In This Episode
Apple recently shocked the App Store developer community with news that small developers with revenue of less than $1M per year will pay a commission of 15% instead of 30%. Within hours of the news dropping, David and Jacob recorded this episode with the hottest of takes, exploring what this means for the future of the App Store.
David Barnard: https://twitter.com/drbarnard
Jacob Eiting: https://twitter.com/jeiting
Here’s the Outline of Our Conversation:
[0:30] Breaking news: Apple announced a new Small Business Program
that allows small app developers (making less than $1M/year) to reduce their App Store commission from 30% to 15%.
[1:32] Is this a good thing or a bad thing? (For once, David takes the cynical view!)
[4:39] 97% of developers using RevenueCat qualify for the program.
[6:44] This is a stimulus for the app economy.
[7:13] What this means for ad spend, CAC, and LTV ratios.
[7:32] How the Small Business Program gives indie developers a competitive advantage.
[9:26] Doing the math: How much of a difference can this really
[12:50] Changes to App Review
would have had a bigger impact on David’s indie developer business.
[13:17] VCs decide whether or not to invest in a mobile app based on App Review, not the 30% Apple cut.
[13:45] Under this program, more apps will be able to grow from small to medium to large businesses.
[14:16] 97% of developers are affected by this change — representing only 5% of all App Store revenue.
[16:03] Why this is a win-win decision for Apple.
[17:40] Implementation details of the program.
[18:56] What happens if you cross the $1M revenue threshold?
[20:10] Progressive tax brackets; big apps like Fortnite
[25:00] Was the announcement intentionally vague?; Apple’s IDFA announcement
[26:00] The $1M “magic number”; the 85/15% split
[28:35] 95% of App Store revenue is generated by just 5% of developers.
[29:11] Optimistic take: Apple is listening to and investing in small developers.
[34:00] App acquisitions; increased valuation of apps; Launch Center Pro
[36:35] How Apple could help different types of businesses succeed in the App Store; Kindle
[39:55] The Small Business Program is a good thing, but there’s a lot more that needs to be done.
[40:40] Apple should self-regulate to avoid governmental regulation.
[41:30] This is a great first step and a win all around — hopefully the first of many.
“Indie developers can hire out more things, like customer support. You can afford to do a lot more as a small developer and spend on tools and services and help and designers — there’s so much you can spend that money on that will improve your product, that will help you build a better business, that will lead to more innovation.” - David
“What this does is it make small developers more competitive in the bids because we can spend more, so on the ad spend side of things, I think it’s a huge boon to smaller developers.” - David
“I still think that the App Store economy generally is more limited on innovation not because of money but because of App Review. VCs are making decisions whether to fund or not fund a mobile company based on App Review, not the 30%. VCs recognize that the marginal costs of digital goods and services is zero. So you can stomach a 30% tax on zero-marginal-cost goods, if you can build a great product.” - David
“From a more strictly innovation standpoint, it’s not the money that’s limiting innovation — it’s Apple’s stranglehold on what can and can’t [succeed in the App Store].” - David
“I do think this is in some way, the perfect non-action for Apple.” - Jacob
“We have to keep asking for the things that developers need, and making more money is always good! That's our mission at RevenueCat; I'm always a fan of that. - Jacob
“This is a step, it’s something, and it's not insubstantial. And it's well targeted and well thought out.” - Jacob
“Apple gave us a raise!” - David
“Ultimately I think all these things that [Apple] could do — like changes to App Review, creating a program to reduce the App Store fee for businesses who can't make it work — all those things ultimately benefit Apple in the long run. As developers are more innovative, as more apps are able to be on the App Store, as the platform grows, they're going to make even more money. So it’s a win all around.” - David
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