App Store: The Good, the Bad, and the Glitches

[00:00:00] Welcome to the Subscription League, a podcast by Purchasely. Listen to what's working in subscription apps. In each episode, we invite leaders of the app industry who are mastering the subscription model for mobile apps. To learn more about subscriptions, head to subscriptionleague.com. Let's get started.

[00:00:19] Hey, welcome to the show, everybody. Today, I have Jeff with me and a secret guest. I'm going to do his intro but only give his name at the end. And depending on which question you found his name, you'll know how much you know him or not. So welcome to the show, secret guest. How are you? I'm good. Thanks for having me. Awesome. So the first clue is that you're Danish. And the one part that Jeff knew about and I had no clue about actually is that you're a race car driver. You raced in the 24 hour of Le Mans and the American Le Mans series.

[00:00:49] And did pretty well. Do you want to tell us how good you did on those races? Yeah, so I got started quite late with race car driving. I didn't get my driver's license until I was 25 years old. I didn't sit in a race car until I was 27. But then I was on the grid at Le Mans at, what's that going to be? 32.

[00:01:06] So I started at the 24 hours of Le Mans in 2012. And I won the race in my category in 2014. And I finished on the podium a bunch of times in various classes. I've done the race in total 11 times, most recently this year. But we'll see if that keeps going. And you're also a book author. You wrote Rework, Remote. It does not have to be crazy at work. Any other books that you wrote or did I miss one?

[00:01:33] Rework is the big one. And even before that, we wrote a small one we self-published called Getting Real. There's four books in total. Yeah. Nice. It's impressive to see how many different things you've tried and did pretty well at. You created Ruby on Rails a few years back now. When was that actually? 2003 was when I got started on Rails. So over 20 years now. A few years ago.

[00:01:54] And so after that, you worked on 37 Signals Basecamp. And the last clue that I have for our listeners is you're, should I say the founder or creator? I'm not sure. You'll correct me of which term I should use. But I'll say you're the creator, founder of the Hey! email app that a lot of people have heard about over the last few years. So which title should I give you on that one? Well, I think either works. I mean, I'm a co-owner of the business that produced both Hey! and Basecamp 37 Signals.

[00:02:22] We released Hey! in 2020 after having worked on that for a couple of years following being quite fed up with Gmail, which is otherwise a lovely system. But one that was released all the way back when I started working on these kinds of systems. I think 2004 and then kind of didn't change perhaps all that much ever since. Still a great system, but there's room for fresh ideas after 20 years. Yes, yes, yes. So I'll turn to Jeff so he can tell us who's our guest. Let's see if you have the right answer.

[00:02:50] It's crazy to think that it's just one person behind all the achievements and pretty young one, not a 70 year old one. So it's the famous DHH, David and Meyer Hansen, that we have on the show today. And I'm very happy because we've been thinking about having you on the show for a long time. We didn't dare to ask in the first place. And it was surprisingly pretty easy to have you in. All it took was an email, right?

[00:03:12] Yeah, it took me an email. And I'm very happy. Besides everything that you have done, I'm very happy to have the opportunity to share with our listeners some of the great thoughts or maybe not great. They'll figure out. But very singular thoughts that you have on the different topics that we have for you today, which will be regarding not surprising for us, the app stores and the subscription space. Welcome, David. Thank you.

[00:03:36] So let's jump right in on the question after that random introduction. After all I listed, your kind of definition of busy guy, you keep all your initiatives alive. You still code, you manage 37 signals. What does your schedule look like? Do you know what? Most of the time it is lovingly empty. I really enjoy having an empty calendar. I try very hard not to fill it up with all sorts of obligations that I need to do, all sorts of recurring meetings or recurring tasks.

[00:04:05] Because the stuff I like to do the best, which is things like writing and programming and really moving our business forward, requires long stretches of uninterrupted time. And you can't have that if you jam pack your calendar full of standing meetings and one-on-ones and all the other stuff that seems to be a requirement in a modern way of working. Well, we've taken that requirement and we've thrown it out at 37 signals.

[00:04:29] So my calendar is quite often quite empty. Plenty of days start with essentially an empty space. Although that's a bit of a misnomer because people talk about like, oh, my calendar is empty. No, it's not empty. It's just full of the stuff that you're here to do. It's full of the work. It's full of the mega block to actually solve problems that matter. And that's just how I enjoy to work. This is one of the reasons why I work remotely. I work from home. I love closing my door. It is just me, my desk and a computer.

[00:04:59] And then I can just turn off all these distractions that rob the time of so many folks who will spend an entire week at work and then reach Friday afternoon thinking, actually, what did I get done? Was it anything important? Did I move the needle? And I think that's a source of enduring existential dread.

[00:05:18] Simply, when people are not able to deliver something, to ship something, to make a dent, make an impact on stuff that really matters, I think they actually end up being kind of sad about it. And I think so much of the modern malaise of, quote unquote, email jobs comes from that. This sense that we're busy all the time, but we're not doing anything that really matters. I want to get as far away from that stuff as possible.

[00:05:44] And speaking about coding and doing and achieving, how much coding represents in a daily job? 50%? Sometimes it's 100%. Like we just introduced a major new version of Ruby on Rails, version 8. I'd spent several weeks leading up to that, spending my time on basically nothing else, just getting the new release prepared, some of my own programming and some of my own contributions, reviewing other folks' contributions and getting that ready.

