“Today, Apple will reinvent the phone.” The announcement made by Steve Jobs when the first iPhone was presented has come true, also because suddenly there was an app for everything. But there is also criticism of the successful model.
Cupertino.
Apple’s iPhone is considered the most successful electronic product in history worldwide. Since its launch in 2007, Apple has sold well over a billion smartphones worldwide. It is true that more smartphones with the Android operating system are now being sold worldwide by countless manufacturers than iPhones. But when it comes to sales and even more profits, Apple is regularly ahead because of the higher average selling price of the iPhone.
The success story of the iPhone is inextricably linked to Apple’s App Store. There are currently almost 1.8 million apps to choose from on the platform. In total, over 370 billion apps have been downloaded there in the past 15 years. But now the successful model is threatened, at least in Europe, because the current EU legislation will end the monopoly of the App Store on the iPhone.
When the first iPhone premiered in 2007, Apple co-founder Steve Jobs did not yet have a coherent software strategy. There was no App Store back then. Jobs’ concept simply stipulated that app developers should offer their applications as web programs that run on the Safari browser. However, no healthy app ecosystem could emerge on this technically shaky basis.
Gold Mine App Store
However, Jobs quickly recognized that there was a need for change: In October 2007, the then Apple boss announced that it would be possible to program real apps for the iPhone. And on July 10, 2008 – 15 years ago – the time had come: Apple opened the App Store with more than 500 software applications, including games, education programs, shopping apps and productivity tools for business. Around a quarter of the apps were free, the paid apps often cost less than a dollar. The new store even eclipsed the presentation of the new iPhone 3G a day later, which, in contrast to the first iPhone, was able to support the more powerful UMTS (3G) mobile communications standard.
Even then, Jobs was certain that the App Store could become a billion-dollar business. In an interview with the Wall Street Journal, Jobs said in August 2008 that he could imagine annual sales of half a billion. “And at some point it might be a billion.” In fact, it became very many billions. In fiscal 2022 alone, the App Store’s contribution to Apple’s balance sheet is likely to have been around $70 billion.
At the start of 2008, however, these sums were not in sight. However, the competition also became aware of the concept: in October 2008, Google followed suit with its platform and introduced the Android Market, which is now known as the Google Play Store. A year later, Apple then allowed developers to initially offer the apps free of charge in the store, but then to charge money within the apps for additional functions or the hiding of advertising. These in-app purchases drove the computer games business in particular.
Dispute over revenue sharing
Initially, app developers generally had to give 30 percent of their sales in the app store to Apple. After fierce protests from major players such as the game provider Epic Games (“Fortnite”) and music services such as Spotify, Apple reduced the revenue share for subscriptions and smaller providers to up to 15 percent. Legal proceedings are still pending in the dispute over the alleged “Apple tax”.
Despite this controversy, sales within the app universe continued to soar. According to a study by the market research company Analysis Group published in May 2023, almost 98 billion euros were generated directly with digital goods and services in the Apple App Store in 2022. In addition, there are 102 billion euros that come from advertising within the apps.
Online retail growth in China
If you look at all the transactions that also run indirectly via apps from the store, the threshold of the equivalent of one trillion euros in sales was even exceeded for the first time. The growth in online trading in China is primarily responsible for the boom. There, the Analysis Group alone recorded sales of goods and services via apps from the store amounting to the equivalent of 490 billion euros. Europe comes to almost 112 billion euros across all areas.
The associated huge market power of Apple is criticized on the one hand by competitors like Microsoft. They complain that Apple has not yet allowed an alternative to its own app store. But this quasi-monopoly is also viewed critically in politics. In the European Union, the Digital Markets Act (DMA) was passed at the beginning of July, which is intended to prevent anti-competitive behavior by large internet companies. The DMA will come into full effect this year and in 2024. After that, “gatekeepers” like Apple can be forced to allow app stores from other companies.
With iOS 17 a lot is supposed to change
This should also break Apple’s resistance to alternative app installation options and billing options. According to US media reports, the group is preparing to allow alternative app stores for iPhone and iPad in the EU, as well as the direct purchase of apps without a store at all. It should start with iOS 17, which is expected next fall.
Apple customers will then have more freedom of choice, at least in Europe. It is expected that several players such as Microsoft and Epic will open their app stores in the Apple environment without delay. And the direct installation of programs will also be possible – combined with the risk of catching one or the other malware. (dpa)