If in August 2018 you had invested £5,000 in Apple stock, you’d have doubled your money in two years. Nifty, eh? But if you’d bought a single share at the company’s IPO price of $22 in 1980, it would be worth nearly $28,000 (£21,000) today. This is the kind of hindsight that is bad for one’s blood pressure: it merely confirms Warren Buffett’s famous observation, quoting his mentor Ben Graham, that in the short run the stock market may be a betting machine, but in the long run it’s a weighing machine.
Either way, Apple’s market capitalisation now weighs in at $2.2tn. What was once a plucky little outfit battling against the mighty Microsoft has somehow morphed into a corporate behemoth. And the interesting thing is that, until recently, nobody outside of stock exchanges seemed to have noticed the implications of this metamorphosis. When the House judiciary antitrust subcommittee summoned four tech bosses to a critical hearing in Congress, for example, Apple’s Tim Cook got off lightest. Subcommittee members reserved most of their ire for Amazon, Facebook and Google.
And yet Apple is an exceedingly powerful monopolist in two areas: its App Store, and iOS, the operating system for iPhones and iPads. And although the two are intimately related, it’s the company’s operation of the store that is likely to give it the most trouble, 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 (which came to be called apps – for “applications”). In principle, anyone with the requisite skills and knowledge could 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 safe (and legal) ran on it, the only way for developers to get their apps to users was by submitting them for inspection by Apple – who decided whether they were fit to be offered to users. In the event that an app passed the test, Apple took a 30% commission on the price of any non-free apps.
At the beginning, this seemed like a win-win for everybody. iPhone users got apps that had been vetted; developers got 70% of the price without having to get involved with credit cards and the paraphernalia of e-commerce; Apple maintained quality control of the app 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 it for the costs of running the store.
The store took off like a rocket and now has more than 4m apps available. And customers of the store – iPhone and iPad users – were the ones most worth reaching because they seem generally to be wealthier and less price-sensitive than Android users. So although developers might have chafed at the 30% levy they felt that the benefits of submitting to Apple’s terms outweighed the costs.
But now the store has morphed into a giant monopoly. If you want to get your app onto an iDevice, you still have to abide by the rules – and pay that 30% commission. Worse still, for big companies (especially gaming companies), is that if your app involves “in-app purchases” (and many games do) those purchases are also subject to the Apple “tax”.
These developers regard this (rightly, in my view) as unjustified monopolistic rent-seeking. And last month one, Epic – the owner of Fortnite – sued Apple after it had been booted off the App Store because Epic had updated the game to include an alternative payment system.
This landmark suit is currently wending its way through the courts. Apple will probably win, on the grounds that it’s entitled to set any rules it likes on its own property. But if – as seems likely – the legislative mood towards tech monopolies becomes darker, the company may have to become more flexible on commissions.
Related: ‘This isn’t the 1990s’: Apple under pressure from app developers
On the other hand, users (as distinct from developers) are about to see an upside of Apple’s monopoly power. The next update of its mobile operating system, iOS14, includes a change that should have a dire impact on many online advertisers. The industry assigns a unique code to each device called an IDFA. Knowing your IDFA can help advertisers tell whether their ads are effective, particularly when they’ve shown you the same ad in multiple places. Facebook uses the IDFA as part of Audience Network, its ad network for developers.
But with iOS14, Apple will require developers to show you a warning that they are collecting your IDFA – and you’ll have to opt in to sharing it. So iPad and iPhone users can expect an initial blizzard of requests for permission to share your device’s IDFA – requests for which there is a simple, two-letter, answer: no.
This prospect had many stalwarts of the business memorably described by George Orwell as “the rattling of a stick in a swill bucket” changing their underpants twice a day. So loud were their screams of pain that Apple announced on Thursday that it would delay the switch to 2021 to give the poor dears time to adjust. The corporate world will see this as a pragmatic decision, given current attitudes to tech monopolists. The rest of us see it as a wasted (or at least deferred) opportunity to do some good.
What I’ve been reading
Beyond Silicon ValleyThere’s an interesting GQ interview with Jaron Lanier, the pioneer of virtual reality, among other things.
Lisa Borst’s long and thoughtful review in the Nation of Joanne McNeil’s new book, Lurking: How a Person Became a User, ponders how the internet got so bad.
Book him, refThe Register has a sharp report on the latest Facebook fiasco and Mark Zuckerberg’s unconvincing apologies.