Apple's App Store Compliance with the Digital Markets Act: The 7 Deadly Sins You Must Know

Apple’s recent proposed changes in Europe to iOS 17.4, in line with the obligations of the Digital Markets Act, hold significant potential for the mobile ecosystem. If effectively implemented, these changes could foster greater competition, reduce fees for developers, and enhance the app installation experience for end users.

While Apple's proposed model for other app stores (referred to as the Marketplace of Apps) is well-conceived, it's unsurprising that the company sought to safeguard its iPhone monopoly in the implementation details.

These seven "implementation" aspects represent Apple's seven deadly sins. They're deemed "deadly" because failure to address them could spell the demise of any potential competition in the European app store landscape. They're labeled as "sins" because Apple is capable of better. Over the years, Apple has been a trailblazer in innovation, and by overcoming these "sins," it could spearhead much-needed change in the mobile ecosystem. Such a shift would likely prompt Google to follow suit, ultimately impacting far more than just the 440 million European consumers—it would resonate with the 5 billion mobile users worldwide.

[Gluttony] Charge 0.50€ per new install (Core Technology Fee)

For developers who enroll in the new terms, Apple has announced a Core Technology Fee (CTF) of €0.50 per first install yearly.

This fee has been widely criticized as excessive by nearly every player in the market. What exactly does this charge cover? What is it intended for? The value of €0.50 covers only Apple's notarization system and Apple Connect, and nothing more.

Certainly, the CTF does not appear to cover:

• App download transfer: downloads are facilitated by the Marketplace of Apps, not by Apple.

• Operating System development: the iOS operating system is paid for by customers at the time of iPhone purchase.

Given the scale of app distribution on iPhones, we strongly believe that the CTF should not exceed €0.05. In 2022, there were 7.7 billion downloads in Europe from the Apple App Store (source: Statista). If half of those downloads are made under the new terms and half of those are first-time installations (yearly), a €0.05 fee would result in €100 million in annual revenue. The development costs of Apple's notarization system and Apple Connect are much lower on a yearly basis.

[Wrath] Impossibility of the Developer to revert from new to old terms

Although not publicly available, Apple has communicated to developers that those who opt to transition to the New terms will be unable to revert to the old terms.

Developers naturally fear that the new terms could have a negative impact on their businesses, especially given the inability to switch back.

In contrast to other platforms where customers can change terms monthly. This is the case of Apple Music or Apple iCloud+ where you can change your plan once in every billing cycle. We believe that Apple should allow developers to change Terms every 3 months, giving the flexibility to the developer to choose what is the best for him. As billing variables are processed automatically, this is no different from other Apple services.

[Lust]  Have multiple screens with friction in installation time

Given that the App Store's offerings are meticulously curated by Apple and undergo thorough screening via the Notarization system, we believe the installation process should be as seamless as possible, without unnecessary friction.

However, Apple recently announced a three-step installation process for apps from the App Store. To ensure users have an informed yet streamlined experience, Steps 1 (Change definitions) and 3 (Pop-up window) should be consolidated into a single step. Additionally, the messaging should remain objective, avoiding any unnecessary fear, uncertainty, or doubt for the user.

[Greed] - Marketplaces of Apps need to pay CTF from the first install

Apple also announced that App Stores, or Marketplaces of Apps, are now required to pay a Core Technology Fee (CTF) from the first installation onward and will no longer receive a "free ride" for the first 1 million installs. This stands in contrast to other app developers who are granted 1 million first installs per year per developer before being subject to the CTF.

Considering that the Marketplace of Apps is an app itself, it should also be entitled to benefit from the initial "free ride" to build up its user base just like the other developers.

[Sloth]  Remove warning in payment flow

For payments facilitated by Alternative Payment Providers, Apple requires in every purchase that users to confirm their awareness that they are not transacting with Apple (source). While it's commendable to provide users with information, we believe this message should only appear once per game and only if the game is downloaded from the Apple App Store.

Furthermore, it should not appear at all if the game is downloaded from a third-party Marketplace of Apps. In the latter scenario, users have the necessary context since they downloaded the app from a different app store, where it's expected that billing is handled.

In instances where the app is downloaded from the Apple App Store, the messaging should remain objective, avoiding any implication that Apple's payment system is inherently more secure or private than alternative providers.

[Pride] Don’t allow Marketplace of Apps to be in the Apple’s App Store

The Apple App Store is currently the "de facto standard" channel for app distribution on iOS devices.

A Marketplace of Apps should have access to this channel to distribute their apps, as it cannot be pre-installed on iPhones like the Apple App Store.

[Envy] Make it mandatory for developers to report in-app purchases processed in other app stores back to Apple

Apple is mandating (source) that every in-app purchase (IAP) processed through the Aptoide billing system be reported back to Apple. This will offer valuable insights into the competitive landscape for Apple.

With this data, Apple will gain knowledge about which developers are collaborating with the Marketplace of Apps, their earnings, and the Average Revenue Per Paying User (ARPPU) / Lifetime Value (LTV) of those users.

The asymmetry of information creates challenges for other Marketplaces of Apps to compete effectively in the billing space.