The App Business Blog

Since the beginning of the App Store there have been complaints about Apple’s 30% cut, it’s app review rules and the enforcement of them. It’s an impossible task to create rules that will please everyone, but is it possible to create ones that are more clear, leave fewer gray areas and can endure over time?

When In-App Purchases were launched in 2009 it was initially targeted at selling digital content like books and magazines; I worked on the Zinio magazine reader and the Iceberg book reader apps at the time. Steve Jobs made the argument that when Apple brought a paying customer to a publisher Apple deserved to be paid 30% for it, and when existing subscribers paid they could do so outside of the App Store and Apple would not receive any commission.

In order to preserve this division of who brought the customer, Apple decreed that you could not link to your website or encourage customers to leave the app and sign up to your service outside the app. We’ve probably all had app rejections where app review finds a link or a mention deep inside the app that could be followed back to your website. Never mind that it does not take a genius to type in “Netflix” or “Salesforce” into a search engine to figure out how to sign up for their service. (Ironically, “Hey” may be an exception to this.)

For Apple to make good on their claim to bring customers to apps they need to provide a great way to discover apps in the App Store. The recent addition of curated content on the Today tab of the App Store app is great and I happily give Apple a commission every time a new customer finds one of my apps this way. But only a very small fraction of apps can be surfaced by Apple’s editorial team. The other major mechanism to discover an app is through search, and we all know what a joke search is on the App Store.

I would argue that most people find new apps via friends, social media and other articles outside the App Store. They all refer you to the App Store with a link so that you can install the app. This may give the impression that Apple served up a new customer to you on a silver platter, but in reality Apple had very little to do with the discovery. Therefore Apple’s original argument rings very hollow today and it’s not a stretch to see it more as “rent-seeking”.

The above history lesson skips over episodes like where you could offer purchases on your website inside a web view, but only for a brief time before you had to launch Safari to the same URL, before all such links became forbidden. So it’s not exactly been well defined and stable rules in this, the most consequential part of our apps: how we get paid.

Let’s try to find a clear line that divides apps that must use Apple’s IAP from those that don’t.

One one extreme end of the spectrum would be that all apps have to use Apple’s IAP for unlocking any feature or functionality in the app, and no alternative mechanisms for payment would be allowed. That is essentially what Apple says in paragraph 3.1.1 of the App Store Review Guidelines. But then this is followed by with several exceptions to this rule. So even Apple realized that this was too restrictive and it would needlessly bar many types of apps from the App Store.

The most curious exceptions are listed in section 3.1.3(a) under the heading “Reader” Apps. They include (and are specifically limited to):

• magazines
• newspapers
• books
• audio
• music
• video
• access to professional databases
• VoIP
• cloud storage
• approved services such as classroom management apps

It has been pointed out by several people that this list has a lot of overlap with paid services offered by Apple. Since each addition to this list means fewer payments to Apple there must be very special reasons for adding to this list. One obvious reason is antitrust: it looks really bad if your direct competitors are forced to pay 30% of all their revenues to you just for the privilege to be on your platform. So adding more app categories to this list is a good thing for app developers, but it violates our goal of finding rules that do not morph over time. If Apple were to hypothetically launch a paid fitness app/service in the future, would that be added to the list of reader apps? Would existing apps of this type have this new rule applied retroactively, or the next time they submit an update?

SaaS services like Salesforce and Slack are not included in the list above. So why can they offer an app that has no functionality unless you already have an account with them? Do they fall under the category “approved services”? Is there a secret list of approved services?

I would argue that none of the above rules fit the criteria of being clear, encompassing and enduring. The further you move away from “all”, the more exceptions you have to make and the more gray areas you create. And that’s without examining all the one-off exceptions that Apple is known to have made with some notable companies.

Let’s approach the problem from the other extreme: all companies can do whatever they want to collect payments. Apple’s IAP system is just one payment system developers can choose from, and it has to compete for business on its own merits.

Apple’s core argument here is that a free-for-all system would more confusing and more risky for consumers. Some app developers are very crafty and it would not take long before devious scams would appear on the App Store, for example apps whose sole purpose is to collect credit card numbers. How would Apple avoid responsibility when an app defrauds customers and Apple approved the app for inclusion on the safe App Store?

