The real problems of the Apple Tax — it ruins value-chain and sets itself as an anti-customer company

Let’s see what happens due to the Apple Tax and how it influences stakeholders in the value-chain. Aside from obvious monopolistic behavior there are two simple reasons of the Apple Tax destructive nature.

1. It ruins value-chain and makes it uneconomical

For every value created a customer receives there is value captured by a company paid by this customer. Let say a company creates a service valued as 1X by customer and customer pays 1X for that. This balance guarantees accessibility and interest among many customers.

Apple tax demands for a customer to pay 1.43X for the same value of 1X (0.43 = 30% of 1.43). It means that the balance is ruined and customers do not get enough value for what they pay. In value they still get 1X despite paying for 1.43X. Hence, a company gets significantly less customers and at the same time it’s unable to benefit from additional 0.43X customers paid. Drop in the revenue is significant. That makes business unsustainable.

So, what a company could do? It could provide more value by letting go own margin in favor of only Apple benefitting from the service or it could increase marketing expenses to attract more users. But then again that additional marketing budget eats into a company’s margin. And again, makes it uneconomical.

Basically, a company needs to run at least 60% margin business and get from it only 30% margin to be at least on the same foot with Apple.

Having margin less than Apple gets in your business is a nonstarter. At the same time Apple makes exactly zero investments to make this company provide a service.

Maybe it used to be acceptable to pay the Apple Tax in 2008 when it was enough to just create a simple non-cloud app like calculator, submit to AppStore, and forget about it. In those days there were no expenses to actually run the service. Now the core of mobile services happen outside Apple ecosystem and an iPhone is a mere access point and interface to them. Nothing more. It’s a mere mobile browser for 3rd party services.

Apple’s investments in APIs are not investments in 3rd party services. Those are investments in the product Apple sells. All of them are paid by customers when they pay for an iPhone. That’s why customers buy iPhones — because Apple provide them ability to access services. And APIs are part of the platform customers get when they buy an iPhone.

Apple ecosystem is attractive to customers also due to billions of dollars in investments small companies make by developing and promoting their services for iOS.

The power of the iOS is 3rd party services created for it.

Apple not only disrespects that, but blatantly extorts 3rd party services and ruins their economics.

Wonder how many great businesses weren’t realized due to Apple making them uneconomical. 🤔

2. Apple is an anti-customer and anti-family company

As I wrote above users already paid for all the APIs when they bought an iPhone. Now what Apple makes is it demands for 3rd party services to increase prices to compensate for the Apple tax. It means that Apple double dips into consumers’ and families’ pockets to extract from them even more.

Customers already made a significant sacrifice in their family budgets by buying Apple products. Still, they are demanded to sacrifice even more just for the richest company in the world get even more money.

It looks like complete and utter disrespect for own users.

As a result, what we see here is a destruction on the both sides of the equation: Apple makes business via iOS uneconomical and makes customers to double pay for less value.

The only way to solve that is to avoid the platform altogether. At first it looks like wrong decision, but when enough companies do that, it will have real ripple effect for Apple.

Do you want to have a business partner that disrespects you and treats you as a hostage?

Hope more companies will stop doing business with Apple and just ignore the platform. Hope users will realize that and more of them would stop buying Apple products since there won’t be available services they need.

Stop investing your resources into developing for Apple ecosystem just to pay Apple Tax as a result of all your efforts.

Do simple math and calculate how much your company invests into Apple ecosystem considering all expenses through all activities — no only R&D. Are the value and margin your company catches at the end acceptable?