How recent legislation could break up monopolies and lead to better third-party app monetization

Acting as a trusted iPhone app developer is not as easy as it once was. Given the sheer number of listings, totaling roughly 8 million apps and games available in Google Play and the Apple App Store, gaining visibility among other factors is a serious challenge in 2022. san di which essentially have a monopoly, needs to account for the 15-30% of commission for in-app purchases combined with the cost to develop a minimum viable product. Producing an app can take anywhere from 2 to 9 months and cost anywhere from $40k to over $300k, depending on the complexity and functionality of the product.

Tech giants like Apple, Google, and Amazon have been heavily criticized for taking advantage of their monopolies to drive independent developers out of the market. This, combined with the “sherlock” effect where third-party developers release a new app then shortly thereafter Apple or Google will embed those features into their operation system or offer it as a stock app, is stifling competition and creating barriers to entry. Legislation introduced to Congress late in 2021 is aiming to break up the app store monopolies and allow smartphone users access to less expensive third-party. As TechCrunch puts it, both bills, S.2710 – Open App Markets Act and S.2992 – American Innovation and Choice Online Act, will require third-party app stores and alternative in-app payment mechanisms. 

Fortunately, as a top-tier Los Angeles-based app development firm with a presence in Seattle, New York and San Diego, we’ve digested the critical information regarding the new legislation that is poised to influence app developers and distilled it into an easy-to-follow blog. Let’s dig in.

Open App Markets Act 

The first of two bills introduced to address big tech app store monopolies is S.2710 titled Open App Markets Act. Essentially, this will force large app distributors with 50 million or more users to operate under the following new rules:

1. Prohibits owners of distribution platforms from requiring third-party apps to use their in-app payment systems. Essentially allowing third-party apps to utilize alternative payment channels and avoid high commission fees which eventually get passed to the consumer.
2. Prevents third-party developers from being penalized for selling their app at a lower price on an alternative platform or when using a different payment channel.
3. Disallows unreasonable preferencing of their own apps in the search rankings over third-party apps.

American Innovation and Choice Online Act 

S.2992, the second of two bills titled American Innovation and Choice Online Act has similar aims, but applies to a wider range of online retailers – not just app stores. If both or even one of the two legislations become law, developers will have much better chances at monetization and conversion of their product while guaranteeing the consumer a better price. The bill pertains to “large” online platforms such as Apple or Google and lays out four key rules:

1. Prohibits preventing or limiting a third-party apps capacity to access or interoperate with the operating system, hardware, or software. 
2. Disallows shadow listing and unreasonably preferring their apps’ search ranking above a competitor, third-party app.
3. Using non-public data from a third-party app business to advantage the app store operator’s own apps.

Security concerns – are they well founded?

Apple has strongly criticized the Open App Market App as raising serious privacy and security concerns for its users. Apple representatives have stated that allowing users to download apps outside the Apple App Store, which implements a strict vetting process to become listed, will risk malware and scams to its users. Despite these concerns, many developers and critics believe Apple’s high commission fee of 30% is the real reason driving their opposition to S.2710.

As TNW notes, third-party app stores will offer customers a trade off between choice, price, and security. Nothing in these bills will stop smartphone owners from only selecting their third-party apps from big distributors like Apple and Google if they prefer to work exclusively with their iOS owners’ app store. Ultimately, experts argue, this legislation will foster more competition within the third-party app space and facilitate more value to both the customer and developers.

Where do we stand with third-party app markets? 

As of February 2022, the Senate Judiciary Committee panel approved the Open App Market Act with bipartisan support. In order to fully pass in the senate and eventually become law, two key improvements need to be made to the bill. The first is setting clear measures that enforcement agencies can follow to prevent taking advantage of legal loopholes. Secondly, the bill needs to define how these new, open app distribution platforms will guarantee user safety and privacy.