Written by Dan Wilkinson Content Manager
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23 May 2019  |  Guide

Is This the Death of the App Store?

9 minute read

With a Morgan Stanley report of app store downloads falling for the first time since 2015 and the need for them called into question by companies like Spotify, we’ll look into the value they offer and how software developers can gain independence equalling increased growth by selling direct.

When every software developer starts out, they face the significant but slightly inevitable choice of either selling their product directly through their website or using an app store to do the discovery and back-end for them.

The immediate benefit that app stores offer consumers is a variety of emerging and innovative apps - from note-taking to practicing mindful meditation. Selling with an app store from a developer’s side can build up the app’s presence as well as save valuable time and effort in the back-end building process; when building an audience should be the priority. The downside for a developer is that you build a dependence on the app store to handle a variety of tasks; the cut taken for sales/recurring subscriptions also limits further growth.

The downside for a developer is that you build a dependence on the app store to handle a variety of tasks

According to a recent Morgan Stanley report in April of this year, app store downloads have fallen by 5%; the first time in four years. Couple this with Spotify’s video calling out Apple for its 30% cut when selling subscriptions on its App Store (which has led into an antitrust investigation which could alter how the app store serves its customers) and you can start to figure out why Software providers don’t love the app store as much as they used to.

The criticism casts light on the point at which big-name apps (like Realmac and Rogue Amoeba- who’ve both moved to having a direct offering) no longer need to use the app store to sell their products. The reason Spotify cited the threat of leaving was that Apple’s cut of its profits didn’t justify the value it offered anymore.

We’ve touched on what you can practically do when contemplating a move outside the Mac app store; here, we’ll delve into why people make a move to sell direct and how you can survive the leap. However, first, let’s take a look at what draws developers to app stores in the first place.

What value do app stores offer?

When judging why apps are calling out app stores, we first have to understand why they’d join them in the first place. Spotify’s argument for leaving centered on Apple not delivering enough value to justify a 30% cut of a product its size, so where does that initial value come from?

App stores are the primary way that apps are sold, with estimates of their value going as high as $34.4 billion for 2018 sales via the Apple App Store and Google Play Store, according to TechCrunch.

The reason for this is that, when looking for an app, the first place people go is the app stores of established brands like Apple or Google. Those visitors are also exposed to emerging apps by virtue of them being in the store - a clear advantage of an app store vs. selling directly. For an app to gain visibility when selling direct without first being an established app means they would have to do a lot of the heavy lifting marketing-wise first. Fortnite developers Epic Games and apps like Spotify have certainly used this to its advantage, as they gained fame through a relationship with the app store initially.

The App Store’s recommendations allow for greater discovery; apple store trending selections

Through Apple and Google’s role as tastemakers, being selected for the trending section of a major app store increases an app’s credibility and reputation exponentially. Being chosen also guarantees a lot of curious customers ready to bet with their money on a tastemaker’s curated choice.

The infrastructure of having an app store deal means you don’t have to worry about handling back-end processes and systems necessary to deliver your product, handle taxes and payments and billing infrastructure. This is highly desirable for apps starting out as it allows them to build out the process over time, ultimately removing the burden of selling and managing the sale of the software at the initial release stage.

Ultimately, there’s no debate that the app store delivers value; it’s just whether this value is geared towards emerging apps rather than established brands, brands that have a loyal fanbase who’d be happy to buy direct rather than through the app store.

When an app gets too big for the app store

Once you’ve reached a level of critical mass and your app has become a brand in itself with a sustainable amount of loyal customers, you may also start to wonder whether the cut of subscription sales the app store takes is really worth it. If the app store gets money doing something you already subsidize through your direct offering, you end up asking yourself, ‘why are we still on the app store?’

Spotify has found itself in this situation, whereby Apple’s App Store brought them the early benefits of infrastructure and eyes on its product. However, the recurring cut of subscription sales Apple takes after the initial sale undercuts the growth they could have long-term. Addressing these issues in a video, Apple’s response, which was posted on their website, centered on how Spotify uses the app store for clients but doesn’t want to give anything back for that value.

