Imagining a world with third party app stores on iOS: 16 implications

What changes in a world with third party app stores on iOS?

We’re seeing multiple news reports that Apple is planning for a future with third-party app stores for iPhone and iPad apps. We predicted this back in early July because the EU’s Digital Markets Act essentially requires it. It would be the biggest change on iOS since Apple launched the original App Store, and it would put at risk Apple revenue of $64 billion in 2021 alone, and perhaps $300 billion over the past 8 years.

But what does it change in the mobile marketing ecosystem?

Pretty much everything.

Potentially, a multi-app-store world on iOS changes almost everything about mobile marketing. Here’s a short list of things to be thinking about as we prepare for a world in which the only way to get an app onto an iPhone is NOT the official Apple-owned App Store.

1. Will there be third-party app stores in the EU only, or in the whole world?

The impetus for the expansion to third-party app stores is clearly from the European Union’s new Digital Markets Act, so if and when Apple allows third-party app stores to exist, you have to believe that they will launch first in the EU.

But …

When the United States sees third-party app stores for iOS apps in Europe, it’s hard to imagine government officials — and people — not wanting the same privilege. And I think the same goes for basically every country in the world.

So, Apple may just bow to the inevitable and make a new third-party app store policy globally, or may force countries to fight for the right one by one, or region by region. Either way, it’s likely to happen everywhere eventually.

2. Will Apple still charge fees for apps installed via third-party app stores?

The Netherlands has already legally required Apple to allow apps to run their own payment processing systems. (This is no small task, by the way, requiring a full e-commerce infrastructure with the ability to handle currencies, refunds, security for credit card numbers, taxes, coupons, and more.)

But while app developers probably thought that doing so would enable them to avoid Apple’s 30% cut on most digital sales in their apps, Apple has so far had the last laugh.

Why?

Apple still requires a 27% fee on transactions that apps processed themselves:

“Consistent with the interim relief ruling of the Rotterdam district court, dating apps that are granted an entitlement to link out or use a third-party in-app payment provider will pay Apple a commission on transactions. Apple will reduce its commission by 3% on the price paid by the user, net of value-added taxes.” 

Oh, and you have to report all sales to Apple weekly within 15 calendar days following the end of Apple’s fiscal week, and remit Apple’s commission within 45 days.

Plus, “in the future, if Apple develops technical solutions to facilitate reporting, developers will be required to adopt such technologies.” And, Apple has audit rights on your app. Fail to pay, and Apple can remove your app from the App Store.

So it’s a valid question: would Apple still charge fees even if the actual download and install process is now being handled by a third-party app store?

3. Will Apple drop the fees on the official App Store to compete?

Imagine this scenario:

1. Apple enables third-party app stores
2. Everyone goes nuts building app stores, shouting FREEDOM and anticipating huge paydays
3. Apple drops commission fees on most digital sales to 15%
4. Developers vote with their feet and stick with easy, pocketing the extra 15%

Competition creates competitiveness. 

And if Apple is forced to compete in third-party app stores, it’s not hard to imagine that they might just shave their fees a bit to retain revenue, block the path to break-even by third-party app stores, and — importantly — keep all the user intelligence on purchase behavior.

(Which is essential, don’t forget, to the competitive advantage its growing Apple Search Ads ad network depends on, and which it could expand to multiple other verticals, including podcast ads, where Apple owns significant advantages.)

4. Why have app stores at all?

We’re very used to app stores today, thanks to Apple’s iPhone and Google’s Android ecosystem designs. 

But we did without app stores for 3 to 4 decades in the packaged software world, where any store could sell any software on disk, CD, or DVD. And we did without app stores for easily 2 decades in the internet age, when any website or FTP server could offer software for downloading.

Today, for example, I can download an app from a software publisher’s website to my Mac, install it while clicking yes on a bunch of scary-ish warning screens from Apple, and use it in 5 minutes.

Theoretically, this would be completely possible on an iPhone as well: it’s a computer, it has storage, it can download files, it can install programs. App stores are conveniences, not necessities.

5. App Store-as-a-Service: will Apple completely reinvent itself and try something truly innovative?

OK, this is wild, so bear with me.

What if Apple reframed all of the features that make up the App Store experience as services, and made them available via API? In other words, third-party app stores could compete by saying apps are “Apple reviewed,” “Apple Approved,” “compatible with Apple Pay,” and so on. Even app ratings and reviews could be served from the App Store, and aggregated from all app stores, resulting in a better shopping experience for users.

Apple could make official app store reviews available at the cost of a few percent of fees, make payment processing available at another level of cost, and so on. Apple would still see and review all the apps installed by app stores that used these services, but each app store would have the ability to offer only what it wished.

What this would enable is a multiplicity of app store experiences and price points, but all with the same level of trustworthiness.

