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The AppStore Business Model is Dead


Back in January, I argued that AppStores are not necessary as mobile economics mature and start to mimic web economics. Why do I need to download Skype from the AppStore when I can just go to Skype.com and do the same?


Apple changed the rules and suddenly the AppStore looks like it may die a toddler. Back in February, new rules for advertising revenue and media content were implemented by Apple. If your app is in the app store and you generate revenue from a new customer, you have to give Apple 30% of the revenue of everything you sell.  As per Steve Jobs:

"Our philosophy is simple -- when Apple brings a new subscriber to the app, Apple earns a 30% share... When the publisher brings an existing or new subscriber to the app, the publisher keeps 100% and Apple earns nothing."

Talk about a finders fee! Take the Kindle for example. If a new customer downloads the Kindle on the iPad and buys a book for $10, Apples gets $3 from Amazon, killing its margins. The same for the New York Times, Economist, Financial Times, and other magazines. What particularly vexed those publications is that Apple would tell the publisher absolutely nothing about the subscriber (Apple owns that data!), reducing any ability to personalize marketing to their own subscribers!

Content Producers Strike Back

The content producers started to fight back. Amazon was the first to strike with its web based Kindle Cloud Reader. It is a web application that uses web standards (HTML5) to allow users to read (online or offline!) their books. You can install a link on your iPad home screen making it look like an app, but it is not. It is just a web site and you completely bypass the AppStore, allowing Amazon to keep 100% of the revenue and customer data.

Another popular content producer struck an even deeper blow to the AppStore. The Financial Times, the winner of the Apple Design Award in 2010, has done the same as Amazon and released a cloud based version of their popular iPad app. Then in a move that can only be described as insurrection, the Financial Times has pulled its (award winning!) iPad and iPhone apps altogether from the AppStore!

With such moves by industry leaders Amazon and the Financial Times, the floodgates are open for others to follow. Apple can’t block the web in its devices, so it is the end of the AppStore as we know it. Even if Apple comes back and says, “ok ok, we will only take 3%, not 30%”, why would Amazon give Apple 3% when it can keep 100% for itself? Tasting freedom, publishers will never come back.

It was nice knowing you AppStore. RIP.


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