Apple:
Apple today announced the global App Store ecosystem facilitated $1.3 trillion in developer billings and sales in 2024, according to a new study by economists Professor Andrey Fradkin from Boston University Questrom School of Business and Dr. Jessica Burley from Analysis Group. For more than 90 percent of the billings and sales facilitated by the App Store ecosystem, developers did not pay any commission to Apple.
The purpose of this study — also produced in 2020, 2021, and 2023, though not last year — is two-fold. First, it indicates to lawmakers the footprint of the App Store and suggests any further regulatory action would seriously compromise the economy as a whole. The second reason it exists is to soften the impression of Apple’s commission on digital purchases, hence this part of the study and press release, emphasis mine:
The new study by Professor Fradkin and Dr. Burley highlights how developers on the App Store have more ways than ever to monetize their apps. The study found that in 2024, developer billings and sales for digital goods and services totalled $131 billion, driven by games, photo and video editing apps, and enterprise tools. Sales of physical goods and services exceeded $1 trillion, fuelled by rising demand for online food delivery and pickup, as well as grocery orders. In-app advertising revenue from ads placed by developers in their apps was $150 billion.
A big amount, but measured against the total estimated economy of $1.3 trillion, it is supposed to be seen as a small fraction — “less than 10%”. This number is, the study’s authors write, not an estimate of payments made through In-App Purchases:
Sales from digital goods and services purchased elsewhere but used on apps on Apple devices are included, while billings from in-app purchases made via the App Store but used elsewhere are excluded.
I do not understand why this definition was chosen. Surely the excluded sales are actually a better example of transactions “facilitated by the App Store ecosystem”, even if the purchase is ultimately consumed elsewhere. But, then again, I cannot think of many things I can buy with In-App Purchases which I ultimately use outside the app, so perhaps it does not make much difference if they had been included. It may be the result of a methodological gap in the study.
The study’s authors still conclude Apple takes a commission on “less than 10%” of $1.295 trillion. If this number was closer to 1%, the report would probably say that. It is perhaps a touch unfair, but let us assume it is about 10%, which happens to be just shy of the $131 in total digital billings. Apple’s commission is not as straightforward as the flat 30% rate it used to charge. But, at its minimum 15% rate, this suggests Apple made at least $19.4 billion in 2024 in App Store commissions alone — from what the Analysis Group says is less than 10% of an economic ecosystem facilitated by the App Store.
Jeff Johnson:
I’ve always been baffled about why a small minority of developers, including small indie developers like me, are required to finance the App Store ecosystem for every developer, including the developers of “free” apps that nonetheless generate billions of dollars per year from billings and sales. Why is Apple’s IAP not required for all purchases in all App Store apps? It’s difficult for me to see a principled distinction between the apps that have to use Apple IAP and the apps that don’t. It seems completely arbitrary. Apple made a big deal about Spotify not making “contributions to that marketplace,” yet Apple also openly (and hypocritically) admits that most of the financial transactions that occur in App Store apps are not contributing to that marketplace either. There are a lot of “free riders” in the App Store.
The thing about the Analysis Group’s report is that it is very broad. While it does not include transactions made through Safari on iOS, things like shopping in Amazon’s app or buying airfare in Kayak’s app are factored in. Whether these purchases were actually facilitated by the App Store ecosystem is questionable to me — would someone have not bought that flight if not for their iPhone?
Where this gets especially murky is with the whole economic world that is dependent on smartphones. The classic example of this is Uber. Taxis have existed for a long time, and so have pirate taxis, and you could always ask your friend to carpool, and you can take a bus. But the structure of Uber, which relies on an app each for customers and drivers, would not exist without the App Store. Yet Uber is not required to use In-App Purchases, nor does Apple collect any commission on its business. A similar argument could be made about social apps like Instagram and TikTok, which are also smartphone-dependent, yet are funded by ads Apple does not get a cut of — mostly.
Apple has argued in court this commission is for App Store upkeep, developer relations, API development, and for intellectual property licensing. These are things common to all apps. Yet only those facilitating transactions for digital services are expected to pay? How is Uber — with its half-gigabyte client app updated once or twice weekly for tens of millions of users — not paying for App Store hosting and bandwidth, but indie developers are?