[00:06:10] And then there are other weeks where it's literally zero because I have other applications at 37 Signals that I tend to. And that's one of the ways I try to get things done is I treat them sequentially. I will invest a lot of time, fully dedicated into one topic and really get to the bottom of that, release something, and then I'll move on to something else. So this is why when you look at all the things I'm involved with, it's not like most of the time I'm involved with all of it at the same time. It's one at a time. And then there's plenty of time.

[00:06:40] 40 hours a week is enough if you don't squander those hours on useless meetings or you chop up your work week into these little work moments. But if you actually have those glorious long stretches of uninterrupted time, there's plenty of time. Yeah, interruptions for brain and OS are very bad. We know that. Speaking about diving pretty deep into one topic and making the most out of it. In the past months, you've been very active about fighting the App Store.

[00:07:09] There were Epic Games, Match Group, Spotify that fought hard against the App Store monopoly and its 30% commission. But you were one of the few individuals because you were not named as 37 signals but DHH and one of the few individuals who fought alongside these tech giants. Can you remind us what happened?

[00:07:31] And is it just about one concern or is it the global issues you were fighting against or if it's a global system that you were trying to fight? Sure. So a bit of context, when I got started developing applications, the Internet was essentially the main, if not only, distribution form that we use for these applications. This was back in 2004. And that glorious period, unfortunately, only lasted a couple of years before the iPhone was introduced in 2007. And I say that with a bit of a smirk.

[00:08:01] I've been a big fan of what's happened with mobile computers for a very long time. I stood in line for literally hours and hours to get one of the first iPhones. And several years after that, I would line up in front of the Apple Store to get the latest version of the iPhone. So it's not like I have some deep-seated animosity against the idea that we should have great, powerful pocket computers. In fact, I find that wonderful. I love computers.

[00:08:25] So to be able to shrink that down into a tiny little device that fits in your pocket, amazing in so many ways. But I think where things started going a little off track was once the app stores began having so much success that these companies that run these app stores realized just how enormous the opportunity would be if they simply erected a toll booth and collected all of the commerce that went through and took a cut.

[00:08:53] There is nothing more profitable than taking a slice of other people's business. I mean, the margin is literally damn near 100%. So when that started happening in the early 2010s, I thought, you know what? This isn't great, but it's not really affecting me personally. We have an application in Basecamp that we've had on the App Store, I think, since 2010 maybe even. We've had the initial version, which I thought for the longest time was, quote-unquote, safe.

[00:09:22] That we were making a companion app to an existing system and it was mainly targeted towards businesses. And we thought, you know what? It sucks what's going on. It sucks for all these apps that are being caught up in the toll booth dilemma and are being shaken down to have to pay 30%. I don't like it.

[00:09:41] And in fact, in 2000, I think it was 19 or maybe it was early 2020, I testified in front of a congressional working group in the U.S. for this topic. Again, I wasn't even involved directly in the fight with any of my own apps or anything else like that. I just went like, you know what? This isn't great.

[00:10:01] These app stores have become so powerful and so consequential to people's lives that the mobile computers people have in their pocket, for a lot of people, that's the most important computer that they have. Maybe it's even their only computer. So if we want society and the economy to recognize that and embrace that, it's not great that we just only have two choices. And they have colluded essentially on the terms of that they charge the same fees and essentially split the market in this way. It's just not good for our economy.

[00:10:31] It's not good for our society. We should do something about it. There is a long history in the United States of pursuing antitrust action when something else like that happens. It happens with the telephone companies. It happened with the oil companies. It happened with financial trusts. So when they had that hearing, I thought like, this is great. Like someone's starting to pay attention to it. Little did I know that just a few months later, it would actually become an existential fight for us at 37 Signals. When we released Hey.com, our new email service.

[00:11:00] Because we'd been working on that email service for a couple of years. And we'd been working on the pretense that this was going to be the same as Basecamp. Basecamp is our project management tool. It's been in the app store. By that time, it had been there almost a decade. We'd never really had any problems. We thought this was a safe space. That if you make a companion app to an existing service, you're fine. The whole 30% business doesn't apply to you. Well, we came to find out that maybe it's not so clear cut.

[00:11:27] So we launched Hey in the summer of 2020. And we got to enjoy the launch on completing like a two-year project. Millions of dollars invested in this. We launched on both the app store. We launched on the web. We launched on the Google Play store. So we were on all challenges all the time. And we got to enjoy that for literally like a day. Actually, that's not true. I think a weekend because the initial application to the app store was approved. So the Hey email app was in the app store.

[00:11:55] And then Monday morning, we wake up to essentially a rejection of our first update to the app. Apple said like, actually, we approved you, but we didn't mean it. We want 30% of your business. We want everyone who signs up with the Hey app to be able to buy it through our payment system. And therefore, we will get 30%. And first, I thought like, this is just a mistake. I mean, I've heard of so many mistakes in the app stores.

[00:12:21] I've heard of sort of random bureaucrats interpreting the rule one way or the other. And you just like kind of shrug it away and you resubmit and they approve it the second time. And you don't know why, but that's kind of just the lottery of the app store bureaucracy. Well, unfortunately, that turned out not to be the case. And Apple really dug in. And quite soon after the first rejection threatened us with not just not updating or allowing us to update the app again, but to kick us out of the app store.

