Why Are Apple’s App Store Policies Killing Its Mobile Ecosystem

Fresh out of the Thanksgiving holiday shopping spree, a few interesting reports came out digging into the Black Friday-Cyber Monday ecommerce shopping performance. cialis sale

rts/black-friday-2012.html” target=”_blank”>According to IBM, mobile engagement continued to soar, making up 24% of the traffic and 16% of the sales. Fab.com, a design-focused ecommerce startup, has been seeing very interesting mobile stats on sales and the dominance of the iOS platform – revenue from its mobile apps reached 25% of total sales just 30 weeks post-app launch (95% of which came from iPhone & iPad), and mobile apps generated over 1/3 of its Black Friday-Cyber Monday sales. This phenomena is not hard to undersand – people are simply spending more time with their phones than with their computers.

The continued rise of smartphone led to an appreciation for a “mobile first web second” strategy – in order to deliver the “right” mobile experience, you have to start building your product with the mobile UX/UI in mind (vs. building a website and then repurpose the web experience to mobile). As a result, countless startups focused all their resources and energy to build a killer iOS app (why iOS first? because it continues to dominate Android on engagement and monetization) only to realize there are some serious flaws in this approach.

Some of the issues around building a “mobile first/mobile only” product can be attributed to the unique properties of a mobile device (e.g. smaller screen translates into a constant battle between usability and monetization, small/ineffective ad units, etc.), but a few of the key problems can be traced back to how Apple runs its App Store.

Problems:

  • Discovery/Distribution – One of the key differences between the web and mobile is that there is no SEO/SEM in the App Store, a key tool for organic traffic and paid marketing for driving visitors to your websites. Yes, you can “kind of” buy pay-per-installs through ad networks such asTapjoy and Flurry, but Apple continues to crack down the whole pay-per-install model with its latest App Store rule change. The sheer volume of apps in App Store plus its notoriously random “Featured Apps” system makes it extremely hard for an app to gain any organic visibility. In short, no one has cracked the app distribution nut and Apple is not helping.
  • App Approval Process & Cumulative Reviews – In a web environment you can iterate much more cheaply and faster than you can do so on mobile. For one, it costs much less to build a “minimum viable website” to test key hypotheses than to develop a fully-functional native app. Apple’s app approval process has improved over the years in terms of speed and transparency, but it is still a barrier for fast iteration and testing (wait time running up to to three weeks). Furthermore, the fact that all Ratings & Reviews of an app is carried over across versions means that the first version “can’t suck.” The only way to avoid “getting on the app store stage before you’re ready” (to avoid bad reviews) nd test your app with users is through Apple’s Ad Hoc distribution (but you’re limited to 100 beta testers) or third-party hacks such as TestFlight.
  • Apple’s 30% Cut – Apple charges 30% revenue share on gross revenue generated through apps (in-app purchase AND ad revenue). 30% off the top is great profit for Apple in the short-term, but if no one can build a real mobile business in the iOS ecosystem given the high customer acquisition costs (see “Discovery/Distribution” above) and the hefty 30% payment to Apple (and we haven’t taken into account credit card payment processing, taxes, etc.), Apple might have a problem in the long run.

So what can you (and Apple do) beyond reconsidering the above policies?

  • (You) Build Web Presence to Drive Mobile Download – Instead of “mobile first web second,” maybe the alternative strategy is “mobile product web marketing” – leveraging traditional SEO/SEM and the web’s larger screen to do more effective, targeted marketing and a simpler on-boarding process. You do the “selling/convincing” on your homepage, walk the user through a sign-up process to create an account, then bring the user to the App Store to download the app. An example: I found out about Lift through an article and arrived at its homepage, which did exactly the above. I would’ve never thought of looking for the Lift app in the App Store otherwise. Instagram also leveraged its web presence (via shared Instagram photo landing pages) to drive awareness and downloads.
  • (Apple) Native “Share An App” Function and Referral API – The major benefit of Apple’s “closed” App Store ecosystem is that the user experience is much more unified across all apps. Contrary to the web environment, there’s no easy way to create a mobile viral loop among iOS devices to facilitate sharing an app with friends. One thing Apple should consider is to build in a native “Share An App” function that sits within each iOS app, so a user can easily spread the word with contacts who have iOS devices. To push this thought further, Apple could develop a referral credit API (e.g. invite a friend and get $10 credit when the friend installs/purchases) to further help facilitate native viral loops within the iOS environment.

Apple’s iOS ecosystem is currently enjoying the mindshare of developers, and developers need a thriving ecosystem that can help them build a business. It’s a fine balance to strike between maintaining the integrity of the user experience and optimizing on monetization, but Apple should start spending more time to help developers make a plausible business case by investing in “mobile first on iOS.”


