Global App Spending Set For Another Record Year

Faced with antitrust allegations and the wrath of (some) app makers, Apple extended an olive branch to its developer community in November 2020 by introducing the App Store Small Business Program, which reduces the company’s contentious app store commission from 30 to 15 percent for developers earning less than $1 million a year. In what is arguably an even bigger concession to developers, Apple announced this week that it would allow app makers to inform users about payment methods outside of Apple's ecosystem, for example via email, which would enable them to circumvent the App Store commission.

Ever since the App Store was launched in 2008, Apple has taken a 30-percent cut on app sales, in-app purchases of digital content and subscriptions made via iOS apps (the latter dropping to 15 percent after the first year), which has lately drawn the attention of competition watch dogs, especially in cases where Apple competes with third-party app makers (e.g. Apple Music vs. Spotify).

The following chart explains why Apple is fighting so hard to protect its slice of the App Store pie. According to estimates from app analytics firm SensorTower, App Store revenue amounted to more than $40 billion in the first half of 2021. Assuming most of that total qualifies for Apple’s commission, that amounts to at least $10 billion in revenue in just six months, which even for Apple is no small change. An expert witness called in the company's court case against Fortnite maker Epic Games estimated that Apple earned $22 billion in App Store commissions last year at an astounding profit margin of almost 80 percent. Apple of course disputed these estimates, arguing that its true profit margins are considerably lower.