[00:12:47] That we were going to get a short period of time to rectify this problem that we weren't willing to give them 30% of the business. Otherwise, it would kick us out. And was it for all your products or just for hay? Just for hay. Or at least, I mean, I'm assuming. But I suppose that would happen. Just the whole thing? Right. Actually, they probably would have. They probably would have terminated the account if they in their sort of jurisdiction had decided that we like Epic had somehow violated some rules and they would just cancel the whole account. I hadn't even thought about that until now. But yes, that was probably a risk factor as well.

[00:13:18] And in that moment, I just realized how awful. So we've been spending all this time. We invested all this money. We're a small company. We're about 60 people today. We're even smaller at that time. This is devastating. If you submit your app to the app stores and you're not approved, it could kill the whole business. Especially when it comes to something like, hey, it's an email client. Today, our app is in the app store after a long fight that we thankfully were able to beat Apple back a bit.

[00:13:45] But 85% of people who pay for hay use Apple products. So for us to just go like, oh, okay, I guess we just won't be on the iPhone. I guess we just won't be on the iPad. We would lose 85% of the business. No business is going to survive that. No business is going to be competitive on product categories like email unless you're present on the iPhone. So this was really high stakes. And I think that's why the battle perhaps took Apple a little by surprise.

[00:14:12] The vast majority of businesses where Apple shows up with a completely ludicrous demand, as they did in our case, what are they going to do? They're just going to fall. They're just going to accept the fact that Apple now takes 30% of the business, whether that means the business isn't even sustainable or not. That's just the terms. But we did things differently because we refused. So we first started just the back channel way, just saying like, yeah, I think you got this one wrong. Look, we've been in the App Store for 10 years with Basecamp.

[00:14:42] This is the same thing. People sign up on hay.com. Remember, people weren't even able to sign up in the hay app because we knew Apple kind of frowned upon that, to put it mildly, right? You can't sign up in the app and then pay on the web. So we just said like, this is a companion app. It doesn't do anything unless you already have a subscription because that was how Basecamp had been running for 10 years, a bunch of other applications, Netflix, even some of Apple's own apps for developers. There's just so much precedence here that you can have a companion app to an existing subscription.

[00:15:12] But of course, the problem with the rules made by Monopolis is that they can change them at any time. They're not rules in the sense that you would think about rule of law. These rules are, first of all, very vaguely written by design. So Apple at any point can just choose how they enforce those rules rather than actually change the rules themselves and completely change the playing field. And that's what they did with us. They would not yield on the idea that we had to use their payment system.

[00:15:41] We had to allow people to sign up through the app. And the argument they used was the most ludicrous of all, refuted by all these examples I just mentioned. The app didn't do anything. Which, by the way, was a term that Phil Schiller came up with in an interview. That was the first time we actually heard the full argument. That the reason, hey, it wasn't going to be allowed was that the app, if you downloaded it, quote unquote, didn't do anything. That meant you were faced with a login screen. Again, a million examples of this, right?

[00:16:09] You download your banking app, right? Can you do anything with a bank if you don't have an account with a bank? No, of course you can. You got to log into your account. The same thing with Basecamp. You can't do anything with Basecamp when you download that. You got to log into an existing account. But they changed the enforcement of the rules and came up with this idea that, like, the app has to do something. Which, by the way, was mentioned nowhere in the App Store guidelines. It's still mentioned nowhere in the App Store guidelines.

[00:16:36] That's just sort of esoteric arguments that they came up with on the fly. But anyway, we wrestled back and forth with them for about two weeks. But our good fortune was twofold. One, we had a loud and large platform to raise the issue on. I've had hundreds of thousands of people follow me on Twitter and all sorts of other channels. So we could make noise in a way I think Apple perhaps in part wasn't used to.

[00:17:00] And the other good fortune was that we launched, hey, I think one week before WWDC 2020. Therefore, you already had maximum attention from the media on Apple's relationship with developers. And here you had a case where Apple was just demonstrating in awful clarity just what kind of landlord they are.

[00:17:21] A completely abusive, arbitrary one who will show up to shake you down for 30% of your business, whether that is written in the rules or not. And that vast majority of companies, they have simply no choice but to roll over and pay. And we were perhaps one of the biggest cases. It's not. I'm curious. You're making a very clear argument as to, you know, the downside of the App Store. And as you said, they introduced the App Store quite a while back now.

[00:17:48] But at the time, it was a little bit revolutionary, even if it like locked you in. And so I'm curious, what upside do you see, if any, in the App Store for developers out there, large and small? So I actually think the core premise of Apple's even 30% cut is not outrageous in and of itself. There are certainly apps where I could see that making sense. You don't want to deal with international taxes and all these other things.

[00:18:15] If this was a voluntary program where you could choose, do you know what? Apple has a good product here. I would like to process my payments through Apple to say I don't have to build up my own payment processing system so that I can have them deal with all the taxes. Who would argue against that? The problem is that Apple does not have that kind of confidence in their system. They need to force people to use it, even when they're not interested, even when it has hugely negative effects for customers.

