Basecamp thought it was following Apple’s rules when it launched a new email app called Hey last week.
Hey, which costs $99 per year for a more private and serene take on email, distributed its iPhone and iPad apps for free, and it carefully omitted any mention of its website, where users can become paid subscribers. By making users connect the dots on how to sign up, Basecamp believed it could steer clear of the App Store’s in-app purchase system, which entitles Apple to 30% of subscription revenues (or 15% after one year).
It turns out Apple’s rules are more complicated than Basecamp thought. After initially letting Hey into the App Store, Apple said it should never have done so and blocked Basecamp from delivering future updates. Apple also threatened to boot Hey from the App Store altogether unless Basecamp reworked its app or embraced in-app purchases—not a great look as Apple kicks off its annual Worldwide Developers Conference this week.
The controversy around Hey shows just how broken Apple’s system is.
Navigating Apple’s in-app purchase rules, which most apps have to use if they want to make their digital products available in the App Store, aren’t just a developer problem. Some services charge more through the App Store than they do elsewhere to offset Apple’s 30% cut, while others must use cryptic messaging to explain why users can’t sign up directly through the app. In Hey’s case, Basecamp had to scramble over the weekend to create a free version of its app so users can try the service with a randomized email address. That’s not a great experience for users, but Basecamp hopes it’ll at least satisfy Apple’s unwritten App Store rules.
The controversy around Hey shows just how broken Apple’s system is. While Apple says its in-app purchase policies help ensure a good experience for customers, the way developers must dance around those rules is only leading to customer confusion, more developer frustration, and sometimes even higher prices.
Fortunately, the best solution is also a simple one: Just remove all the inscrutable rules that prevent apps such as Hey from accepting other payment methods through a web browser, so that Apple’s own in-app purchases have to compete. The result would be a better experience for users, more flexibility for developers, and possible relief from antitrust scrutiny for Apple. Unless the App Store’s rules are purely about maximizing Apple’s services revenue—which Apple has suggested they are not—the result would be a win-win-win for everyone.
Deciphering Apple’s rules
Certain iOS apps, including Netflix, Spotify, Dropbox, and Slack, are already exempt from Apple’s in-app purchase requirements because they fall into a category called “Reader apps.” Apple defines this category as including “magazines, newspapers, books, audio, music, video, access to professional databases, VoIP, cloud storage, and approved services such as classroom management apps.” If you’ve ever wondered why Netflix won’t let you subscribe through its app, and doesn’t even mention its website, these are the conditions that this narrow range of apps must meet to avoid using in-app purchases.
One problem—aside from Apple’s nonsensical definition of reading material—is that even the exceptions seem to have exceptions. The email service Fastmail, for instance, offers no functionality unless users subscribe on the web first. (Fastmail now says it’s adding in-app purchases at Apple’s request.) The email app Spike sells additional features through its website that can’t be unlocked through an in-app purchase. Spark, another email app, sells extra features for teams through its website, but not through its app.
How does Apple explain those cases? It depends where you look.
In a letter to Basecamp, Apple suggested that Hey could avoid using in-app purchases by creating a free email app that worked with users’ existing email accounts. Basecamp could then sell its own email subscription service through Hey’s website with no in-app purchase required. Speaking to TechCrunch’s Matthew Panzarino, Apple marketing chief Phil Schiller said the company is just trying to avoid scenarios where users “download the app and it doesn’t work.”
For all the snark and exasperation, we’re going to take @pschiller up on this offer: “There are many things that they could do to make the app work within the rules that we have. We would love for them to do that”. We won’t ever do IAP, but try some of the other “many things”.
— DHH (@dhh) June 19, 2020
Apple gave another explanation to Protocol’s David Pierce, who wrote that an exception to in-app purchase rules applies to “business services but not consumer products.” Panzarino clarified further that apps don’t have to use in-app subscriptions if they “only offer bulk pricing options that are paid for by institutions or corporations rather than the end user.” This would explain why remote collaboration tools from Basecamp or Slack—and even Spark’s email tool—could get a pass.
One problem—aside from Apple’s nonsensical definition of reading material—is that even the exceptions seem to have exceptions.
Neither explanation appears anywhere in Apple’s App Store guidelines, though. There’s no mention of special treatment for certain types of business apps, no exception for email apps with a free component, and no distinction between freemium and premium as a condition for avoiding in-app purchases. (Apple did not immediately reply to a request for comment.)
Denys Zhadanov, the vice president of Spark developer Readdle, told me his company wasn’t even aware of these rules when it bypassed in-app purchases for Spark’s team features. It only did so to offer certain team-based billing features that Apple doesn’t offer. “I do believe that the guidelines should be reviewed,” Zhadanov says. “There are definitely things that are too broad and not very specific.”
