Selling a $9.99 book would end up with Amazon taking 28.5% or 38.5% (the lower percentage only if you enroll in the Pro Merchant subscription program for $39.99/month) of the price.
Perhaps you should actually read the Amazon terms first:
"By our General Pricing rule, you must always ensure that the item price and total price of an item you list on Amazon.com are at or below the item price and total price at which you offer and/or sell the item via any other online sales channel."
Sell to people who jailbreak. Take advantage of Cydia. You just won't be able to reach people as easily (just like if you don't like Amazon's terms you make people jump through hoops to put your books on a Kindle).
You are mixing two things up. Selling apps and selling goods with in-app purchases. Apple restricts the app market because it adds value to their platform (for everyone).
As for in-app purchases [what this whole discussion is about] you can sell your product (books in the example above) on your website, but you also have to make it available for in-app purchase. Also the price must be the same or cheaper in-app. These are the exact terms Amazon has. You can sell your product on your website and through Amazon, but the price has to be the same or cheaper on Amazon.
>Apple restricts the app market because it adds value to their platform (for everyone).
Provably false. I'm part of the group 'everyone' and am stating that having one market does not add value for me. I believe there are quite a few of my type hanging about.
By everyone I meant all parties involved, not every single person in the entire world (that would be a ridiculous statement):
Apple: benefits by having exclusive apps of a quality standard they can determine where the platform and the store are almost synonymous. Ex: I'm getting an iPhone so I can play that game.
Developers: Benefit by having a platform with as few barriers to purchases and a large audience. Ex: I'll target my game for iOS because there are 100M+ potentials users and popular opinion is to get an iPhone to have access to the most games.
Consumers: Benefit by having an easy method to purchase apps with a certain level of trust and a vary large selection available in one place.
Normally a free market comes up with these things.
The argument above (and in nearly every conversation on this topic) is, the Apple market is NOT free, is designed for Apple's financial benefit alone, is capricious and repressive. And the iPhone is the only market like this.
Apple have a monopolistic control over how you sell software for their mobile devices, and Amazon have a similar monopolistic control over how you sell products on their website.
Both can only be an actual real monopoly if they had no realistic competitors. This is not the case for either Apple or Amazon.
That kind of 'monopoly' isn't what people mean by 'monopoly'.
They're thinking of things like telcos who have (or had, in some cases) government-granted monopolies that prohibit potential competitors from even trying to compete, or they're thinking of cases like Microsoft back in the day when they used their leverage from a dominant position in one market to attempt to force out competitors in a different (but related) market. (By shipping IE for free at a loss to ensure that Netscape couldn't profit from selling a browser, for example.)
That's why people deliberately incorrectly use the term when referring to Apple. They're trying to evoke that feeling of a big corporation with an unfair advantage.
But that only works if Android doesn't exist, and BlackBerry doesn't exist, and Windows Phone/Mobile doesn't exist, and Symbian doesn't exist (which will be true soon, I guess!), and WebOS doesn't exist, and something prevents competitors from even trying to have their own mobile platform.
Apple's store is not really a "marketplace" - at least not a free market. There's no competition allowed, in a market that's everywhere else free and open.
And as for Infrastructure - what does Apple own except the web site? They don't own the iPhone - I bought mine for cash, I own it. They don't own the network - ATT and Verizon own that, and I contract to them. They don't own the apps - they just try to.
That leaves them in the position of market predator - trying to make a buck by warping the market in their favor, throwing up roadblocks to anyone using their own hardware on their rented network for anything that Apple can't scam a buck from.
And how did those apps get on your phone? That's the infrastructure part. Those apps can be sold in 100+ countries around the world with payments processed and on a platform that Apple is selling with catchy commercials and by ensuring a certain level of quality. That's the infrastructure and value Apple is adding with the app store. Do you seriously think there would be 350,000 apps for the iPhone if each developer had to set up distribution and payment handling for 100+ countries around the world, and be able to do it for small payment amounts ($0.99)?
Yeah, but people on this site are pretty familiar with putting up a web sales site, and aren't going to be very impressed by that - certainly not to the point of paying their entire margin to Apple for it.
Yes its a popular site - hey! could that be because its the only site?
This argument is tantamount to saying MSFT owns windows and so deserves 30% of all purchases made through IE. This is insane.
If Apple wants to provide infrastructure developers can use for handling in-app purchases, and give them the option to do so, that is fine. Forcing people who write software for their platform to use their APIs for in app purchasing, and to pay 30% is wrong.
Apple does not own phones it has sold. The owners do, that is why they paid for them.
A better analogy would be Lenovo, Dell, HP requiring all software installed on their laptop or desktop machines to be purchased through them and skimming 30%.
I didn't imply a positive or negative view (though I do disagree with it). I was simply offering a better hardware analogy since I disagree that Apple's hardware lock-in would be similar a Microsoft Windows lock-in.
They already force people who wrote for their platform to use their API's for everything, and charge 30%, and on top of that $99 a year. I don't see anything new. They provide the payment infrastructure and the back-end.