[00:18:42] When you're being forced to use Apple's payment system, your customers are no longer your customers. They're Apple's customers. You're just essentially wholesaling your product to Apple and then Apple sells that to their customers. So you're completely disintermediated from your customers. Do you know what? There are certainly situations where I think that's not a big deal. On a multi-platform app like Hey, where you also might want to use your email on your computer, where you might want to use it on a Windows machine, maybe you have an Android phone. It's a complete mess. It doesn't work at all.

[00:19:12] Like we can't actually help customers in that way. So I think the voluntary plan, if there was such a thing, that would work very well. Now, I also think that there was a symbiotic relationship that Apple had with a large class of developers who were making companion apps to existing services that worked very well. We will put our apps into the App Store, making the iPhone far more attractive than it would be otherwise. And in return, do you know what? You provide the infrastructure for that.

[00:19:42] So we will add all this massive value to the iPhone. I mean, the biggest argument for the iPhone is that it has all the apps, right? If Apple had stuck with Steve Jobs' original vision that there was not going to be an App Store, that there was just going to be first-party native apps and then the rest of it would be websites, and they were competing against Android, and Android had the Play Store, I mean, the iPhone would have been a complete minority bit player because no one would pick the iPhone versus an Android if Android had access to all these native apps.

[00:20:12] So in that argument lays the truth that developers bring an enormous value to these platforms. In fact, that's why these phones are so ever-present, because of all the services that are on them. Yeah, and that's why Windows Phone never took off, because they were never able to get the developers on the platform. Exactly, exactly. That is perhaps even a better argument. I'm glad you brought it up. I had a Windows Phone for a while. I actually liked some parts of the Windows Phone better. I think their launcher and everything was way ahead of its time.

[00:20:41] I think its design aesthetic was way ahead of its time. I thought it was a really good phone, and it completely fell flat, because they did not have third developer support. Yeah, and it's not Android that made Apple move to doing an App Store, but it's jailbreak at the time. And it was challenging the relationship they had with carriers, with business relationship, and exclusivity on carriers, because as you were not only unlocking your phone for all the carriers, but also opening up to a new set of apps.

[00:21:09] And Apple moved in a matter of maybe six months or something like that, because they announced six months after the initial release that they were going to release the App Store. Which is, I mean, a clear indication of the fact, first, Apple got it wrong in their original design, in their original conception of what the iPhone was going to be. They thought, you know what, as long as it's a phone, an internet communicator, and an iPod, that was Steve Jobs' famous introduction of it, that that was going to be enough. Clearly, it wasn't.

[00:21:36] This was a real computing platform, and a real computing platform requires third-party software to be a success. There's never been a successful computing platform that did not have a vast third-party ecosystem. That's why Windows got the prominence that it did. This was why the Mac, for a while, was in dire straits, because it did not have access to Office. It did not have access to some of those must-have apps.

[00:22:00] So I think that's one of the reasons why I'm so disappointed in Apple, because they seem so blind to the fact that it is developers that are bringing such a huge part of the value proposition. This is why people buy a $1,000 glass brick. They're not going to buy that brick if it was just an internet communicator, an iPod, and a phone.

[00:22:25] They buy it because it runs Instagram, because it runs WhatsApp, because it runs all these apps that people want to use, right? But Apple looks at this very aggrieved and go, do you know what? You all just exist because we allow you to exist. Therefore, you owe your entire existence, or at least 30% of it, to us in rent. And I think it's that argument that is just so uncompelling, actually disgusting. That's my real word.

[00:22:53] And have you seen some good evolution on the store recently, or anything that's going in the right direction, or is it getting worse in your mind? I think Apple is as intransient on this question as they've ever been. The EU is twisting their arm on a number of topics, and some of that has some bright spots in it, but the whole thing is a mess. I mean, Apple is committed to malicious compliance.

[00:23:19] It's to make the provisions of the EU rules as uncompelling as possible, as broken as possible. The whole third-party app thing with their core technology feed, it's built to not work, which is just such a... What they could argue with is that they can say they are providing a full ecosystem with all the tools. They're also providing resources in a lot of places in the world, with schools, with training programs.

[00:23:48] They also do the free distribution, for example. I just checked this today, like Facebook doesn't pay anything to Apple, but still they have a 350 meg application daily twice a week delivered to hundreds of million users, and they don't pay anything to Apple. So first of all, I think it's worth knowing, what does that cost Apple? It doesn't cost them diddly squat in the grand scheme of their business.

[00:24:13] Serving even large files like that over the internet is so cheap that it's approximating zero for a $3 trillion organization. And I know this in part because, I mean, we have CDNs. We know what it costs to distribute media files and so forth. It's just not a consequential cost for them. There are other consequential costs. I'm not going to deny that. Operating a vast app store bureaucracy with individual humans who sit and make terrible decisions about which apps should go in and out of the app store, that's expensive. But not that expensive.

[00:24:43] And also developers already pay for it. They're paying literally $100 per year for every single developer. Apple has something like 2.6 million registered developers. So that's a quarter of a billion dollars to operate this bureaucracy just off the base of those fees. Yeah, but that's also that bureaucracy that's provided. Because one thing that is great, I have my parents are pretty old. And whenever they use an app, the app store, etc., I'm sure they're not scammed. You know? They probably should be.

