Pixel Envy

Written by Nick Heer.

An Apple-Funded Study Indicates Over $500 Billion in ‘Facilitated’ Commerce in 2019

Margaret Harding McGill, reporting for Axios last week:

House antitrust investigators are pressing Apple, Alphabet, Amazon and Facebook to say by Sunday whether their CEOs will testify as part of the Judiciary Committee’s tech competition probe, Axios has learned.

[…]

The Judiciary Committee this week sent the companies letters, seen by Axios, seeking documents and answers to the CEO testimony question. The panel wants to hold a hearing with the executives next month.

By extraordinary coincidence, Apple’s U.S. Newsroom — and only its U.S. Newsroom — today published the results of an Apple-funded study conducted by Analysis Group:

Apple today announced the App Store ecosystem supported $519 billion in billings and sales globally in 2019 alone. The new study, conducted by independent economists at Analysis Group, found that the highest value categories were mobile commerce (m-commerce) apps, digital goods and services apps, and in-app advertising. The results encapsulate the full sweep of the dynamic, competitive, and flourishing app economy, which has unleashed a torrent of innovation across 175 countries and revolutionized the way the world learns, works, and connects.

The study reveals that the direct payments made to developers from Apple are only a fraction of the vast total when sales from other sources, such as physical goods and services, are calculated. Because Apple only receives a commission from the billings associated with digital goods and services, more than 85 percent of the $519 billion total accrues solely to third-party developers and businesses of all sizes.

The key words in the study and the way Apple describes it are “facilitated” and “supported”. That means that dinners ordered through DoorDash, goods bought through the Amazon app, and transactions made through Venmo or WeChat are all estimated in this study as being commerce facilitated by the App Store.

That assessment is not entirely unfair. It’s very possible that, had delivery apps not existed, you would not have had a takeout dinner from an independent restaurant and, instead, ordered pizza or bought groceries. But it is not likely that you would not have eaten dinner at all. The App Store and the software offered through it can certainly take credit for enabling new ways of paying for stuff.

But this study also introduces some curious framing to the mix. Here’s what I mean (PDF):

Earlier this year, Apple reported that earnings it has paid to app developers who sell digital goods and services through the App Store or within their apps totaled more than $155 billion worldwide since 2008, with a quarter of those earnings paid in 2019. Such direct monetization through the App Store occurs through paid apps and digital content or services obtained using Apple’s in-app payment system.

While such direct monetization of apps is substantial, it significantly underestimates the size of the Apple App Store ecosystem. This is because developers can choose to monetize their apps in different ways, including several that do not involve transacting directly through the App Store. These other monetization strategies include selling digital goods and services outside of the App Store that can be used within apps on Apple devices (such as streaming apps), selling physical goods and services (such as grocery delivery apps), and offering ad-supported content (such as social networking apps).

Did you catch that? “Selling physical goods” is, apparently, just another way of monetizing an app. While you might consider apps from DoorDash or Amazon just native front-ends for their business, this study reverses that logic and suggests that the apps’ existence is facilitated by the goods and services sold through them.

This study, conducted by three antitrust experts at Analysis Group, is damn near a transparent attempt to buttress Apple’s forthcoming defence of antitrust arguments made against its App Store conduct. Its overall logic is, more or less: iOS apps allow lots of goods and services to be purchased through them, and the App Store provides those apps; therefore, the App Store can take some responsibility for the vast amount of money passing through those apps. I do not think it this argument is entirely wrong, but it takes an extraordinary leap of faith to believe that, had the App Store not existed, these products and services would not be sold. “Facilitated” is certainly an all-encompassing word to describe the App Store’s role in these transactions.