Thirty Percent
By @edent
· android blackberry ios iphone nokia Windows Phone 7 wp7 · 11 comments · 450 words · read ~342 times.
A decade ago, I was invited to the UK launch of Windows Phone 7. It was Microsoft's attempt to compete with Apple's iPhone and Google's Android. Sure, Microsoft could make a brilliant OS and had excellent hardware partners - but could they convince developers to use yet another system?
At the time, I wrote:
The revenue share is 70/30. I really think MS have missed a trick here. It’s an “industry standard” price point because no one wants to get in to a price war. Increasing the share that goes to the developer would be an excellent way to convince wavering developers to adopt the platform.
Back in 2010, BlackBerry charged developers 30% as did Nokia Ovi, and HP's WebOS, app stores from Opera and Samsung charged the same amount, even the Amazon app store charged 30%. None have shifted their pricing in the last decade.
That's curious, isn't it? Surely a new entrant into the market - or one struggling to retain market share - would have picked a different revenue split?
What a coincidence that they all, independently, came to the conclusion that 30% was a fair and reasonable amount to charge developers.
In a healthy, competitive market, I would expect these companies to attempt to undercut each other. Sure, some of them offer incentives to large developers - and others offer promotions to smaller developers. But where's the price war to attract developers?
I doubt anyone has said "My favourite app is £1 cheaper on Android, time to ditch my iPhone and buy a Samsung!" But we know from the game console market that exclusive games drive purchases. Recently, Apple forced the removal of the popular "Dark Sky" app from Android - presumably because they wanted users to switch. Attracting developers and convincing them to concentrate on your platform doesn't rely on increased revenue share - but it sure can't hurt.
Obviously, I don't allege that they have acted as a cartel. I mean, just because Apple and Google colluded to suppress workers' wages, doesn't mean they've done so to suppress developers' income. A wide-ranging conspiracy to overcharge developers and pass those costs on to end-users seems unlikely. But I wonder why, in the last ten years, no one has challenged this seemingly arbitrary percentage.
And I wonder which app store will be the first to break ranks?
Ten Years Later - Was Elop Right?
It seems to be a common figure in other areas too, e.g. I think the major takeaway apps charge 30% (to restaurants). And unsurprisingly when the financial regulator brought in an overdraft cap, most banks charged the same amount. I'd be interested to know if this is a known issue in economics and market theory - I'm sure someone has looked into it.
What a weird coincidence!
Turns out, Adam Smith's "invisible hand" was 'invisible' in precisely the same sense as the emperor's new clothes were… 🙄
The app stores aren’t really competing, though. Customers can’t purchase Android apps through the Microsoft Store, or Windows apps through the Google Play Store. You do see some competition on Android. I don’t know what cut they take, but Android apps and games are often cheaper on the Samsung Store than on Google Play Store.
It's not necessarily about competing for end-users - it's about competing for developers. Would you put an exclusive feature on one platform first if you could earn a bigger slice of revenue from it?
Even within the same ecosystem the three main Android stores - Google, Amazon, Samsung - all seem to charge 30% to developers.
Alex says:
In most cases is it realistic to compete for developers? Most app developers are trying to maximise reach. With very few exceptions, it wouldn’t make economic sense to exclude 50% of your potential market but releasing exclusive features on only one platform.
Of course the base fee of 30% does provide the stores with opportunities to offer incentives for exclusive content , which I think Samsung have done with some games content.
Unusual counter-example:
• Steam takes a 30% share; • Epic takes 12%.
Alex says:
Which is because they can compete on the same platform (PC). I think each mobile app store needs to be considered in isolation as there is no meaningful mechanism for competition between them.
Conor Rohan says:
I got a Nokia Lumia ~8 years ago and this broadly sums up my experience.
No issues with hardware, and the UI was crisp to a fault, but why on earth would an 18 year old in 2012 stick with a phone that had no Snapchat and no Tinder? I think it was the first time I realised how much value I placed in third party applications, and I’ve been begrudgingly oscillating between Android and iPhone ever since.
I still don’t understand why Microsoft didn’t aggressively incentivise developers to use their platform. Feels like they missed a trick as they had some great handsets and the backing of a tech giant.
Nigel Megitt says:
For a developer, isn’t the biggest factor driving their income from an App Store the number of users?
Need to work through the figures of numbers of users, chance of any user buying the app, etc, then ask what difference a marginal percentage change to their cut, say 2% more, would make compared with reaching a whole new app store user base. Or indeed, losing one.
Alex says:
“Apple forced the removal of the popular “Dark Sky” app from Android” is a very loaded way of putting it. Apple have bought the DarkSky business so they can integrate it into their operating system. The fact their choosing not to continue to develop the android app and closing the APIs after a couple of years is a change in direction for the product rather than an App Store commercial tactic.