The App Store Undergoing Major Changes

App-Store

Apple and Google which are responsible for the lion’s share of smartphones sold all over the world are making some important changes to their revenue sharing model in order to try and revitalize the app economy.

As the App stores have grown, there are certain problems that developers have started to face. The first is that users do not seem to be downloading apps anymore. The average number of apps downloaded per month by a user is 0.

There is not much the Google and Apple can do about this and it could also be a sign of a maturing market where people know what they want from their smartphones and stick to that.

The other is the problem of viability. Small and medium app developers, in particular, are having a hard time staying afloat as they fight for a very small percentage of the population that is willing to pay for their apps. The developers then have to pay 30% to Apple and Google out of every sale, a hefty amount, particularly for corporations that are counting every dollar.

Thankfully, though, Apple is now going to allow all developers to offer subscription-based revenue models to their users and incentivize long term subscribers by taking only 15% of the sales. Google also followed suit and actually bettered Apple by announcing  that it would start taking 15% from subscription revenues from the outset.

While it was always inevitable that subscription models would be opened up to all app developers, the reduction in the cut from both companies comes as a pleasant surprise. Apple also announced that it would be allowing paid advertisements for the first time ever in its App store.

This means that app companies which have the budget will be able to pay for more potential eyeballs. We find it hard to understand how this move makes the app store more friendly to smaller developers although it is clear that Apple is looking to the app store as an area from where it can continue to increase its earnings in the coming years.

One of the great things about the App store used to be the fact that small indie developers could compete on the same level playing field against bigger companies. Look at examples such as Flappy Bird which became a breakout hit through organic growth and word of mouth. Maybe Apple is hoping that the same trend will continue even after the changes come into place.

Record hardware sales quarter after quarter has allowed Apple to treat its app store idealistically and forgo some of the obvious revenue streams staring it in the face. Now, however, it looks like that outlook is about to change fast.

 

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