breaking restriction. Dropbox likely can’t be profitable giving Apple a 30% cut of their paid plans and we know Amazon can’t sell Kindle books profitable this way (though do they even sell Kindle books profitably?).

However, other apps that rely solely on the App Store likely can make this profitable — they just raise all their prices and hope that the sheer reach of iOS gives them the returns they need.

When looking at Apple’s cut from the perspective of a developer, it is fairly easy to make the argument either way — depending on what you are trying to seek and where the bulk of your customers are. Most would assume that Apple’s cut is too big, but they offer quite a bit in reach and exposure — also the most willing group of consumers to spend money on software. Good and bad.

Apple

It seems pretty clear now that Apple is heavily benefiting from demanding the 30% cut, but let’s not forget that it was and is a huge risk for the company. There are only two reasons this is playing out well for Apple right now:

  • Apple has a ton of leverage given the popularity of iOS among developers.
  • iOS users have shown a much higher willingness to spend money than users of any other mobile platform.

If the former reason wasn’t true, this likely wouldn’t work as developers would just hold off until Apple started paying them (like Microsoft is having to do with Windows Phone). If the latter reason wasn’t true, then this would be a non-issue because developers would be on another platform, and you can argue with me here, but I don’t see that many compelling paid apps for Android that haven’t first been an iOS only app for a while.

It’s clear today, that for Apple, this 30% cut of everything is a fantastic strategy. It’s hard to argue with their pile of cash.

Bloggers / Media

Though bloggers like to complain (a lot) about Apple taking its cut, what would we talk about otherwise? It may be odd that I include bloggers in this break down, but they/we play an important role in informing consumers. Therefore, how this policy affects bloggers will directly effect most of the other categories (to some extent). 1

As I said above, Apple’s supposed ”greed” gives a lot of fuel for the writing fire, but it also pits many bloggers in an awkward position. On the one hand bloggers like to promote products other than Apple’s and end up establishing friendships with various developers. So bloggers can sit on either side if the coin.

On the one hand shaming Apple for rejecting universally loved Dropbox compatible apps, while on the other eyeing with amazement all that Apple has done to change their lives with the tools they use.

Rock and a hard place. Bloggers should be fair and unbiased in the issue, but because “we” use these vary tools all day, we simply cannot be. It’s both good and bad for bloggers and that really creates a problem when trying to look at this object fully because there are mounds of citations supporting either side.

Consumers

Ultimately this is the most important group.

Apple is a for profit company, and consumers vote with their wallets. Thus, if consumers don’t like Apple taking a 30% cut and they stop buying Apple products because of it — well that’s how you get Apple to change its mind.

So does Apple taking a cut effect consumers?

I say yes, massively so. In fact I think Apple taking a 30% cut is a large part of the reason so many consumers are willing to spend money for software. For the first time consumers have one, easy to use, place where they can buy digital goods from a company they trust. And trust really is the real issue here.

Going back to Dropbox for a moment. As a consumer, not a blogger, I would feel far more comfortable paying for Dropbox via an in-app purchase than I do through Dropbox — and increasingly I would guess that the first interaction that many users have with Dropbox is via iOS.

Apple is a known quantity, third-party app developers (for the most part) are not known. Consumers don’t know who is behind Instapaper, LLC, App Cubby, Sky Balloon and others. As bloggers we know the people behind the companies, as developers you know or know how to check, as Apple you know, but consumers? They probably don’t even look at who the app is from, they just trust that everything they do within the realm of that app has been OK’d by Apple.

This is the heart of the issue. Consumers don’t, can’t, and shouldn’t have to know the people and motives behind purchases in apps — all consumers should need to do is trust that Apple has done their job vetting all of this.

Apple failed to do that with Path and other apps that uploaded user contacts, but I have yet to see a scenario where in-app purchases turned out to be a scam. Apple vets the in-app purchases closely because they know that consumers trust them to do just that — and because Apple must spend the time and resources to vet these goods, Apple feels they are entitled to their cut.

I think Apple is entitled to their cut too — just so long as they continue to do an excellent job vetting the apps.

  1. No way to make that statement without sounding completely jackasstic.
Originally posted for members on: May 2, 2012
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