Yet the lack of clear language is almost beside the point. The real issue with Apple’s contorted rulemaking is that it’s making iOS worse for users.
Decoding Netflix’s cryptic sign-up instructions, for instance, is not a good experience. Paying an extra $5 per month for Tidal’s HiFi music service just for signing up through the iPhone app is not a good experience. Not being able to purchase e-books through Amazon’s Kindle app is not a good experience.
Likewise, an obligatory free version of Hey, built only to satisfy Apple’s unwritten rules, could make the app less appealing. At some point, the idea that Apple’s rules exist for users’ benefit rings hollow.
Fixing in-app purchases
The Hey controversy has prompted lots of suggestions on how Apple—or, perhaps, regulators—should fix this problem, but many of the potential solutions would have unforeseen consequences.
Forcing Apple to support sideloading—that is, letting users install software from outside the App Store—might provide some consolation to aggrieved developers, but it would also be a major technical undertaking that opens up new security risks on iOS. If Android’s sideloading support is any indication, most users would also just ignore this capability anyway, making it meaningless as a check on Apple’s power.
Regulators could mandate that Apple abstain from making certain kinds of apps where third-party options are available—that is, the Elizabeth Warren option—but that would introduce major inconveniences for users. (Imagine, for instance, an iPhone that didn’t come with an email app or a web browser.) It would also only benefit a narrow scope of apps, which might even become complacent by not having to compete with Apple.
At some point, the idea that Apple’s rules exist for users’ benefit rings hollow.
Requiring Apple to take a smaller cut of in-app purchases is a possibility, but good luck defining a percentage that would satisfy everyone. Besides, the 30% revenue has long been a standard for digital marketplaces, including the Google Play Store for Android devices and Valve’s Steam marketplace for PC games. Singling out Apple for a lower split seems unfair.
That brings us back to the idea of just letting developers sign people up for services through their websites, just as Hey was trying to do in the first place.
There is a downside here, too: More apps could try to forgo Apple’s billing system altogether and push people to pay for things through a website. If app makers started avoiding in-app purchase mechanisms en masse, the iOS experience could become worse.
All the more incentive, then, for Apple to compete with those alternative payment methods by making in-app purchases the most compelling option. It might consider lowering its revenue cut to stay competitive, or it might just add more payment features that developers have been requesting, such as discounted billing periods, refund support, upgrade pricing, and bulk licensing for businesses. Apple could even reward developers who support in-app purchases with better promotion and search rankings in the App Store.
“I would love to be able to sell to businesses through in-app purchase, and give Apple its cut, because it’s such a better experience, and it removes the friction,” Readdle’s Denys Zhadanov says.
Besides, in-app purchase would still be the most attractive option for users. It’s simple and trustworthy, and for subscriptions in particular, it provides automatic billing reminders and hassle-free cancellations through a single settings page. Matt Ronge, the CEO of the Mac screen mirroring app AstroPad, says developers would have plenty of incentive to support in-app purchases even if they weren’t mandatory, because some customers just prefer that option.
Matt Ronge, Astropad
Apple’s put this arbitrary line in the sand saying, ‘Well, if it’s a virtual thing, we want our slice.’”
Besides, Ronge says, Apple already allows apps that sell physical goods and services, such as Uber and Walmart, to offer their own payment methods, and it hasn’t caused mass chaos.
“It’s already happening today. It’s just Apple’s put this arbitrary line in the sand saying, ‘Well, if it’s a virtual thing, we want our slice.'”
Why would Apple agree to any changes? Last week, the European Union said it will investigate the App Store’s anticompetitive nature. In an interview with The Verge, David Cicilline, the chairman of the U.S. House of Representatives’ antitrust committee, referred to Apple’s in-app purchase fees as “highway robbery.” The consumer advocacy group Public Knowledge is pushing for a new regulatory body to scrutinize tech platforms, and economists such as Hal Singer are calling for a tribunal that lets app developers collectively bargain against Apple and other tech giants. Without action, some regulation is starting to seem inevitable. In the meantime, the controversy is hurting Apple’s reputation.
“It’s just bad PR,” says John Bergmayer, Public Knowledge’s legal director. “At some point, is the potential extra boost to services revenue worth the damage to your reputation? I would say not.”
Freeing developers from the contorted rules that require in-app purchases could relieve some of that pressure. More importantly, though, it would make the App Store a better place—not just for the developers who built it up to begin with, but for the people who use it.