[00:25:11] I mean, there's plenty of cases of these apps or this app store bureaucracy not exactly being flawless. And I think even worse to the case to the app store is that people have the expectation it is flawless, right? Because Apple is managing all of it. So, for example, when your parents go on the internet, that's the Wild West, right? Like anyone can put it on their website. You can click on the wrong list. You can quite quickly get into some dark places if you follow that. Somehow, the internet is still the most important communication platform in the world.

[00:25:37] It is the most important computing platform, I would actually argue, in the world. And that is kind of working out all right. Now, I'm not saying that Apple does not have a right or an interest in ensuring that the iPhone is a reliable computing platform that's not full of malware and not full of junk and so forth. But they already have one of those platforms. It's called the Mac. Normal people have Macs. Normal people install software on their Macs.

[00:26:05] The Mac is not overrun by malware or scams or whatever. And this is the dilemma that Apple is in, that they literally have the A-B test for their bullshit. The A-B test is, does this work or not on the Mac? What happens on the Mac when we don't have these crazy rules? And in fact, on the Mac, they have exactly what I was talking about at the beginning. They have a voluntary program where developers can opt in to be in the Mac App Store. And then if they do, they pay the 30%.

[00:26:34] And quite a few developers do, but many of them don't. Adobe is not in there. Many of the other major software developers are in there because for them, it's actually a bad deal. And for them, it's not necessary. I think if your parents were into, let's say, Photoshop or whatever. They don't. They're not. But let's just imagine that someone is, do you know what? I want to have a Mac. I like Apple. And then I also want to use Photoshop. I want to use Premiere, whatever. Is this somehow making their equipment more inferior that they have to go to adobe.com to download those things?

[00:27:03] Of course it's not. Because this is how we built the entire computing industry. This is how literally every computer that has gained any success over the past 40 years was deemed to be. Yeah, which works pretty well, as you were saying today for large brands like Adobe, etc. But we are old enough to remember what it was before the iPhone. And for indie developers, I was an indie developer back in that day. I remember like monetizing your work was tough. I mean, tough because you had to provide a payment infrastructure.

[00:27:32] And that's one thing that Apple brought with the App Store, with all in platform that made a lot of indie people. Exactly. You're describing the voluntary argument, right? Hey, before the App Store, this was tough. I didn't want to do these things. I don't want to be a payment process. I don't want to do all these things. No one anywhere is telling Apple that they can't do that. That they can't offer developers a compelling package to distribute their software and handle payments for them.

[00:28:00] The problem is that Apple wants to ram that out on everyone's throat, whether they're interested in that solution or not. So I think they can have their keg and eat it too, if they were willing to look at this as a little bit more of a two-way street. That all third-party app developers don't just owe their entire existence to Apple and their iPhone. That it's actually possible to build applications and customer bases outside of the Apple ecosystem. And then distribute software to the iPhone in a way that's safe.

[00:28:28] In a way that Apple has already proven to work very well with the Macintosh over the past 40 plus years. And for them to spin us a tale of the world falling apart if they can't force every developer to go through their payment processing is simply ahistorical. Not only is it ahistorical, it's split brain to the max.

[00:28:49] What are all the lovely Apple engineers who work on the Mac supposed to think about this ludicrous argument that if the iPhone worked a little more like the Mac, then everything would fall apart? It just doesn't add up. Except on the bottom line. It really adds up on the bottom line. Apple makes some $20 billion off this service toll booth. The easiest money they make in any part of their business. It's actually really hard to make a great iPhone.

[00:29:16] It's actually really hard to make a great operating system. It's hard to make a really good and compelling suite of applications. It's very easy to take 30% of someone else's business. That part, that's not the hard issue. So David, let's give you a promotion. I hereby name you chief of the App Store. You already told us probably what your first action would be to make the 30% optional and you have to sign.

[00:29:39] Are there any other changes that you'd like to see and that you would enable in your first 100 days to reflect the American politics similarity?

[00:30:17] We could get more developers. Even more of them would think that this is not worth their while to set up their own payment. Maybe 10%. Maybe that's the sweet spot, right? At least we'd start having some, I think, experimentation in that realm. And also they would just stop poisoning the relationship with all the developers who don't want those Apple services. And then for the rest of it, the App Store bureaucracy, I think, is broken.

[00:30:39] I don't know if there's a lot of folks who develop for the App Store in any period of time who have not had a nonsensical response from some App Store bureaucrat. That just doesn't make any sense. As we started talking about, like, it's been a common pattern that you get a rejection and you just go like, well, I got a dud. I got a bozo. Let me try to draw again. I will submit the new update with some minor changes and it'll probably go through because the guidelines are so vague.

[00:31:06] So I think Apple should double down on the most compelling part of their jurisdiction for the App Store, which is safety. The apps that go into the App Store should not be able to steal your data. They should not be able to steal your money. They should not be able to do anything that is a security risk. We have a great parallel for this. This is what the browsers do. The Internet is full of gangsters. It's full of people who want to take your money, steal your data. And by and large, they can't. Why?

[00:31:36] Because the browsers are designed for a hostile environment. This is also how the Mac works. There's a reason why the Mac is not flooded with viruses. That the first thing you do when you buy a new MacBook is not scramble to figure out how you install McAfee or something else like that. Because the core technology offering is simply well protected. So if you focus on that part of the equation, then you have to focus less on the taste making part of the equation.

