App, app and away: if Steve Jobs could see Apple now
App Store's booming growth defies founder’s fears, and is now a key piece of the Apple jigsaw
When Steve Jobs unveiled the first iPhone to a San Francisco audience of software developers and tech fanatics in 2007, the tech world was irreversibly changed.
The first true smartphone, followed by its successors and rivals, would go on to shape the world around it, even if few people could predict it at the time.
But for all of the Apple founder’s characteristic showmanship, the original iPhone had one major oversight: it was impossible to install new software on it.
Consumers who paid hundreds of dollars for the original iPhone were stuck with the handful of pre-installed apps, such as the calendar, e-mail service and web browser.
Jobs is hailed as a visionary, but when the iPhone was first released it was unclear whether even he had reckoned with its full potential. He spent much of his presentation 11 years ago raving about the iPhone’s ability to make phone calls, apparently unaware of just how little time people would spend using the device to talk.Developers who wanted to create software for the iPhone were offered an unappetising solution: building modified versions of websites that looked like apps, but offered little of the functionality. Many owners took to hacking their iPhones to be able to install their own apps.
According to his biographer Walter Isaacson, Jobs had resisted pressure from others within Apple to allow outside apps on the iPhone, fearing they would “pollute its integrity”. But just months after he first unveiled the iPhone, Jobs changed his mind.
On July 10 2008, Apple launched the App Store, a portal for developers and companies to release their own iPhone apps. Five hundred were available on the first day, including MySpace and AOL Messenger, and 10 million were downloaded over the first weekend.Jobs, brushing over his initial reticence, called the launch “a grand slam”.
A decade later, the number of apps in the App Store has swelled to more than two million. The ability to combine core technical features of the iPhone with software and the Internet created businesses that would previously have been impossible.
Uber, now the world’s most valuable technology start-up, is essentially a combination of the Internet and a GPS receiver. Instagram combined the smartphone camera with social media to create what is now a crucial part of the Facebook empire. And the business has become one of Apple’s crown jewels. In 2017, consumers spent $38-billion on Apple apps, according to industry estimates. That was up 35% year on year, and up almost fourfold from 2013.
For the majority of that spending, Apple takes a 30% cut, adding up to around $11-billion, making the App Store alone a business roughly on a par with Netflix.
Almost all of that is profit: compare the cost of producing, shipping and selling an iPhone with taking a slice of an app download. Given its growth rate and fat profits, it is easy to understand why the business has become such a key focus for Tim Cook, who succeeded Jobs as Apple’s chief executive seven years ago.As sales of the iPhone have slowed down in tandem with the global smartphone market saturating, Cook has pumped resources into the App Store. At the same time, the service has become a significant selling point for the iPhone itself, helping to maintain hardware sales.
Ben Wood, of tech analysts CCS Insight, says the App Store creates a “flywheel” effect for Apple. As the iPhone grew in popularity, the App Store became a more lucrative destination for developers, which in turn made the iPhone more attractive over Android, Google’s rival operating system.
“It’s little surprise that developers turn to [Apple’s] iOS first,” Wood says. “The general rule of thumb is the best apps arrive on Apple first [before Android] and developers tend to give their iOS apps the most love. It drives that loyalty from customers.”In fact, there are now signs that Cook has been willing to prioritise revenues from the App Store at the expense of Apple’s core business of selling iPhones and iPads.
At the company’s annual software conference last month, Apple announced that the latest version of its operating system would be made available for iPhones that date back as far as 2013, a break with tradition that significantly extends the shelf life of older devices. The move potentially sacrificed sales of new iPhones, but inflated the potential App Store audience. At a time when consumers are holding on to their old phones for longer, it looked like a shrewd move.
The App Store has not been without its critics, however. Some have accused it of censorship (the company maintains strict rules around what apps are and are not allowed, recently banning software that mined cryptocurrency, and has banned certain apps in China at the behest of the government) while others bristle at the hefty cut that Apple takes.
Some tried to bypass the App Store completely by building web-based apps, while others called for Apple to reduce its cut, something that the company eventually relented on two years ago when it halved the commission it took on apps that charged for a recurring subscription.
Many developers have still done remarkably well. Apple said this year that $100-billion had been paid to developers since the App Store was launched a decade ago.One app alone, the smartphone game Clash of Clans, made by the Swedish giant Supercell, has made $4-billion.
“Apple are taking a minority amount of the revenue; for that they are providing one of the biggest digital marketplaces,” Wood says.
Last month, Cook unveiled an overhaul of the iPhone software that would allow users to place time limits on how long they spend on certain apps, amid growing concerns they are becoming too compelling. When you have to find a way to get people to spend less time using your product, you must be doing something right.
– © The Sunday Telegraph