In-App Purchase Fanboys

I’ve blogged a lot about in-app purchase recently, and I’m finding that every time I tweet about it now, someone parrots back this “Apple is bringing customers to you, so be grateful” line. It’s a response that’s taking hold among Apple apologists, and I don’t think it’s nearly the counter-argument that its adherents think it is.

This argument is something that Daring Fireball’s John Gruber comes back to, notably in his Dirty Percent blog entry (more on that in a bit). But there’s a nice counter-argument in Josh Benton’s To the Victor Goes the Pricing Power (a title that parallels my own arguments that Apple is rent-seeking). Benton writes:

But if someone searches for and downloads The New York Times app — after the Times has spent more than a century building up its brand, at the cost of billions of dollars — can it really be said that Apple has “brought” that subscriber to the app, and that they deserve 30 percent of the revenue the app generates, forever? (Gruber doesn’t address the eternal nature of Apple’s cut; it’s like paying a New York apartment broker his finder’s fee, every year for the rest of your Manhattan-dwelling life.) It certainly seems like a transaction different in kind from, say, a game that exists only on (and only because) the iPhone platform.

Now back to Dirty Percent… one thing that’s interesting about this essay is the degree to which Gruber acknowledges the legitimacy of many of the arguments against Apple’s new policy. He explicitly agrees with Matt Drance’s criticism that the price matching requirement is unreasonable, is troubled by the fact that the new requirement to offer I-AP for digital products available elsewhere is “is taking away the ability to do something that they previously allowed” (in more recent entries, he’s gone further and said this feels like a bait-and-switch), and on the topic of 30% being too big a cut for doing little more than a credit-card swipe, he simply responds that “Apple… doesn’t see it this way”, neatly avoiding taking a stand himself.

Far from an absolute defense of Apple’s new I-AP policies, Gruber has wisely distanced himself from the most indefensible of Apple’s actions, and left himself some wiggle room in case things change.

The most rabid Apple defenders have also blithely ignored the inherent problems of I-AP, preferring to change the conversation to a “old media needs to change their business models” argument (which makes them sound curiously like the “everything should be free” crowd, who willingly misread Lawrence Lessig and Tim O’Reilly in order to justify content piracy). As I’ve said on a number of occasions, “if you don’t hate I-AP, you haven’t had to use it yet.”

A client of a client of mine is likely to get caught up in this I-AP drama, and in a meeting this week, we laid out exactly how I-AP works, and what they have to do in order to implement it, including entering every product into the iTunes Connect web interface, a nightmarish prospect when you have thousands of SKUs. When we finished, there was a long silence on the phone, followed by a colleague saying “you can probably imagine the look on everyone’s faces here.”

Adapting a company’s current digital storefront to incorporate I-AP is a grievously unpleasant proposition. Adding a storefront UI and Store Kit to the iOS app, plus integrating I-AP on the server side (coordinating I-AP purchases into the existing storefront, validating purchase receipts with Apple, etc.) will cost tens, if not hundreds, of thousands of dollars in developer time. More work for me as a consultant, but I can see why clients aren’t eager to spend it.

Because think about it: if the “Apple will bring you customers” argument were valid, everyone would have willingly done this back in 2009 when I-AP first hit the scene. It would have been in their self-interest to do so.

Look, I used I-AP in Road Tip because it suits the economic model of the app: I have ongoing service costs to MapQuest for every user; a data subscription plan is an appropriate way to cover that for users who continue to use the app. But it’s not necessary for other kinds of apps, like apps that view content the user has acquired elsewhere, or deluxe clients for websites that don’t work correctly in Mobile Safari (because, say, they depend on Flash).

The legitimate fear is that some content won’t be available at all for iOS because the hassle and expense of I-AP is too great. Obviously, Apple is counting on this not being the case. And I think this is a bigger deal for the small, niche content than for the big media companies. My fear is that the Apple Fanboys will go out of their way to purchase content through Apple as a political statement, so the small providers that somehow do cobble together the resources to add I-AP and enter all their content into iTunes Connect will then lose 30% on every sale that they could otherwise have run through their website. If you’re determined to pay Apple and only Apple for your content, you’d better hope they’re capable of meeting all your content needs indefinitely, because you might lose third-party content providers in the process.

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