[00:32:04] And this is where I think Apple is still kind of split-brained about what they wanted to do. I remember an early interview with Steve Jobs where he talked about the App Store being this curated experience, right? Like, we're just going to offer, like, the great stuff that everyone wants. That's not what it is today. There's three million plus apps. I don't know. There's dozens of fart apps. There's dozens of... Actually, let's not even take the fart apps. Let's just take the games for kids. Oh, they don't accept them anymore anyway. They also don't accept them. Which I think is also nonsense, actually. Do you know what?

[00:32:32] If the people want fart apps, let them fart. Where I actually get really incensed about this is mobile games for kids. Anyone who's downloaded any of those mobile games... And I have three boys, so I've seen it all. It's way worse than even the worst sludge I can find on the internet. It's way more exploitive. It's way more just full of nasty dark patterns. It's way more full of just ad junk. This is what exists in the App Store today. So if you're going to hold this moral standard that you just have the best of the best.

[00:33:01] This is basically the Hermes of app stores. We just have the finest leathers and the finest qualities. You have to contend with the fact that you have an app store full of shit. Now, there's also a bunch of good stuff. Of course there is. But out of three million apps, there's just tons and tons of crap. And Apple has decided they want the crap. They want... In part, they want those mobile games because I think they're highly profitable.

[00:33:26] I saw some reading saying that something like 80% of the app store revenues comes from these mobile games. So clearly this is a huge part of Apple's kind of monetization of the app store. And it's nasty, right? So you've already accepted this. You've undermined your own argument a thousand different ways. So you don't have a lot of credibility when you go out and talk about this highly curated experience.

[00:33:50] How do you solve the issue with curation, level of quality, and arbitrary decision around what is the level of quality? Because if you're going to go for a high level of quality, then you are going to reject app based on subjective standards too. Which you can make the argument that's already what they do. But you're going to stay with the same issue. I'll make the argument, no, they don't. There are not 3 million plus high quality apps in the app store.

[00:34:19] That is simply a mathematical impossibility. Because there's not 3 million apps that are good in the world. Which one do you decide is high quality enough to get in? Exactly. Exactly. And not piss off developers because you rejected them. That's exactly it. And your rejections are going to be subjective. They're going to be random. They're going to be infuriating for any developers trying to go through that gauntlet. When you've equipped a bureaucracy with some very vague rules that are based on things like taste. What's good?

[00:34:49] What's bad? It's fart apps. Is that bad? But these exploitive games targeted to minors, they're good. You know what? I'd take the fart app over most of the mobile games that I've seen my kids get exposed to. So I think they've set themselves a mission they can never accomplish. They can never achieve. You could have achieved that purity of quality if you said, you know what? The app store is going to be 500 apps. A thousand apps. I'd give Apple that credit. I think they could find a thousand good apps.

[00:35:18] It is utterly incompatible with the idea that this is going to be a general computing platform that can span 3 million apps. It's never, ever going to happen. And until you resolve that fundamental conflict, you're never going to get something that adds up, that is congruent. About the curation, there's a huge difference between Apple and Google is that, and I don't know how it works on the Danish store. Maybe you're still in the Danish store and see the apps, but they have local editorial teams

[00:35:45] that actually curate local apps and big apps also and tell stories, tell developer stories. So does the Play Store. No, no. The Play Store, they don't have like local teams that you can reach out and showing local apps and showcasing like the editors. Maybe they do in the US and you have the impression because you live in the US. But if you live in Europe, if you go to the German App Store and you go to the German Google Play Store, you won't have like German apps popping off. You won't have, because they don't have any localized editorial team. So this is how they solve the issue. Okay.

[00:36:15] I think this is even a better argument to the fundamental point I'm trying to make. If Apple went like, you know what? We think when we promote apps that we have a fair and legitimate interest in promoting apps that kind of work with our stuff, right? So we would make it part of the deal. If you sign up for our payment processing, we're going to give you access to this editorial promotion. I wouldn't have a problem with that. I'm not asking Apple to direct any marketing attention whatsoever towards neither Basecamp nor Hay. And I don't think other people are either.

[00:36:43] I don't think anyone would get offended by the fact that Apple's editorial team would favor their own interests, right? That's not the problem. The problem is that Apple is saying like, it's not just we're not going to feature you. It's that you don't get the right to exist. It does. You don't have access to the iPhone. Whether the customer who paid $1,000 for that computer in their pocket want that access or not, right?

[00:37:08] This is a curious, spurious point that Apple is actually working against both their own customers and their own developers at the same time on a bunch of these decisions. When Apple was threatening to kick us out of App Store with Hay, we had all these customers who would sign up, which is like, no, Apple, please don't. I'm using Hay. I want to keep my iPhone and I want to keep using Hay. Aren't you supposed to do what's best for users? Here you have a completely consensual contractual agreement between a user and Hay.

[00:37:36] They want to use their $1,000 computer. And Apple says, no, you can't do that unless you pay your 30%. It's just a nasty setup. And I think the problem is the incentives are to be nasty, right? The way you juice the growth rates for the App Store, for the service part of the business, which by the way, has been growing faster than any other part of Apple's business, right? The service money is the easiest money Apple makes. That is evidenced by the highest margins that they make on that. It has had the highest growth factor.

