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Apple’s iOS update will be bad news for developers, but a boon for Apple users

If In August 2018, if you had invested £ 5000 in Apple shares, you would have doubled your money in two years. Handsome, right? But if you had bought a single stock at the company’s IPO price of $ 22 in 1980, it would be worth almost $ 28,000 (£ 21,000) today. This is the kind of hindsight that is bad for blood pressure: it only confirms Warren Buffett̵

7;s famous observation, quoting his mentor Ben Graham, that in the short term the stock market may be a slot machine, but in the long run it is a weighing machine.

In any case, Apple’s market value now weighs $ 2.2tn. What was once a lucky little outfit fighting the mighty Microsoft has somehow turned into a corporate holiday. And the interesting thing is that until recently, no one outside the stock exchanges seemed to have noticed the implications of this metamorphosis. When the House Justice Department subcommittee convened four tech executives for a critical hearing in Congress, Apple’s Tim Cook went for the lightest. Subcommittee members reserved most of their ire for Amazon, Facebook and Google.

And yet, Apple is a very powerful monopolist in two areas: the App Store and iOS, the operating system for iPhones and iPads. And although the two are closely related, it is the company’s operation of the store that is likely to cause the most problems, at least in the short term.

The App Store was launched in 2008, a year after the iPhone was first launched. Since the phone was designed as a handheld computer with an internet connection, it could run small programs (called apps – for “applications”). In principle, anyone with the necessary skills and knowledge can write such apps and sell them to users. But because Apple maintained total control over iOS and wanted to ensure that only apps that were secure (and legal) ran on it, the only way for developers to get their apps to users was to send them for inspection by Apple – who decided for whether they were able to be offered to the users. In case an app passed the test, Apple took 30% commission on the price of non-free apps.

At first, this seemed like a win-win for everyone. iPhone users got apps that had been researched; developers received 70% of the price without having to engage with credit cards and e-commerce equipment; Apple maintained quality control of the app’s ecosystem; the chaotic free-for-all of the Android app ecosystem with its rampant malware was avoided; and Apple could claim that the 30% cut compensated for the cost of running the store.

The store started as a rocket and now has more than 4 million apps available. And the store’s customers – iPhone and iPad users – were the ones most worth reaching because they generally appear to be richer and less price sensitive than Android users. So while developers may have reached the 30% fee, they felt that the benefits of submitting Apple terms outweighed the costs.

But now the store has turned into a giant monopoly. If you want to get your app to an iDevice, you still have to follow the rules – and pay the 30% commission. Even worse, for large companies (especially gaming companies), if your app involves “in-app purchases” (and many games do), purchases are also subject to the Apple fee.

These developers see this (rightly, in my view) as an unjustified monopolistic lease search. And last month one, Epic – the owner of Fortnite – sued Apple after it was launched from the App Store because Epic had updated the game to include an alternative payment system.

This landmark case is currently pending before the courts. Apple is likely to win, on the grounds that it has the right to set rules they like on its own property. However, if the legislative mood towards technological monopolies becomes darker, the company may need to become more flexible in the commission.

On the other hand, users (unlike developers) are seeing an upside of Apple’s monopoly power. The next update of the mobile operating system, iOS14, includes a change that should have a serious impact on many web advertisers. The industry assigns a unique code to each device called IDFA. Knowing your IDFA can help advertisers tell you if their ads are effective, especially when they have shown you the same ad in several places. Facebook uses IDFA as part of the Audience Network, its developer ad network.

But with iOS14, Apple will require developers to show you a warning that they are collecting your IDFA – and you must choose to share it. So iPad and iPhone users can expect an initial blizzard of permission requests to share the device’s IDFA – requests that are a single, two-letter, answer: no.

This prospect had many strengths of the business that George Orwell remembers as “rattling a stick in a bucket” that changed underpants twice a day. So high was their cry of pain that Apple announced on Thursday that it would delay the transition to 2021 to give the poor loved ones time to adjust. The business world will see this as a pragmatic decision, given the current attitudes towards technological monopolists. The rest of us see it as a wasted (or at least postponed) opportunity to do something good.

What I have read

Beyond Silicon Valley
It’s interesting GQ interview with Jaron Lanier, including the pioneers of virtual reality.

Net tap
Lisa Borst’s long and thoughtful review in Nation of Joanne McNeil’s new book, Lurking: How a person became a user, wondering how the internet got so bad.

Order him, ref
The registry has a sharp report on the recent Facebook failure and Mark Zuckerberg’s compelling apologies.

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