2 Comments

  1. Ruchi Jain

    In principle, I agree that Apple does not make things easy for app developers, especially with the three problems you highlight. However, I think that Apple has designed these policies keeping the customer in mind.

    Discovery is certainly an issue but not necessarily because of a lack of SEO/SEM, but because of the volume of applications created every day. The lack of SEO is also great from a customer’s point of view: people are not creating search-engine-optimized poor quality apps that they are trying to artificially raise the rank of. Discovery should not be a problem for an app that serves a customer need. A great application will gain visibility through word of mouth and other organic channels. So if the customer has not heard of an app on other media, or from their personal networks, they probably do not need it. Even though Apple may not allow advertisements of apps on the App store, apps are free to advertise on other websites.

    As an App Store customer, I personally really like Apple’s app approval and cumulative review process. The cumulative review process sets the bar really high for even the first version of the app, which is great from a consumer perspective. Apple is clearly a high-end product, and I think the app approval and cumulative review process is very consistent with their strategy of providing the best possible user experience. However this is not really at odds with the minimum viable product concept – developers are free to pick and prioritize whatever features/capabilities they want for their app and it’s only the quality of the user experience that is typically assessed by Apple. The 3 week review time is certainly a pain for developers and something that Apple should address and is always striving to address – hopefully adding more application reviewers can help alleviate this problem.

    I understand that Apple’s 30% cut squeezes developers, but Apple does this across iTunes and most of their other platforms as well. It’s just Apple’s way of monetizing their customer base and it seems fairly standard for a platform to charge third parties for access to their customers. It sounds to me like an extension of the advertiser model for newspapers and magazines – third parties pay a publishing company to get their ads (or awareness of products) in the hands of the publishing company’s’ customer base. Apple is also just a regular corporation working to maximize shareholder value.

    I think your first suggestion of building web presence to drive mobile download is a good idea because it does not conflict with any parties’ incentives. Companies such as Flipboard seem to be doing this already.

    I really like the Share an App feature you suggest. The Referral credit is not as easy as it sounds though. Referral credit incentivizes people to share the app blindly just to earn the credit without necessarily adding an actual user for the developer, who loses money through this process. For instance, I share the app with you, who install it and then ask your grad school friends to do the same; all of us earn money but if we never use the app even once except at time of installation, the developer just paid a lot of money to get nothing in return. Therefore, the Tapjoy crackdown is valid because Tapjoy is trying to pay users to download apps and skew app store ratings. In an ideal world, one would want the app store downloads to be closely correlated to usage by the users. Tapjoy strongly violates this principle.

    As is the case with any two-sided network, Apple needs to balance the costs and benefits to each side – developers and users. However, given the company’s strong focus on user experience, and the power that Apple holds over developers, I do not see Apple drastically changing their strategy towards developers anytime soon.

  2. Bart Clareman

    Great post on an extremely important topic. I worked at a startup over the summer and app discovery (along with user retention — downloads are only half the battle!) was one of the major topics we struggled with.

    You would think it would be in Apple's interest to develop a more sophisticated app discovery engine — anything that delivers more/better apps to users should theoretically increase user stickiness and, to the extent that having additional apps expands a given user's disposable income within apps, enhance Apple's profitability via the 30% iOS tax (this is an uncertain proposition — certainly, we think of audiences having set "entertainment budgets" or "clothing budgets" from which they draw down with each purchase — but given the low costs associated with in-app-purchases [as distinct from the e-commerce users now conduct on their mobile devices rather than the web], it is possible that there's tremendous room to expand users' "app budgets" beyond current levels).

    In any case, I agree the share an app concept has a lot of potential. Given the cozy relationship between Apple and Facebook, I would also think there would be an opportunity to funnel apps to specific users based on the apps their Facebook friends have on their phones. (Granted, that would be a little creepy, but isn't everything in the big data/digital domain creepy initially before gaining broad user acceptance?) There are a million restaurant recommendation or news aggregator apps out there, but searching the app store by apps my friends have downloaded (with a listing of which friends exactly have done the downloading) would provide an important new means of app discovery with credibility far exceeding whatever one derives from the reviews currently listed next to apps.

    In any case, hopefully Apple (and other app stores as well — I believe everyone struggles with this) gets this issue sorted out quickly. Granted there are hundreds of thousands of apps out there and many more introduced every day, but to the extent that app discovery poses an imposing hurdle to would-be developers, the lack of App Store SEO/SEM inevitably stifles some amount of innovation.