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InContext / An inside look at the business of digital content

Are app stores worth the effort? CafeMedia thinks the answer is no

August 27, 2020 | By Evan DeSimone – Independent Journalist @Media_Evan

To anyone paying attention to the digital publishing space in recent months, it is clear that the already fraught relationship between digital publishers and platforms has frayed even further. Publishers have long been critical of the power of Apple and Google, the two major mobile operating system operators, which dominate the mobile app economy through their respective app store platforms. However, in just the past month, intensifying antitrust investigations, legal action from gaming publisher Epic, and publishers’ vocal concerns have all highlighted concerns about Apple’s anti-competitive practices.

As digital media consumption has become ever more mobile, a broad cross section of publishers built mobile apps. Their goal has been to build deeper audience connections and try to regain some control over customer relationships increasingly mediated by social platforms.

In that endeavor, publishers have historically had a friend, or at least frenemy, in the OS providers that allow them to access mobile audiences through their app stores while exacting sometimes onerous terms. As that complex relationship transitions to open hostilities, the industry is asking itself some fundamental questions. Among them: “Are app stores even worth it?

To better understand some of the drawbacks of the app economy, we spoke to Paul Bannister, Chief Strategy Officer at CafeMedia. He discusses some App Store challenges that have led his company to forgo apps altogether.  

Discoverability

First among these challenges, according to Bannister, is the limits of discoverability in the app store environment. This is a particular issue for niche and emerging publishers that don’t have globally recognized brands. Prominent legacy news brands like the New York Times and Wall Street Journal can use existing channels to drive a critical mass of dedicated audience members toward an app. However, this is far more difficult for publishers that are still building a business, or for those with niche audiences.

Instead, says Bannister, publishers should build properties on the open web that can be discovered through multiple channels by people searching for the kind of content they excel at producing. Smaller publishers can’t solely rely on a dedicated core audience that’s dedicated enough to a brand to seek it out and download an app. 

Monetization

Bannister also points to the limited monetization opportunities offered by the existing mobile app ecosystem. The advertising model has taken a beating in recent years. Critics blame both the market-distorting presence of Google and Facebook and, more recently, the advertising pullback spurred by the global pandemic. However, he argues that advertising remains a significant source of revenue for almost any digital publishers, be they niche brands, publishing startups, or household names like the Times and the Journal. 

By contrast, Apple favors monetization through in-app purchases transacted through its own App Store, through which it extracts a 30% transaction fee. This fee is the subject of Apple’s current fight with Epic. But, according to Bannister, it’s this self-interest on the part of the tech giant that curtails the advertising opportunity of publisher apps.

“It’s clear that Apple is really opposed to advertising,” says Bannister. “They prefer to make everything about in-app purchases so they can collect their pound of flesh. They don’t have a presence in advertising so there’s nothing in it for them. So they make it harder to make money in other ways.” 

Market dominance

When it comes to the app sector as a whole, Bannister takes a historical view. He compares the role of today’s two dominant mobile operating system providers, Apple and Google, to the monopolistic dominance of telecom giant AT&T’s Bell System in the 1980s. 

“They’re the gateway to content for all consumers,” Bannister says. “If you’re any sort of digital publisher, you have to go through one of the mobile operating systems or one of the browsers. And those two companies control 99% of the mobile OS market and 95% of the browser market. That’s unhelpful to competition and they need to be opened up.”

The Bell System was famously broken up and regionalized following the landmark antitrust case United States v AT&T. Bannister isn’t necessarily recommending similar action be taken to reign in the power of OS makers and their app store platforms. However, he does believe that change is needed. 

“I have no strong opinion on whether that means regulation or whatever that means breaking them up, but it’s not healthy for two companies to dominate all access to information,” Bannister says. “The desired outcome is a level playing field where everyone can compete, and win, and do well. How we get to a level playing field is up for debate. But a fair competitive environment is the goal.” 

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