A solution could be to have the payment systems be audited and approved by Apple or a third party organization. Then each developer would choose the payment system that best fits their business model. Apple would no longer have to categorize apps and decide which ones need to use which system. With competition between payment systems that should make antitrust regulators happy as well. Apple could probably justify taking a small fee from all transactions as payment for letting lots of electrons pass through the systems they maintain. It would of course not be anywhere near 30% though.

Will Apple make any changes to their rules without being forced to? In 2019 Apple paid out $39B to app developers. That means their 30% cut was likely more than $10B (accounting for some 15% deals and that some apps are paid up front). Most businesses would fight tooth and nail to keep that much annual revenue. Even if it means semi-regular firestorms in the press and antagonizing the developers who do most of the work to earn that revenue. For now it seems that Apple is content to be just like most businesses in this regard.

written by Nick

The German site ifun.de noticed that Apple recently changed their iTunes Terms and Conditions for several (all?) EU countries. The changes include several new paragraphs related to “right of cancellation” and it mentions a 14-day period within which you can cancel your order and receive a refund, without giving any reason.

9to5mac seems to have been the first U.S. site to pickup the story and they ran with the headline “Apple introduces 14-day no questions asked refunds for App Store & iTunes in EU countries”. This was quickly picked up by many other sites and caused a lot of buzz on Twitter.

So it must be true then?

The iTunes T&C were indeed changed for EU countries on December 16. You can read the new U.K. version here. The new paragraphs in question are conveniently placed at the very beginning of this very long legal document. Here’s the smoking gun:

Right of cancellation: If you choose to cancel your order, you may do so within 14 days from when you received your receipt without giving any reason, except iTunes Gifts which cannot be refunded once you have redeemed the code.

Compare that to the U.S. version which succinctly says:

All sales and rentals of products are final.

Very interesting. And a significant change to how business is currently done on the App Store. Could this finally be the introduction of free trials that so many developers have asked for? But if that is the case, why introduce it as a change to the T&C and do it during the holiday season? Apple is certainly not known for being proactive in their communication with developers, but this borders on the Christmas Eve document dumps that governments like to do when they don’t want anyone to notice.

But if you bother to read a bit further into the T&C document, you quickly find this paragraph:

Exception to the right of cancellation: You cannot cancel your order for the supply of digital content if the delivery has started upon your request and acknowledgement that you thereby lose your cancellation right.

Given how the App Store works with downloads beginning immediately when you purchase an app, this change is really only interesting to lawyers and EU commissioners who are pushing a new directive on consumer rights.

Nothing new here. You can go back to your holiday vacation and glögg.

But since I have your attention, let’s do a thought experiment: What would happen if Apple suddenly did implement a 14-day no questions asked return period for iTunes?

Who would benefit from this?

Consumers obviously. But I also think that many developers would make more money as a result of such a change. If you have an app that is expensive, it seems very likely that more people would be willing to give it a try if they know that they can easily get a refund if the app is not right for them. This is the argument put forth by proponents of time limited trials in the App Store.

When you shop in the App Store you know that you are inevitably going to buy some duds: apps that were not what you expected, apps that are buggy, apps that were totally misrepresented in the App Store description, etc. When apps only cost $0.99 it’s easy shrug off the bad purchases. The total price you paid to find an app that you end up using is still pretty low. However, if the risk of purchasing a “bad” app is taken away, then that could lead to an overall increase in App Store prices. The difference for developers is that the good apps will get all the money instead of it being spread out accross several not so good apps. This is a good thing in my opinion.

Who would become the losers?

Developers of bad apps are likely to suffer economically as a result of easy refunds. Their refund rates will skyrocket and the business model of flooding the App Store with crap will crumble. I would not cry for them.

Unfortunately some really good apps could fall victim to this change as well. Think of apps that you “finish” within 14 days. Many casual games fall into this category. Event specific apps too. Perhaps some travel related apps, e.g. after your short vacation trip you may not “need” a city guide app anymore. Of course it’s not right to fully enjoy an app for 13.9 days and then request a refund. But some people would of course abuse this.