[00:38:06] It is so tempting to juice that with a few billion dollars extra by just tightening the thumb screws on a few more apps, right? Hey, do you know what? And this was the sensation I got. What changed? We'd been in the App Store with Basecamp, for example, for 10 years. No one showed up and said like, hey, suddenly you got to pay. And then we submit an app that is based on the same principles of accessing an external service. It's a companion app, da, da, da, da. And suddenly the thumb screws have been tightened because Apple wanted more growth.

[00:38:33] And this is the insidiousness of those incentives that when you own a toll booth, it is ever so tempting to just say like, you should go through the toll booth too. Yeah, yeah. You guys over there as well. And it is fundamentally at odds and adversarial to a working relationship with developers. And I think it's also harmful to consumers. And of course, that's the point that the EU has taken as well, that they're not just doing this to save some developers.

[00:39:00] They're doing this to say, when you're a citizen of the EU and you buy a product like a thousand dollar phone, you should have the right to install software on that phone as you see fit. And Apple's denying that right through their monopoly. And this is why this enforcement is coming in. Well, you're making a perfect transition to my next question. EU has forced Apple, Google, and I think in the US it's also changing with Google to let different app stores, payment processors, well, do their job.

[00:39:25] Aren't you scared to have a multiplication of stores available to users? And there's also some companies that were saying they were working on building these stores. How do you feel about what's going to happen? Even if you were mentioning Apple, maybe try to slow it down using your own words. How do you feel about that? And how it's going to be evolving in some ways? And won't we like move the problem to another space? Because if like, for example, Epic releases an app store and there's a lot of people coming

[00:39:55] to also raise the prices at some point and end up being at 20, 25 percent? So I think the first thing to accept is when you have competition, prices usually go down, not up. So when you have multiple app stores that are competing against each other, you have a tendency for those app stores to want to improve. That's true. But for Uber, for example, it started with 15 percent cutoff and now they take 20 and 25 percent on the drivers, you know? Yes, because there's now monopoly formation. Most of the Uber competition has gone out of business.

[00:40:24] We have a good example, a good parallel to this. Software stores, especially gaming stores on PC, are actually quite plentiful. There's one for Windows. There's one for Xbox. Epic has one. Valve has one. There's actually a bunch of app stores and they're competing against each other and it's not terrible effects. First of all, a lot of the apps are available in some stores. Sometimes there's some exclusive, but the competition by and large is beneficial. Now, will it solve all problems?

[00:40:51] No, especially not as long as Apple is hell-bent on malicious compliance that's going to make the experience as miserable and nonsensical and scary as possible, which brings us back to these incentives. Apple is heavily incentivized for all alternative app stores to fail. So they're doing everything in their power within the law as they read it to make those failures happen. Right now. Do you know what? Yeah, that's going to be an uphill struggle.

[00:41:17] And I also do think, I mean, I'm not just universally happy about what's going on with the DMA. I think there's a lot of attempts to micromanage the product decisions that go into these stores that are bound to fail. Because as the app store bureaucrats fail, so does the EU bureaucrats. And I don't want EU bureaucrats to design my software experience. That does not sound like a good way out. I would have hoped that they would have focused on the economic terms. These were the remedies that were used against monopolies elsewhere.

[00:41:47] These were things like common carrier, net neutrality, these kinds of ideas that say essentially, do you know what? The iPhone is an important computing platform and you have to ensure that app developers can distribute their apps directly. I actually think the app store way is a bit of a, to me, like, I don't know if it's a blind alley. I think they should exist as alternatives. But I also just think that app developers should have the right to distribute software directly to their customers through other means like the internet.

[00:42:14] Like, we've been doing it for literally 25 plus years. So there are other ways of doing it. I am not at all declaring success that the DMA is going to provide the milk and honey industries and we're all going to be happy. Apple is going to fight very hard to make that still a miserable experience. And I would actually wager better odds that they're going to succeed than not. That Apple is going to outsmart EU bureaucrats on how awful they can comply with the regulations that's written. Okay.

[00:42:41] It seems that the app store is not the best proxy to, or actually how it's operated today, the best proxy to download apps. I had another question about benefits of having this intermediary. For example, if I had to ask for a refund from, I don't know, kids spend thousands of euros on Epic games and Apple gave back that money to the parents after they claimed for a refund. I doubt that all the editors would be doing the same.

[00:43:06] There's also that ATT block that provides kind of a privacy to the users from where it's coming on and where the downloads come from. And also all the privacy settings that were added by the EU, for example, on the GDPR that was already implemented on the app store for accessing the contacts, accessing the photos, the geolocation, et cetera, that they forced developers to implement years before the EU came and even more before it became mandatory on some other countries like the US.

[00:43:34] But remember, almost all of that is also on the Mac. Almost all of those protections, they're also on the Mac. You have to request the system to get access to the contact book, for example. None of these things are contingent on the app store distribution platform. Yeah, it's recent. It's recent. It's only been like four or five years since they forced you to use the address book or ask for file system specific locations to access to specific locations. But that's the right answer. Don't entangle this with the app store. In fact, you don't want to entangle this with the app store.