 

Spotify’s recent video also highlighted the conflict of interest Apple has over Spotify because of Apple owning Apple Music as a platform whilst selling Spotify’s app through its App Store. It’s an easy criticism that Apple can’t overcome lightly. Though, a counter-argument is that Apple would be more cautious of showing bias against Spotify as any overt advantage would harm Apple’s overall brand.

Takeaways on Spotify’s beef with Apple

What you need to know

  • Spotify released a video outlining concerns about the 30% subscription cut Apple takes and how Apple stops Spotify promoting discounts to promote Apple Music.
  • Apple responded by saying how Spotify doesn’t want to give back for the value it gets.
  • This has spiraled into a Supreme Court ruling and EU investigation that could level the playing field of how Apple sells its products through the store.

Another reason brands with a presence want to gain independence is to bypass the bureaucratic process of getting your update approved by an app store. This is something which developers have to take into consideration when considering dates of release. The delays in getting updates approved slow Spotify down heavily, according to their video.

When you’ve reached the sales of an app like Spotify, you don’t have to rely on app stores for those initial eyes on your app once you’ve got enough customers. So, what else do you need to consider to be able to make that successful jump?

Essentials for selling direct

Gaining independence from the app store and selling direct sustainably is no mean feat. Success requires a loyal customer base, a marketing plan with budget aimed at acquiring new customers and the necessary back-end features to power it all.

We’ve mentioned having loyal customers as one way of leaping to selling direct, but what else will you need to ensure you survive the jump? Being able to mobilize that loyal audience will be crucial because once you’ve built up and then strengthened your initial audience into a loyal following, they’ll be more likely to purchase a direct offering.

Being able to mobilize that loyal audience will be crucial

So how can you gauge customer loyalty? Having a high retention rate is one way, but another is measuring Net Promoter Score (NPS) which plots the percentage of promoters minus the percentage of detractors. Understanding your NPS will allow you to measure how satisfied your existing customers are with the service and help you anticipate how likely they would be to churn.

If visits to your website organically from search are on the rise but you are still pushing those visitors to the app store, you should consider selling direct.

The best possible outcome would be that your word-of-mouth is so good that your organic customers grow and you don’t need the app store anymore. Alternatively, through the people you’ve previously acquired through the app store, you gain enough credibility and happiness with the service and ability to market to them that you can just start doing it yourself.

You need the kind of customers that will flock to your latest release. Take a company like King, who produces Candy Crush. If King released outside of the app store, using an in-app interstitial, they’d still receive millions of downloads without the app store. So, staying within the app store really is like being a small fish in a big pond.

Realmac focuses on a direct offering first, complemented by an option to go to the App Store: realmac direct and app store

One final consideration will be your back-end capabilities since the app stores will have previously done the heavy lifting of product delivery, currency conversion and tax. A Merchant of Record model handles all these areas and more.

However, what if it all goes wrong? Well, in reality, there may not be an immediate increase in sales as you’ll need to start from scratch to gain your independence. This may be a case of launching campaigns to mobilize your audience and find new ways to generate awareness. Just remember you’re competing in a fragmented marketplace outside of the app store and need to find ways to stand out if you’re to find your footing independently.

The Future of the App Store?

So, what’s in store for the future of Apple and the idea of the app store in general? Will the company continue its dominance with an antitrust suit approved by the Supreme Court? Cases of this size can drag on for years, but the ramifications will be felt if they rule against Apple.

The consequences of a Supreme Court decision against Apple could be allowing companies to sell in-app subscriptions independent of Apple - a very costly resolution for the company. However, the value that app stores deliver is becoming even more commoditized; there are tools for release management and crash reporting out there. App stores could adapt by offering more value through releasing cloud, AR kits and SDKs to help developers build better software. With the overflow of choice available, app stores still provide the best immediate platform for discovery.

The value that app stores deliver is becoming even more commoditized

For apps, though, there’s definite value in taking steps to leave the app store behind. It allows for more significant growth and sustainability by working on keeping customers loyal to your app.

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