Last week, Apple announced that it will allow developers to discount in-app subscriptions on iOS to current and recent users (previously, discounts could only be offered to new users). This may seem like a trivial policy change, but it’s actually very meaningful: the mobile app economy is currently in the midst of metamorphosis, with new business models creating exciting and lucrative new product categories. Releasing new monetization products — such as this discounts mechanic — leans into that tectonic shift in the app economy and gives developers more tools to promote and deliver value to lapsed and under-engaged users.
I’m hopeful that this kind of innovation will continue to percolate throughout the App Store and Google Play. One reason I’m convinced it will is that the 30% platform fee is being very vocally and publicly challenged. I do believe that Apple and Google provide a tremendous amount of value to developers through their editorial services, curation, payments processing and management (especially cross-border), etc. Because of that, while I don’t think enough animus can accumulate to see a wholesale shift away from Google Play and the App Store to something completely and fundamentally new, it would still be wise for the platform owners to pre-empt developer discontent by continuously rolling out new features and products that showcase platform the value. This recent change to subscription policy on iOS does exactly that.
There are three very strong reasons why both Apple and Google should feel incentivized to make sure developers continue to see their platforms as exceedingly and strategically beneficial. The first is that smartphone penetration and the increased quality of devices has caused smartphone shipments to contract dramatically (chart credit, Credit Suisse):
Especially for Apple, services revenue will be a remarkably important growth driver going forward, and so it’s acutely important to keep developers invested into the iOS ecosystem.
Promotion and amplification of the biggest hits
The second is that, because of the rich ecosystem of engagement services like Twitch and Discord that exists for games, new titles can reach almost comically absurd numbers of users at launch. EA’s Apex Legends was installed by 25MM people in just seven days, besting the relatively glacial pace of growth of Fornite, which took two weeks to reach 10MM players (chart credit, Roundhill Investments):
Apex Legends and Fornite are not mobile-first games, but that’s the point: Fortnite was released on mobile months after its launch on PC and console, and it was so large at that point that Epic was able to sidestep Google Play and release the game with a direct download. Apex Legends’ mobile release date hasn’t been announced, but surely EA could potentially do the same thing and release directly to players.
And while very few developers will ever see this kind of frenzied, dazzling growth, these tentpole franchises are important for the mobile platform owners to be able to offer to their users. That a game can reach 25MM people inside of a week without any help from a platform and then launch on mobile devices — which, as the first chart underscores, everyone owns — means that the platforms need to go out of their way to highlight the value proposition of staying with them.
And the third reason that new features and toolsets that bring value to developers are important in justifying the 30% platform fee is that video streaming is a massive mobile use case (chart credit, Ericsson):
Netflix set a bold new precedent for streaming services late last year when it stopped allowing users to register for the service on their iOS devices. Netflix had been experimenting with such a change on iOS earlier in 2018 and had previously dropped payment support on Google Play.
Netflix’s decision highlights Apple’s difficult “rock and hard place” position with respect to payments: smartphone penetration and decreasing hardware sales growth means in-app subscriptions are more important than ever, but in a cross-device world, developers have the option of accepting payments elsewhere. By giving developers tools like lapsed subscriber discounts, Apple makes the case that access to its payments products and features fully justifies its platform fee.