Elon Musk is a bad spokesman for a good fight against app store monopolies
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Elon Musk wants to duke it out with Apple.
In a series of tweets on Monday, Nov. 29, Musk accused Apple and its CEO Tim Cook of opposing “free speech” by messing with his social media company.
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Musk’s complaints are convoluted, but there are three real issues at hand:
Musk claimed that Apple—reportedly one of Twitter’s largest advertisers—eliminated its ad budget on the platform. (Apple isn’t alone: Twitter has lost 50 of its top 100 advertisers since Musk took over in October.)
Musk said Apple threatened to remove Twitter from the App Store but didn’t explained why. Apple removes apps if they do not follow its own content policies. For example, the right-wing app Parler was removed for not having sufficiently robust content moderation processes and enforcement, though it was restored after making changes.
Musk took issue with Apple’s 30% cut for in-app payments. While there are exemptions for some apps that sell real-world goods or services such as clothes or ride-share trips, Twitter is not exempt when it sells Twitter Blue subscriptions.
Apple is well within its rights to spend its advertising dollars as it sees fit. Contrary to Musk’s claims that Apple opposes free speech, advertising is a form of commercial speech with first amendment protections against government interference. It also makes sense that Apple has editorial standards: It owns and operates a virtual store and, in order for third-party vendors to offer their software, they should have to comply with a set of rules.
But on the matter of Apple’s fees, Elon Musk has a point. (Sigh.) Hidden beneath Musk’s tantrum is an important critique of Apple’s chokehold on mobile software developers—one it shares with Google, even though the latter company has (for now) evaded Musk’s ire.
Vendors have often grumbled that Apple and Google’s 30% fees are exorbitant, and that the monopolistic payment policies, which bar them from giving customers alternative ways to pay, are anticompetitive. In some cases, the policies give the store owners too much power in other online markets, such as with music: Spotify argues that it has to compete with Apple Music, but Apple Music doesn’t have to pay 30% margins.
Unless a drastic change occurs, these fee policies will spoil Musk’s grand plans to transform Twitter from a company that relies almost exclusively on ad revenue to one that relies on direct payments from users.
App economics are tricky
It’s no simple feat turning a mobile app into a successful business. If you’re a developer charging users a one-time fee or a recurring subscription fee, you’re likely subject to Apple and Google’s 30% takes.
Developers are also forced to use Apple and Google’s built-in payment processors and cannot instruct users to pay outside of the app. Since 2020, Apple and Google slashed their fees to 15% for qualifying small businesses, but multimillion dollar companies—and certainly billion-dollar companies such as Twitter—are still subject to the full 30%.
Musk is realizing, perhaps for the first time, that his plan to rely heavily on subscription revenue is going to be difficult. He is in the process of torching Twitter’s advertising business, which accounted for 92% of its revenue as of the second quarter of 2022, by relaxing content policies that advertisers rely upon for so-called brand safety (the idea that their ads won’t appear next to hate speech or misinformation). He is laying off most of the ad sales team, and chastising advertisers that cut their spending. And now Apple and Google are getting in the way of his consumer revenue strategy, which relies upon a monthly $8 Twitter Blue subscription, revamped under Musk’s stewardship to give paying users a verified blue check mark.
Should Musk have considered these app store economics before spending $44 billion on Twitter? Yes. Should he have considered Apple and Google’s cut before jeopardizing Twitter’s ad business before chopping and changing its strategy? Almost certainly.
But Musk isn’t new to the app store fight. In fact, he’s just the latest in a long line of web developers, corporate rivals, critics, and regulators to take issue with Apple’s exorbitant fees.
Critics of the Apple App Store are everywhere
Long after the days of Apple’s “There’s an app for that” commercials, the app industry has ballooned into a $133 billion sector, not including the Chinese market. As the two rival marketplaces have grown, Apple and Google’s control over their respective app marketplaces has been intensely scrutinized in recent years.
The US Department of Justice is reportedly preparing an antitrust lawsuit against Apple for abusing its market power to stifle competition. South Korea effectively killed Apple’s cut in the country last year, allowing developers to use alternative payment processors. At the time, Apple told Quartz that the decision would put users “at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases.” Meanwhile there are ongoing investigations against Apple’s app dominance in the EU, the UK, and India.
Epic Games, the developer of the popular game Fortnite, has sued both Apple and Google over their app store policies. (While Apple won on nine out of 10 counts, a court found last year that Apple violated a state competition law in California. Epic Games is appealing the decision.) Epic, alongside Spotify and other corporate critics of the app stores, even cheered Musk’s opening salvo against Apple this week.
Philip Shoemaker, one of the App Store founders, who left Apple in 2016, told Quartz that Apple’s 30% cut is exorbitant. “10% is enough,” he said in an interview. “The fact that they make $22 billion a year on this is just mind-boggling.”
Musk is the world’s richest person by some measures, and he might have been well-positioned to join the fight against Apple and Google’s app monopolies—if he hadn’t paid a premium for Twitter in a leveraged buyout that will cost him $1 billion per year in interest payments. Musk is racing against the clock, and as he picks fights with his advertising base, he doesn’t have much time or financial wiggle room to enter into yearslong litigation with Apple or Google.
For now, he’s just a guy tweeting out angry memes. One who just happens to make a good point.
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