Last week, a bipartisan bill titled the Open App Markets Act was introduced in the Senate that would introduce new rules on the operation of app stores mostly targeting distribution, payments, and competitive positioning. Two days after the Senate bill was introduced, a similar (and similarly bipartisan) bill was introduced in the House.
The Senate bill is short at just 10 pages, and the text is remarkably accessible. Briefly, the content of the bill pertains to:
- Payments. App stores must allow developers to use payments systems that aren’t native to the platform, and app stores can’t require developers to offer favorable pricing terms when using native payments systems or punish developers for not doing so;
- Communications. An app store cannot interefere with or restrict an app developer’s communications with its users related to legitimate business matters;
- Non-public information. An app store cannot use non-public information relating to an app hosted in the app store for the purposes of competing with that app;
- Interoperability. When a company operates both an app store and the operating system through which the app store is accessed, that company can’t prevent users of the operating system from choosing third-party apps or app stores as category defaults, from installing third party apps or app stores from app stores other than its own, or from deleting apps or app stores that were pre-installed on the operating system;
- Search rankings. An app store cannot preference its own apps or those of its business partners in app store discovery or search;
- Open app development. An app store must provide all developers with equal access to “operating system interfaces, development information, and hardware and software features,” regardless of any developer’s affiliation or intended use of those resources.
The bill leaves some questions open related to applicability as a result of how it defines “app” and “app store.” From the bill:
- APP—The term “App” means a software application or electronic service that may be run or directed by a user on a computer, a mobile device, or any other general purpose computing device.
- APP STORE—The term “App Store” means a publicly available website, software application, or other electronic service that distributes Apps from third-party developers to users of a computer, a mobile device, or any other general purpose computing device.
What’s unclear from these definitions is where the distinction is made between “software application or electronic service” and any content that is developed by a third-party and is consumed by a user through an app store. Presumably a content consumption platform only qualifies as an app store when third-party developers directly publish content to it, so that services like Netflix don’t qualify. But could Roblox games be considered “apps” in a broad interpretation of this vague app / app store dynamic? YouTube videos? The Senate bill was ostensibly written with Apple’s App Store and Google’s Google Play in mind, but the definitions proposed can conceivably be applied much more broadly.
Additionally, the bill provides app stores with broad latitude to restrict developer behavior in the interest of privacy, safety, and fraud. Apple and Google might contend that their operation of their respective app stores is therefore fully compliant with the substance of this bill as it is written; certainly Apple’s dedication to consumer safety and privacy was a vanguard of its defense of its App Store policies throughout the Epic trial.
These questions and ambiguities are answerable. On the whole, I’m supportive of this legislation: it makes no sense that developers be tied to platform payment methods, and I’m especially disdainful of the ability of platforms to use developer data to directly compete with hosted apps. The world looks very different in 2021 than it did in the nascent age of mobile app stores: the services that platforms provide to developers are relatively less valuable than they were in 2008. I don’t believe that the platforms should be able to exert total control over the app economy, and the regulation proposed in the Open App Markets Act are thoughtful yet common sense constraints on the near total authority that platforms enjoy within the mobile ecosystem.
But the Open App Markets Act won’t accomplish very much. The mobile app economy was always winner-takes-all, and the winners have already done all the taking. Most of the controls proposed in the Open App Markets Act already exist for the very largest brands and consumer products on mobile. Almost every single mobile subscription app bills outside of the app stores, and some don’t even allow for in-app billing. Click on an ad for Calm or Headspace or Duolingo or Myfitnesspal or Noom and you won’t be directed to an app store but rather to a website for a web-based onboarding that prompts a subscription.
Netflix doesn’t offer in-app subscriptions anymore; YouTube canceled all active in-app subscriptions for YouTube TV and forced those users to subscribe via the web, outside of the purview of the platforms. Since these products are already collecting payments outside of the app stores, the only thing they gain from the legislation related to payments is the ability to link to these payment methods from within their apps. And consider also the category of popular apps that deliver real-world experiences or product fulfilment: Uber, Airbnb, Turo, Booking, Skyscanner, Instacart, Cash App, Venmo, etc. None of these apps is affected by app store payment exclusivity; they all collect payments directly.
While the legislation perhaps has more utility for smaller, upstart companies than larger, established brands, what new companies must contend with is any sort of friction in the purchasing process. Consumers will of course preference native payment methods on platforms, which they likely deem to be secure and which already have their credit card information stored. Introducing any sort of friction into the payments process, but especially that of having to input credit card information or register an account, can have disastrous consequences on conversion. Apple and Google already offer reduced platform fees for small developers: what incentive does a developer have to use a non-native payment process within its app when the native process is so much more streamlined for the consumer?
Alternative app stores and alternative payments methods introduce friction to discovery and monetization that consumers are unlikely to abide. It’s worth noting that Fortnite’s launch as a side-loaded app on Android was plagued by fraud, and the reason that Epic ultimately relented and published Fortnite on Google Play is that Google Play is where discovery takes place on Android. Consumer behaviors have already ossified on mobile: while it’s possible that an independent, third-party app store could become popular, it’s hard to imagine that one could overtake Google Play or the App Store on their respective platforms, meaning it would, at best, be just one more place a developer publishes its app.
Considering the above points of value, which could any other game developer truly live without given the popularity of their own game? The list is small. Epic has the gravitas and Fortnite has the momentum to bypass Google Play, but that likely isn’t a reality for any other games unless they rocket into international notoriety — and seem poised to maintain that popularity — in the same way that Fortnite has, which was completely unprecedented. So while one of the most successful and fastest-growing games of all time can operate off of Google Play to its advantage, such a decision would be disastrous for most other developers.
Consumers mostly don’t perceive the burdens placed upon developers by platform policies: they aren’t impacted by the 30% platform fees imposed on (a diminishing proportion of) developer revenues, and they can’t envision the counterfactual of an app economy free of payments and distribution exclusivity. And consumers have mostly been trained to use the default features of their hardware. Can consumers be explicitly re-trained to use alternative app stores and to share their credit card information with new payments systems? And even if they can, would they want to? What benefit awaits the consumer after inputting their credit card number into a new interface or in downloading a new app store onto their iPhone or Android device?
To the extent that the Open App Markets Act benefits developers, it benefits them on whatever popular computing platform or content interface comes next. Consumer behaviors on mobile are mostly settled science, and the roles that Google Play and the App Store play in consumers’ minds as the reflexive destinations for app discovery loom large. The power of default status is probably insurmountable on mobile at this point: will consumers feel incentivized to change behaviors for no discernible benefit? The rules introduced in the Open App Markets Act may play a role in shaping the next cohort of popular app store ecosystems, but they aren’t likely to materially change the status quo on mobile.
The Open App Markets Act could have been transformational on mobile five years ago. Now, it’s too little, too late.
And this was true before App Tracking Transparency rendered distribution through advertising less efficient: with less capacity to grow an audience through performance marketing, developers on iOS will be even more dependent on the discovery functionality of the App Store, meaning they’ll be less incentivized to experiment with alternative app store distribution. And ultimately, the Open App Markets Act seems to give broad flexibility to app stores to use privacy as a justification for diminishing the competitive power of app developers. That’s probably more pernicious than the exclusivity requirements developers face now.
Photo by Hans Eiskonen on Unsplash