Comment Apple and Epic Games have delivered their final arguments in their California bench trial, but Cupertino is still ratcheting up the charm offensive, revealing the App Store “facilitated” a 24 per cent hike in billings and sales in 2020 to a record $643bn.
The data comes via a study [PDF] from economic consulting outfit The Analysis Group commissioned by Apple. Some of its findings addressed the points of contention raised during the bruising trial with Epic Games.
For example, Apple was forced to defend its anti-steering provisions, which prohibit software developers from pointing to alternative payment methods beyond the walled garden of the App Store. In practice, this means app-makers cannot mention or reference their own payment gateways, where they can process transactions without providing 30 per cent of their revenue to Apple.
The report noted that 90 per cent of total billings and sales occurred beyond the App Store, where Apple would not have been able to take a cut.
Looking at the data, this seemingly included sales of physical goods and services, where Apple didn’t charge a commission, and companies (like Amazon, Uber, and Lyft) that have developed apps specifically for iOS users are “allowed” to use their preferred payment gateways.
During the trial, Apple Fellow Phil Schiller distinguished physical goods from virtual ones by noting the firm was unable to guarantee delivery of the former.
Physical goods and services accounted for the overwhelming majority ($511bn) all of the total “facilitated” app revenue, up 24 per cent from a year ealier. Some $86bn came from digital goods and services, up 41 per cent, with the remaining chicken feed coming from in-app ad sales, which accounted for $46bn and was 4 per cent higher year-on-year.
Apple has tried to link these figures to the earnings of small software developers, highlighting its decision to drop its commission rates from 30 per cent to 15 per cent on small-volume devs in November last year, and pointing to a chart detailing close to three-times growth in earnings for app-makers who make “under $10m a year” since 2015.
But again, that might be misleading as no base figures were given – in fact the “small developer chart” (fig 1) included no financial values at all – and, as the Apple itself noted, the number of small devs increased by 40 per cent in these years.
The Analyst Group further broke down the $643bn figure by category into general retail, travel, food delivery, and so on. Predictably, general retail sales (like those from Amazon) accounted for the vast majority of physical goods and services revenue, totalling $383bn.
This is no surprise. With most brick-and-mortar stores shuttered around the world, and some regions limiting what supermarkets could sell, the only real option was to head online.
The little guys? Not quite
And it was the big players who benefited here, as demonstrated by Amazon.com’s top line for 2020, where revenues jumped more than 34 per cent to $215.9bn. Other large online retailers, like JD and Walmart, also had bumper years.
It’s fair to say that it’s most likely the intrenched retail players with apps on the App Store who benefited last year.
Similarly, the third-largest category, food delivery, is dominated by a handful of large companies, like Uber and Deliveroo. This is a space where smaller vendors are unable to compete. You need a vast moat of venture capital behind your back, as well as the stomach to withstand consecutive years of losses.
This isn’t the only piece of App Store fluffery Apple has published in recent weeks. In May, at the heart of the bench trial with Epic Games, it published a report claiming it stopped $1.5bn worth of fraudulent or suspicious transactions during 2020.
Apple has been repeatedly pressed to justify the 30 per cent cut on its larger developers, and pointed to the safety and security measures in the App Store, as well as other technologies, like the Metal graphics API.
In 2020, Congress estimated Apple’s costs of running the App Store amounted to just $100m, with annual global revenues of $15bn. ®