Apple’s Response to EU’s DMA & its Impact on iOS Developers
Apple has released documentation outlining their plans to comply with the EU’s Digital Market Act (DMA), including the requirement to allow third-party app stores.
In this blog post, we will provide you with our key takeaways from the initial announcements, and discuss the upcoming availability of third-party app stores, changes in terms of business, Apple’s new analytics, and more.
How are third-party app stores coming to iOS?
The most notable change is the introduction of third-party app stores in iOS, specifically starting with iOS 17.4.
However, these third-party stores will (apparently) only be available in EU countries, thus not affecting the majority of regions that contribute significantly to App Store revenues.
Apple’s control over third-party app stores
Despite opening up the platform, Apple retains a firm grip on technology standards. They’ve introduced a “marketplace kit” for all third-party app stores to integrate.
- Apple announced that apps distributed via third-party stores will have to undergo a notarization process. This will include a (simplified) review by Apple meant to ensure they are not introducing malwares or other types of unwanted software on a user’s device.
- Additionally, Apple has introduced an App Installation Sheet system, which will “display information developers have submitted to Apple for review, like the app name, developer name, app description, screenshots, and system age rating” when a user clicks to download an app from an alternative store or from the web. So, even those who opt not to distribute their apps through the App Store are still required to prepare a product page for the App Store. This will provide users with critical app information at the point of download from non-Apple stores or web sources.
- Concerning privacy, Apple’s App Tracking Transparency framework will extend to all apps, whether obtained from the App Store or third-party platforms. Third-party app stores must be downloaded through the web, thereby not benefiting from the measurement exemptions that Apple Search Ads enjoy.
Malware protection and developer considerations
Opening up iOS equally elevates concerns about malware.
Apple emphasizes in their guidelines the right to block any app they suspect contains malware from operating, even if obtained from a third-party store. Developers venturing into these new distribution channels must carefully select SDKs and other tools to prevent their apps from being flagged and disabled by Apple’s protective measures.
Key takeaway: As Apple is making iOS more accessible to other marketplaces under its very own conditions, only established corporations are the ones likely to go ahead and look to build and/or join third party app stores.
Which changes are coming to Apple Payment Services?
Apple is also updating its policies on external payment processing for apps.
In brief, apps can now use external payment systems for purchases but must present a warning screen to users about this action and report earnings from these transactions to Apple.
Apple will still take a percentage of the revenue, which is slightly less than if Apple Pay were used – either 12% or 27% – depending on whether the app was downloaded through the App Store.
Apple’s new business terms
Apple has announced sweeping changes to its business terms.
One of the most critical updates is related to the revenue-sharing model between Apple and app developers.
Historically, developers contributed 15% to 30% of their in-app revenue to Apple.
Under the new EU-mandated framework, developers distributing their iOS apps through third-party app stores must adhere to a new revenue-sharing formula.
This formula introduces a fixed charge – developers will incur a fee of half a euro for every annual unique app install, reinstall, or update beyond the first million users. Additionally, a transaction fee ranging from 10% to 17% will apply, replacing the previous model’s 15% or 30% split. Should developers choose to utilize Apple Payment Services for transactions, an extra 3% fee applies.
For developers who prefer the traditional App Store route, opting into this new formula is a choice rather than an obligation.
The recent declarations seem designed to discourage app developers from seeking alternatives to the App Store and attempting to avoid the so-called “Apple tax.” Apple does this by retaining control over the iOS app publishing process, while also imposing certain costs and additional procedures for those wishing to publish externally.
Despite this, there are notable implications:
- Apple seems to be facing enough competitive pressure to continue improving the App Store as a marketplace, starting with the fact they will share more data with app developers.
- The new business terms suggest that Apple is indirectly assigning value to the various technologies they control – charging 10-17% for in-app purchases plus a fixed installation fee for iOS, its APIs, and framework development/maintenance; 5-10% for App Store distribution and marketing; and 3% for Apple Pay services.