While I take the argument that being an infrastructure player rather than a traditional 'make something people want' business is a good idea in the long term, I disagree with the advice that it's a good idea for a new startup to try to be doing this from day one. That's suicide.
It's worth noting that none of the companies that are 'infrastructure' players today started out that way.
Amazon sold books, and needed to buy lots of servers to do it. The cash from book sales justified buying servers, which some time later allowed them to spin off EC2.
Apple sold personal computers and music players. Eventually they owned such a dominant position in music players that they could build a compelling online music store. Later they sold lots of phones, and used THAT position to justify the app store.
Facebook were, if anything, anti-platform. The original Facebook was for a single university. Later a few. Only some time later did they even allow anyone to sign up, and later still (by the time they were well on the road to being the dominant social network worldwide) did they roll out a 'platform'.
This is why the Internet platforms of today aren't like railroads of old. As a founder you absolutely should NOT be trying to raise lots of money to build infrastructure from day one. You should raise it to build a product that kicks ass that people will buy. That's hard enough for most if us.
If you get your startup to that stage then the platform opportunities that you can use to consolidate your position should be pretty obvious.
Don't get me wrong, dreams of platforms are what get entrepreneurs out of bed in the morning. They're important for that reason, but you're crazy to put it in your buisness plan. Keep it simple - build something people WANT.
Apple's single app store can only exist in the economic distortion created by U.S. government regulation which provide severe penalties for unlocking an iOS device.
If it were not for these regulations, we would see kiosks in Wal-Mart sponsored by EA Games to get a free game by just plugging your iOS device into the kiosk, which would give a free game, unlock your device and install the "Wal-Mart apps store" all in one go.
I wonder why didn't that happen on any of the several "open" mobile platforms beside iOS (including Android)? Or in the cases where they existed (carrier-specific app stores for symbian/javame), is there any case where ANYONE made any money out of it at all?
I work on "this kind of market" since 2003, when there were already millions of smartphones out there. And even now, the Apple Store has been constantly proving as the only successfull app store out there, specially compared to Android and OVI...
I know we love to complain about this, but has this actually happened? Has anyone actually been sued by Apple for jailbreaking? Last I checked, the worst that happens is you void your warranty, and even then, people have restored iOS and gotten warranty service.
Megacorps like Walmart and EA would never order 50,000 kiosks to be built knowing that Apple (or U.S. gov) could get a court injunction within hours of them being deployed.
This is the very nature of rackeeting (in this case the gov being the mob boss). You don't have to actually make good on the threat for it to be effective.
If you still don't believe me, go knock on a few doors on Sand Hill road and pitch just this: "Its like RedBox but for the App Store. We put kiosks at every Walmart and Kroger and install a new App Store". The VCs won't need you to go further and explain your market projections or your team background. They'll have heard enough already.
You may be right, if so, my info is going on 8 months old ;).
I read yesterday that Apple is now blocking use of their store (books was the example) if they detected your phone was unlocked. So now, they're on tack 2. We'll see who has enough money to sue them to stop doing this.
If the (only) owner(s) of infrastructure or a limited resource offers access for only a select group, do you consider them to be offering a service to that group, or to be starving non-members of access?
What do you do about it? Do you hope for competition, or create rules against discrimination? If you create rules, how can you prevent the rule-maker from using the rules to do its own discrimination? If you hope for competition, what if there's not enough of the resource, there are network effects or other high barriers to entry, or everyone in the market decides to do the same discrimination?
So, who do you trust less to be the gatekeeper, the government, or the ISPs? Neither answer is really a good one.
The telcos are doing what's best for their business, but that's not necessarily what's best for their customers - positioning yourself as the owner of infrastructure is a powerful and profitable place to be, but if you get to be in too good of a position, the same debate will come up again - the parallel to the 1800's is a good one.
However, if you're an indie developer Apple's infrastructure is pretty awesome. You don't have to set up your own payment system, which sucks nuts, or use one of the existing retarded payment services, which have worse terms and worse user experience. Neither rolling your own nor using someone else will get you 99-cent payments.
Good analysis, though I'd point out that Modcloth is not strictly speaking an infrastructure business.
Modcloth is closer to the traditional retail model. They buy inventory and sell it. Their innovation is in getting user feedback before committing to holding inventory.
What we're doing at Fabricly is building an infrastructure business, with a distribution and production network for fashion designers.
From the article: "Further, Facebook has one of the most sophisticated targeting technologies for ads ever created. Some retailers can make 2x-4x returns on their ad spend. That's real."
Considering this is a point that's been debated, some references would be good. Further, SOME retailers making 2x-4x investment doesn't sound impressive - the really smart, clever retailers should make that amount on any medium. That doesn't say what the average is at all.
http://www.amazon.com/gp/help/customer/display.html?nodeId=1...
Selling a $9.99 book would end up with Amazon taking 28.5% or 38.5% (the lower percentage only if you enroll in the Pro Merchant subscription program for $39.99/month) of the price.