Not all third-party app stores would choose to participate in this option, but many might.

Now imagine if Apple went a step further and offered a no-code way to make app stores like this that it would then conveniently host on the App Store itself. Fred next door could offer an app store. So could your grandad. Gertrude’s Apps for People Who Knit could live next to Franklin’s Apps for Hiking Enthusiasts, not too far away from curated selections by the internet’s biggest influencers and Hollywood’s top celebrities.

Unlikely, I admit, but this would be a truly Art of War response to the current third-party app store legislation. 

6. Will Apple be forced to host third-party app stores?

Allowing third-party app stores is one thing. Making them available and easy to access is quite another.

If Apple was forced to offer third-party app stores on its own App Store, they’d be easy to add to your iOS experience and easy to test, dabble with, and maybe get hooked on. That would be bad, most likely, from Apple’s point of view.

So third-party app stores are most likely going to need to be sideloaded, either via some new download process or perhaps by connecting to a laptop, going through a process, and clicking through a series of scary-looking dialog boxes.

More friction equals less adoption.

7. App Tracking Transparency enforcement implications: will Apple lose its power to enforce privacy regulations?

ATT is how Apple …

1. Wrested more control of app discovery from Facebook and other players while 
2. Playing a massive global privacy card, and 
3. Enhancing customer trust ahead of a not-too-distant release of a augmented reality/metaverse project that will put cameras on our eyes

App Tracking Transparency is currently enforced via App Store review processes, and violations are punishable by either refusal to release new app updates, or potentially the nuclear option: complete removal from the App Store, the only place Apple customers can get apps at all.

With multiple app stores, Apple either …

1. Loses control of the iPhone privacy story completely, or
2. Weaponizes privacy in a battle to retain customers’ app install/download/payments business, or
3. Moves enforcement of tracking to another software layer, perhaps in the iOS networking code

Each option has positives and negatives from Apple’s perspective, but option 3 is most likely.

A related question: how will access to device identifiers change? Apple controls how apps get to see the IDFAs and other device identifiers now; will this continue in a post single App Store future?

8. What happens to SKAdNetwork, Apple’s mobile attribution framework?

SKAdNetwork is a software framework in iOS that enables privacy-safe attribution of marketing efforts to results. In other words, it helps marketers figure out what ads and campaigns worked, and which didn’t, while not revealing personal information of people who see ads and install apps.

(Many marketers might argue it doesn’t do a very good job, but that’s a story for another day. If this is you, by the way, you need Singular’s SKAN Advanced Analytics, which gets you more and better data for calculating ROAS, measuring cohorts, and optimizing campaigns.)

But SKAN operates in a complex relationship between apps and iOS and the App Store (plus advertisers, ad networks, and measurement companies like Singular). What happens when there are multiple app stores? Will SKAN be implemented by other app stores? Would app developers build in calls to SKAN in apps on third-party app stores? Why would they?

9. What privileges and restrictions will third-party app stores have?

Will third-party app stores on iOS have the same privileges and capabilities as the original App Store? Or, as seems more likely, will they have limited control over how they act? 

Today, the App Store offers access to millions of apps. Find one, tap to install, and you’ve got it. But the App Store is also involved in ongoing payments that requires integration with individual apps for in-app payments, subscriptions, and more. And the App Store is also instrumental in keeping apps updated regularly.

How will third-party app stores integrate with apps for ongoing monetization capabilities? And will they notify people when apps have updates to install, or will Apple allow background access to update apps automatically when there are updates, like the App Store does now?

10. What happens to the app review process?

Currently, Apple reviews each app that makes it on to the Apple App Store. There’s a human review, but there’s also an automated code-level review. The process isn’t perfect, and mistakes do happen, but the end result has proved to be pretty good: most apps are trustworthy, most apps don’t take advantage of users, and most bad actors are caught fairly quickly.

How will third-party app stores police what goes on their virtual shelves?

Probably in similar ways that today’s third-party Android app stores do, which means varying levels of scrutiny, technical capability, and due diligence. And that leads to what Apple will no doubt play up fairly loud: extra risk for users.

There will be malware. We’ve seen it on the Android side.

11. What privileges will apps downloaded from third-party app stores require?

Apple carefully controls how much data apps can access. Apple requires apps to ask permission for access to photos, to location data, to the camera, to the microphone. All of that should still work, because it’s an interplay between apps and the iOS operating system, which is secure by design.

But what if apps on third-party app stores say things like: allow IDFA sharing if you want to play the game? Or, give access to location in order to get the coupon? Or, let me access the clipboard to see what’s just been copied? 

Or, worse, let me see keystrokes?

Or, let me continue to operate with all my permissions in the background while you’re in others apps?