[00:44:04] One of the things I've learned with the app store bureaucrats is they don't really review apps. What they review is business model compliance. They don't check deep into whether you have some hidden settings or whether you're trying to. That's all programmatic. That's all built into the platform. Apple ensures that no one can access your contact book because they actually have protections around the code. They're not relying on some app store bureaucrat catching access in some way. They have systematic tools that protect, first of all, the platform itself, just like the

[00:44:32] parallel we were talking about with the browser. There's no one sitting around reviewing all websites, making sure that that website doesn't steal all your information. No, you build a secure platform and then you don't have that problem. And even better example than the browser is the Mac because Apple operates that too. And they have very successfully over 40 years. Well, let's just even take modern Macs starting with OS X. They've successfully produced a platform that is highly secure, not because hackers don't want

[00:44:59] to steal information from Mac users, but because the platform itself makes that very difficult to do. Not impossible. It's impossible to breach any platform. The iPhone has been hit by numerous zero day exploits. This is just what happens. But a responsible platform operator will build those protections into the platform itself. They don't need to intermingle it with the, I need 30% of your business part of the equation. Well, and about the ATT and the downloads and the fact that when you download an app from an

[00:45:25] advertising, it goes through the store and then you open the app and you have that kind of confidentiality where the publisher cannot know exactly where the context you're coming from. Do you think it's just to annoy Google or it's just to protect privacy of their users? Do you know what? I used to have a more good faith read on Apple's actions that were not coded by their continuous examples to the crown tree. I think the greatest example of this is their Google deal.

[00:45:48] So Google pays Apple $20 billion every year to be the predominant search engine. And iPhone users use it. They use it so much that Google is willing to pay $20 billion. Do you think that Google is not spying on those users with all the tricks that's available to them? Of course they do. Apple implemented ATT in large part to kneecap meta. This is all just sort of, I'm not saying the outcome isn't, can't be good also. I'm saying that's not the main motivation as I see it anymore.

[00:46:18] The main thing was they inflicted a very serious wound on the whole meta Facebook business model, in part because Apple leadership has never been shy about how much they hate Facebook. And I go like, okay, do you know what? I'm not the biggest fan of Facebook either. So I could occasionally go like, okay, yeah, it happens to someone I don't really like either. Fair game. But then when they at the same time have a deal with Google who does all the same stuff, who just tracks out the wazoo and Apple takes $20 billion just off the top from that. Do you know what?

[00:46:47] The moral high ground here is looking a little shaky. Now let's accept all this is true. Let's just accept that it's all done in good faith, that there's no nefarious other alternative motives here. The idea that just because Apple allows third-party developers to, for example, distribute their apps and users to install them directly, that users have to do that is so nonsense. If you go into a reputable store in the United States or anywhere else in Europe, right? You go into the store.

[00:47:15] In part, that store holds its reputation on your outcomes, right? If you go into Target and you buy, I don't know, a blender, and the first thing it does is cut off your hand because it's made totally shit to no safety standard and it just explodes in your kitchen. You might go like, you know what? I don't want to shop at Target anymore. Apple has all the opportunity in the world to create the best store. The store with the highest sort of safety and security where ATT roams, where they can promote the fact that if you get things from here, we take good care of you.

[00:47:44] And then they can trust that users on their own can gauge whether that's a compelling argument or not. The problem comes in when Apple decides, you know what? No, there is no other way. Any distribution of software for this computing platform has to go through us. And usually that means 30% cost. They have all these incentives that are misaligned and back them into these awful corners. One thing, as we talked about, the vast majority of app store revenues come from totally shady,

[00:48:10] shitty games that most parents would be aghast if they actually looked at what those games are like. I have been aghast looking at the kind of games that my kids have downloaded off the app store because I thought, isn't the app store that safe place where app store bureaucrats make sure that nothing nasty is in there? Absolutely not true. And any cursory review of the kind of app or kind of games that are targeted to its kids in there will reveal that.

[00:48:35] And then second, this example, taking $20 billion from one of the largest privacy violators in the world, Google, and then holding moral high ground is incompatible. Except from an economics perspective, very compatible, right? Take both the money from Google while claiming you're all about privacy. Kneecap one of your prime competitors in things like VR and AR with Facebook. Do you know what? That's straight out of the art of war, right?

[00:49:04] Like you exploit your various enemies' weaknesses and you extort the ones you can extort and you kneecaps the one you can't, which is, I mean, that's business. That's corporations. I'm not even making a grand moral judgment here because I don't hold Apple any longer to some sort of universal ideal that they're this benevolent company that just wants the best for all of us. That's bullshit. That's never going to happen with any publicly traded company. They're going to try to maximize their revenues and their profits as they all do, as they should.

[00:49:33] The obligation for us and for the EU is to set the playing field straight, is to avoid monopoly formation. This has literally been in the charter since Adam Smith, 17, whatever, 76, the wealth of nations. You're like, hey, capitalism is good. We should have multiple providers, but you got to look out for cartels and monopolies. That's when the system breaks down. It was really awesome to ask so many questions to David. So we actually kept going because we had so many more questions.

[00:50:02] We also decided to split the episode in half. So we're going to stop here for today and please download the next episode to get the rest of the interview. On behalf of the Purchase.ly team, thank you for listening to the Subscription League podcast. If you've enjoyed what you heard, leave us a five-star review on iTunes or other audio platform. To find out more about Purchase.ly and how we can improve your subscription business, visit Purchase.ly.com. Please hit subscribe in your podcast player and don't miss any future episodes.

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