Why you can’t compare the AppStore with a mall
“It’s just like how a mall functions. I do not understand why these upstart companies are making such a big fuss over it,” my friend retorted to my earlier question.
My answer to this was…
“Well, do you have a business? Are you building an app? Are you paying developers salaries?”
Before I could complete my sentence, he had already interjected.
“hey! It’s just my opinion. I am entitled to it, you know. If any business doesn’t’ like the mall they’re in, they’re free to go to another mall, or hey!! Open up a roadside shack for all I care!!”
I laughed, but in a cynical way. I have to admit that I used to think the same thing a short while ago. Somehow, my perspective evolved.
We had been talking about the current struggle between two of the largest app stores in the world against the government.
Both the Google Play Store and the Apple App Store are currently facing legal action from courts across the globe for alleged offenses, including overcharging developers and enforcing anti-competitive practices on their platforms.
Given that both of these titans created ecosystems that the entire globe now depends on, this may initially appear to be highly unjust to them, especially since they set the precedent for mobile computing.
So how did it come to this?
The 2 Towering Giants
As mentioned above, today the two giants who dominate the world of the app ecosystem are the Google Play Store and the Apple App Store.
How did this happen?
From the start, Apple enjoyed a loyal base of customers who cherished their products, particularly the sleek, high-end Macintosh computers. Following the release of both the iPod and iPhone, as well as Steve Jobs’ comeback, a generation became captivated by the Apple brand and concluded that paying two or three times as much for an iPhone was worthwhile compared to what they would typically spend on a regular phone.
The revolution had begun. All apps that would run on the iPhone would live on the Apple App Store.
History was made!!
Google was obviously not going to stay silent. Their play was much larger. They developed an entire operating system (OS) known as “Android” for the mobile environment and then, made it publicly available to everyone!
In summary, they made the software available at no cost. When this happens, any user or company can take the software and customize it to their needs without paying any charge to the owner they took it from. This is exactly what companies like Samsung, Motorola, Redmi, and all the other mobile phone companies eventually did.
Why was this a masterstroke?
Apple hadn’t open-sourced anything. In fact, Apple doesn’t open source anything in principle, while here Google was offering up an entire mobile operating system on a platter for free.
The battle lines were clearly drawn. It was the closed world of the iPhone, swanky, stylish, and expensive, along with its whole ecosystem of Apple products, against the open Android system from Google, customizable by most of the other vendors and free of charge!!
Despite its imbalance, this market gave different consumer segments different options based on their ability to spend.
Android-powered phones are available now from Samsung, Motorola, Redmi, OnePlus, and even a large number of Chinese cell operators.
The majority of consumers still turn to Google Play, even if each of them has a specialized app store of their own, such as Samsung’s Galaxy Store.
The Charges & the Justification.
So why isn’t everyone happy with the way things are, like my friend said? Why all this noise?
First comes the Mall Analogy.
When a business opens in a mall, it pays for the space it takes up. It also uses the utility services of the mall, such as water and electricity, for which it pays a monthly charge. The mall has security around the clock, which businesses also contribute to. A business gets a lot in return, including heavy footfalls of customers and sometimes even tourists who can now discover their brand.
Switching back to the App Store.
Similarly, when an app is listed in the App Store, the owner too needs to pay for the upkeep of the store. After all, on any phone, the app store is the portal to the world of apps. These app stores list thousands of apps. Some of them are free, and some are paid.
To ensure a secure environment to run apps on a phone, app stores charge a fee. The fee is, in fact, where the problem lies. Fees could sometimes range between 20–30% per transaction. This could suck out a considerable part of the app developer’s revenue.
Why is it so high?
Just like how a mall provides utilities to the businesses operating in it for a fee, app stores do the same with the thousands of listed apps. The services they offer here revolve around security and even privacy.
In fact, that’s where the term walled garden came from. Apple, for instance, states that it keeps its app store secure from malicious attacks and hackers. This obviously comes at the cost of constantly monitoring the environment for threats, keeping system security in check, or, in other words, raising the wall of your garden high enough to keep out all threat actors!!
So how do app stores recover this cost, which is recurring in nature? The straightforward solution involves charging them for each digital transaction that occurs within the app. This mechanism is called in-app purchases.
Two years ago, Fortnight (the creator of Epic Games) sued Apple and also Google for forbidding them to bring their own payment mechanisms into their app and instead forcing them to use in-app payment methods, resulting in high transaction fees. Fortnight was tired of seeing troves of cash float away to these app platforms for every transaction, so they decided to take both app providers to court.
Earlier this month, the Google Play Store removed numerous Indian apps for similar reasons. This time, Google provided three payment plans for app developers who discovered that, despite their choices, a select few received preferential treatment. Eventually, the apps were restored.
Privacy is another feature that is sticky.
In 2021, Apple decided to suddenly give users the option on their phones to share their data with apps. Only with the user's consent could apps that rely on customer data for sales and marketing be allowed to collect such data. Obviously, most users declined to share data since they were now given the option. Meta’s stock price went into free fall!!
How this could play out
Both Apple and Google now have their backs to the wall. The App Store, which brings them most of their revenues, is now under threat.
Their only response now is the Walled Garden approach. They believe that the services that their app stores render to all the thousands of listed apps are priceless!!
I can’t use the mall argument to address my friend’s concern.
The thing is, if app developers do not like Google Play Store charges, the only other option they have is the Apple Store. As we know, these two are on opposite sides of the ring in terms of technology.
As mentioned above, there are lots of other app stores built on Android, such as the Galaxy Store for Samsung, etc. Although these stores are native to a platform, companies developing apps specifically for phone platforms (despite their inspiration from Android) will require significant effort.
So it’s either the Google Play Store or Apple Play Store, or lots of customization to different phone platforms (on Android).
There is not much choice, really, in comparison with the number of malls available.
The Super App
Super Apps have the potential to bridge this gap. These are apps by big firms (note that size does matter here) that have the wherewithal to create them. A super app is one that has an ecosystem of its own and contains smaller mini apps that provide different functionality. Obviously, an ecosystem like this will have its own payment mechanism.
However, it’s just a matter of time before more super apps spring up to offer more choice to users. In time, the two app store providers will also need to rethink their transaction fees, or else they will lose market share and goodwill with app developers and the development community in the long run.
After all, a walled garden does give the impression that passersby folks should stay out of their way!!