Apple polices manipulative quid-pro-quos and other security nightmares like that via App Store submission guidelines and app reviews, but some third-party app stores are incredibly unlikely to do so. The result is very likely to be not only a reduction in privacy for iPhone and iPad users, but also significant breaches and attacks on people’s financial accounts or other areas of their lives.

Here’s the reality: we are all stupid about privacy. Some of us generally and often, some of us very occasionally. But we want what we want when we want it, and if we think this one app will provide it right now, we sometimes make foolish decisions.

12. Will every big publisher become its own app store … will Netflix, for instance, become an app store for its games?

Depending on how this all plays out and what is possible at what price, the temptation will be there for big publishers like Rovio or EA or Activision or Disney or Ubisoft or Gameloft to simply be their own app store and distribute their own games on their own platform.

Imagine that: set your own rules, manage your own fate, cross-promote however you wish, share resources between games — so web3 friendly — create a publisher-centric wallet for use in all apps and games from you as a publisher … the sky is the limit.

Also, will every big brand consider whether it should offer its own app store?

• The Nike app store
• The Coke app store
• The Cadillac app store

We know there’s going to be an Epic app store …

And you also know that the second it can, Facebook will create its own branded app store, as will Google. And they have truly massive platforms to promote their own stores.

Plus, don’t count out the big ad networks:

• Unity
• ironSource
• Liftoff
• AppLovin

These titans of adtech make their living promoting app install campaigns. Imagine what they could do with more data on actual installs and more insight into conversions and just more revenue period by owning their own app stores.

More on this in the coming weeks …

13. Will Stripe offer a mobile app payments layer to abstract all the complexity for apps and app stores?

Payments are hard. Doing refunds sucks. Managing multiple currencies is a PITA. Taking into account taxation rates and rules in 200 countries is not fun.

None of these things are in the core competency of mobile gaming companies, nor in the competency of many other mobile apps in virtually any verticals.

Stripe famously offers payment infrastructure for the internet, but basically it’s for the web. Would Stripe — or similar companies — come in and offer a mobile-centric payments-as-a-service for mobile apps that they can just plug into and use without thinking or worrying about it?

Probably!

14. Content implications: who will police porn, violence, racist material?

Right now the Apple App Store review process checks what kinds of content an app offers, and Apple will decline to host and provide apps that offer full-on porn or other kinds of content, including hard-core racist ideology and so on.

What happens in a third-party app store world? Can the Aryan Nation set up an app store for content they approve? Will we have porn-focused app stores? Gambling-focused app stores? App stores focusing on the worst kinds of violent behavior?

This could be a very nasty door to open …

15. So many publishing implications: where do you offer your app?

Similar to some of what we see now on the Android side, publishers in a multiple iOS app store world will have options. Will they choose to put their app on every app store? Will some of the app stores require or allow tweaked versions that — for example — don’t use SKAdNetwork?

From the app store side, will we start to see app store exclusives: pre-payments at a significant level to app publishers to offer a game or app exclusively on their store?

All of a sudden, publishing and marketing your app becomes much more of a decision and a process than it is right now.

16. So many marketing implications: how do you aggregate all your spend, total your installs, allocate your campaigns?

In a brave new multi-app-store world on iOS, what does marketing look like? 

App publishers and marketers would now have:

• Multiple places to check app download stats
• Multiple places to check sales/revenue
• Multiple locations to target app install campaigns to … the original Apple App Store, various third-party app stores, their own app store …
• Multiple different percentages of revenue they keep, depending on where an app was installed from
• New app pirating concerns if unscrupulous app stores allow anyone to upload a game or app, or even do it themselves
• Multiple means and technologies for tracking/measuring campaign depending on which app store they use

Understanding your campaigns, calculating ROAS for different campaigns leading to different app stores with different commission rates, and allocating spend for various app sources all become things that app marketers on iOS will now potentially have to think about.

In other words, it’s a whole new ball game for app marketing.

Summing up: the world is changing

We thought we saw a lot of change in the iOS world over the past few years, with ATT and SKAdNetwork. Turns out, we might have had a relatively relaxing period of limited change, with much more significant disruption yet to come.

The reality is that the most likely scenario for the immediate future, regardless of whether third-party app stores become available in 2023 or not, is that the official Apple App Store remains the big kahuna of app distribution.

It’s known.

It’s trusted.

It works.

Consumers have it.

Consumers use it.

People trust Apple.

The App Store has all the social proof: ratings and reviews.

It’s tightly integrated into the iOS experience.

Displacing that is going to be a tough task. But big brands, big games, and big publishers will definitely, if legally allowed, try. And the prize, as we’ve seen with the App Store, is hundreds of billions of dollars, plus massive amounts of mobile user purchase data.

That means billions will be invested, particularly by the big social, search, and adtech platforms. In other words, this space is about to get crazy interesting, crazy innovative, and crazy fluid.

Start your engines.

Buckle your seatbelts.