Open questions

• If an app is refunded, would it be removed from the customers iTunes account or can the customer continue to use the app?
• Would this only affect the initial app purchase, or In-App Purchases too? I’m guessing only the initial app purchase as it would be impossible for Apple to “roll back” purchased features and benefits inside apps.
• Would this change only pertain to apps? The Terms & Conditions are for all of iTunes, not just the App Store portion. What about ebooks, music and movies? I think movies would be especially vulnerable to a 14-day return period. It’s unlikely that it will take you 14 days to watch a movie. And if you “didn’t like” the movie is that reason enough to get a refund?

How would this affect you?

If Apple were to implement a more liberal refund system, then you should keep an eye on  your refund numbers in iTunes Connect. In the sales report you can set a filter for Transaction Type = Refund. You have probably seen some of these in the past as Apple has always had a limited refund policy in place, it was just a lot more difficult to use.

In all likelihood you would see the refund number increase initially after a new refund system was introduced. I wouldn’t panic immediately. People are probably going to try this new system in the beginning to see if it really works. Then I think many people are going to promptly forget about it.

Should you pull your app from sale in the countries where the refund policy was introduced? That seems like a foolish reaction. Even if your net sales after refunds is lower than your sales were before, they would still be greater than the $0 you’ll make from no apps for sale in those countries.

If my guess above is correct and IAP would not be subject to refunds, then maybe a change will finally push you over to switching your apps to free download with IAP to unlock all features. Interestingly the reverse is also true: if it turns out that apps that are paid up front convert better than free + IAP, then it should be worthwhile launching a paid app as well.

Why is Apple not doing this?

A Machiavellian approach would be to implement this under the guise of “EU is forcing us to do it”. And if things don’t go well, then they can blame the EU directive. If it’s a success, then they can take credit and roll it out to other countries too.

If nothing else, rolling out a new return policy just in the EU would make for a controlled experiment to determine if trials are a net positive for apps: You can compare your net sales in the EU before and after this change, and you can compare with other regions of the world that do not yet allow for easy refunds.

Apple should view this as a good change for consumers, and Apple usually takes the side of consumers, especially when they can use that club against their competitors. As far as I know the Google Play Store still only offers a 2-hour return window for apps.

As this news flash showed, the thought of instituing a 14-day return period caused a lot of anxiety among developers. But overall I think this would be a positive change for the best developers. And that would definitely be in Apple’s long-term interest.

written by Nick

Right after WWDC I wrote a short note about a new feature in iTunes Connect that allows you to request promo codes for app updates and how you could use those promo codes for testing the final app binary before it’s released on the App Store.

With the release of the new iTunes Connect UI almost everything looks different, but the same features are there. So here’s a follow up with screen images and step by step instructions.

1. Manually release the app

You should always, always release your apps manually instead of having them be released automatically as soon as they are approved. Odds are that your app will be automatically released on a Friday or Saturday evening and then your weekend may be spent answering support emails. So for your own sanity, release apps when it’s convenient for you. Manual release is also a requirement for this promo code testing trick to work.

2. Submit your app for review as usual

Nothing new or different here. If you forgot to select manual release you can still change this while the app is waiting for review.

3. Pending developer release

When the app has been approved it will be in the state Pending Developer Release. At this point the Promo Codes link appears at the bottom of the app details page.

4. Request one or more promo codes

This is the same old process you have probably used in the past to request promo codes for press contacts. Make sure you read the rules so that you do not violate the contract governing how promo codes are to be used. I’m not a lawyer, so I cannot provide advice here.

5. Download your app using one of the promo codes

Downloading an app using a promo code is usually a straightforward process. But in my experience when the promo code is for an update, iOS sometimes gets confused. It’s not consistent. But sometimes the App Store app shows an Update button right after the download is complete. It’s not clear to me if tapping the Update button will download the update you really want, or if it will “update” to the latest public release available on the App Store. Sometimes the whole process fails and my update is nowhere to be seen. So don’t be dismayed if need to burn more than one promo code to get the binary you want downloaded onto your device.

If your app saves any data you should test the upgrade scenario where you have a prior version of the app installed on the testing device. Upgrading from the App Store in this way is what your customers will experience and this is very different from when you are running and upgrading the app from Xcode.

6. Reject or release

If all testing goes well you can release the app at your convenience and in coordination with your release campaign. Tap on the Release This Version button at the top right of the app details page.

If during your testing you find any showstopper bugs you can reject this binary instead of releasing it. Click on the Cancel This Release button in the Builds section of the app details page.

Remember that Apple keeps a detailed history on all status changes of your apps. So don’t reject the binary after it has been approved by app review unless it’s really necessary. When you cancel the release you’re telling the app review team that they just spent time reviewing your app for no good reason since that version they reviewed will never see the light of day.

So don’t use this method as your early stage QA. Use it as your final, final confirmation that nothing went horribly wrong in the very last build step. Give yourself the peace of mind knowing that your customers will not face a botched binary when they go to update your app.

written by Nick

Every year at WWDC I make a point of having a meeting with the App Store team. If you are selling apps on the App Store, then nurturing personal connections with this team is one of the most profitable activities at WWDC in my opinion.

Every year as far back as I can remember I’ve asked the App Store folks if they are going to implement a way to test the final app binary before it’s released to the public. For the past two years they have hinted at an upcoming feature that will allow you to request promo codes for app updates. This year they surprised me by answering that this feature is now available.

Why is this a big deal and how is it useful to me?

Since promo codes were introduced for apps, you have been able to request and distribute promo codes as soon as an app has been approved by app review. Promo codes work even before the app is publicly available on the App Store. The business reason for this is so that you can send promo codes early to the press and have them write reviews that can be published on the day that your app goes live.

But you can also send yourself a promo code. This will allow you to do a round of final testing on the actual binary that customers will see when they download the app from the App Store.

No more crossing your fingers and hoping that the very last build and code signing you do before uploading your app to Apple didn’t introduce some odd error.

Previously promo codes were only available for new apps and not for app updates. That made the promo code testing trick less useful because you could only benefit from it once in the lifespan of your app. But now you have a way to test the final binary of all your releases.

written by Nick \\ tags: promo codes

Ouriel Ohayon of AppsFire watches the App Store for trends like a hawk. Recently he noticed that a single indie developer had the #1, #2 and #6 top positions on Top Free iPhone Apps.

The #1 app is called Flappy Bird and is a not so subtle variation on Tiny Wings. Or as Georgia at iMore puts it: “the game which is what remains when you suck the fun and joy out of Tiny Wings”. Ouch. But since when does the App Store reward fantastic games that hard core games love? For proof, look no further than Candy Crush and the many successful IAP games.

How does an indie developer beat out Candy Crush and other publishers who spend hundreds of thousands of dollars per day to maintain their top positions in the App Store?

Elaine Heney of Chocolate Lab Apps appears to be the only one who has managed to get an interview with the developer Dong Nguyen. In the interview Dong Nguyen claims that he did not “use any promotional methods”.

Carter Thomas has analyzed the historic rankings of Flappy Bird and the other two apps, and his conclusion is that something fishy is going on.

Paying for downloads is nothing new in the App Store economy. The top free to play games do this all the time. A crucial component to make such a campaign profitable is that your app is finely tuned to extract the most money from the players. The big guys have this down to a science. But even with all that in-house knowledge, a common strategy is to launch the app in a smaller market (e.g. Australia or Canada) to tweak and tune the IAPs before launching on a larger scale.

Flappy Bird has none of these characteristics. The only monetization is AdMob banners. This is hardly an optimized monetization strategy.

The darker side of paying for downloads is using bots to inflate your numbers. Since Flappy Bird is ranked high in 50 stores around the world at the same time, it would require an immense botnet to achieve this. The larger your efforts to cheat are, the larger your risk of being exposed becomes. It seems unlikely to me that an indie developer would get his hands on such a weapon.

Many people have pointed out that the reviews in the App Store for Flappy Bird look fake. But when did people suddenly start writing quality reviews in the App Store? Another explanation could be that there’s a meme on Twitter where people try to one-up each other with writing and finding wacky reviews for Flappy Bird.

I’m not going to pass any judgement because we don’t know all the facts.

In my mind the most suspicious part is how did the other two apps climb to the top of the App Store when there is no cross promotion of these apps in Flappy Bird. Do that many people really make an effort to go to the App Store and search for other apps by the same developer and download them?

If there was anything shady going on in the sudden rise to the top, then it’s a sad day. Yet another way to game the App Store. Or as some people would say: business as usual in the app economy. If there is one, I hope Apple finds and closes that loophole quickly.

If this is genuinely a viral super nova for Dong Nguyen, along the lines of Temple Run’s rise to fame a couple of years ago, then that makes me very happy. Congratulations to Dong Nguyen for hitting that perfect combination to make his apps go viral! This means that there is still hope for indie developers to hit it big time in the App Store without a mega budget.

written by Nick

This is a great idea. Start with the apps on your first home screen page. That should keep you busy for a few Fridays. Then go down your list of apps that you use every week. Also reward developers with a new or updated review when they update an app.

If you prefer to read other peoples’ reviews instead of writing your own, you can still help by clicking on the “Was his review helpful? Yes” link for the reviews that are truly helpful. (You can do this in the iTunes desktop app. Remember that one?) So few people seem do this up-voting, that just a few votes will have an impact.

written by Nick \\ tags: rate, Review

Per their annual tradition, Apple will shut down iTunes Connect over the Christmas holiday. This year the dates are December 21-27.

During this time period you cannot and should not

• Login to iTunes Connect.
• Update your app descriptions. Make sure you add any special holiday or sales messages ahead of time.
• Change app prices. Furthermore, do not schedule any price changes to occur during this week as that will remove your app from sale until the 28th.
• Don’t submit any last minute app changes. If you make a mistake the expedited review option will not be available to you, and you’ll sit on the sidelines during the lucrative holiday sales season.
• Don’t wait until the last minute to make meta data changes. iTunes Connect is a vary large system spanning many time zones. Don’t rely on it working with perfect timing for you.

What still works

• The App Store ranking lists are still updated during this period.

How to get your daily sales reports during the shutdown

1. Log into iadworkbench.apple.com to establish your session.
2. Then go to reportingitc.apple.com to get your sales data.

Update: This year I saw several app updates published during this time. Not sure if this means that the app review team is working as normal during this time, or if these were just a few apps that were left in the review queue and they wanted to clear it out.

written by Nick \\ tags: iTunes Connect

written by Nick \\ tags: screenshots

Clumsy Ninja is the featured app in the App Store this week. What’s noteworthy about this is that the App Store listing includes a video. Yes, a video inside the App Store!

It’s well known that most people don’t take the time to read your carefully crafted app description in the App Store. Since the screenshots are more prominently placed (no need to tap a tiny more link, for example) that is probably the primary way most customers make up their minds to download your app or not.

Having a video here would be awesome. With a video you can really tell a story and show off the great features of your app.

But it will also open up a whole new level of competition, as Marco points out.

Right now Clumsy Ninja is the only app on the App Store that has its own video. Hopefully Apple will roll out this feature to all apps in the future. To begin with I’m guessing that they will use videos just for the featured apps. This will allow them to gauge the popularity of videos and work out the initial kinks. (For example: Did you notice that the Clumsy Ninja video only plays in portrait mode on the iPhone, but it looks like the design of the video was deliberately made so that all the vital information actually fits in portrait mode when you tap on the full screen vide button?)

written by Nick \\ tags: video

Ever since the iPad was launched Apple has heavily encouraged developers to create Universal apps that have two separate UI:s in one binary, instead of having two separate apps in the App Store.

This week Apple finally launched their Apple Store for iPad app, and interestingly it’s not a universal app. It’s an entirely new app just for iPad. The old Apple Store app (for iPhone) is still available. Note that the iPad app requires iOS 7 while the older iPhone app still works on iOS 6. So maybe this release was just an artifact of separate development timelines and the two apps will merge in the future.

Since Apple has opened the topic for discussion, I think it’s worthwhile to consider the pros and cons of each approach:

Benefits of one universal app

• Customers only have to purchase and keep track of one app.
• Higher likelihood of being featured by Apple in the App Store. (Anecdotally)
• All your app downloads are aggregated for the purposes of ranking in the App Store, instead of being split across two separate apps.

Benefits of two separate apps

• You can make two sales to your customers who use your app on both types of devices.
• You can price the two apps differently.
• Reduced size of the app binary when you remove all the image assets for the other device type.
• One release will not tie up the other. Say that you are working on an iOS 7 UI update and you complete it for the iPhone version first, then you don’t have to wait to also finish the iPad UI update before you can release the app.

written by Nick