Recently, Apple blocked updates to the Hey email app on the iOS App Store and threatened to delete it. What does this tell us about App Store guidelines? And unwritten rules?
In this episode of TechFirst with John Koetsier we chat about Apple’s App Store guidelines with Denys Zhadanov, a VP at Readdle. Readdle has 7 top-30 apps in the App Store including the Spark email app which competes with Hey.
There’s always been controversy that Apple isn’t allowing competition for its own apps and services, and the EU antitrust division is looking into it now. We dive in with an App Store insider.
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John Koetsier: Recently, Apple blocked updates to the Hey email app on the iOS App Store and threatened to delete it. What does this tell us about App Store guidelines and maybe unwritten rules?
Welcome to TechFirst with John Koetsier. Apple has long had App Store guidelines, right? It’s part of what makes iOS apps safe and generally high quality, but there’s also always been controversy that Apple isn’t allowing competition for its own apps and services, and in some cases that it’s taking an unfair slice of revenue.
To chat about that, we’re going to bring in someone who should know, his name is Denys Zhadanov. He’s the VP at Readdle. They have seven top-30 apps in their categories at the App Store, including the Spark email app. Welcome, Denys!
Denys Zhadanov: Hello, John. Thank you for having me here.
John Koetsier: Wonderful. How are you doing?
Denys Zhadanov: Very good, very good. Thriving I guess.
John Koetsier: Excellent. Glad you could join us here. Hey, Apple has been accused of making life difficult for some apps that compete with its own services. And of course, some apps hate Apple’s 30% cut. Spotify has complained for example, what’s your perspective?
Denys Zhadanov: Well, might be biased here, but I do believe, first of all, that the App Store ecosystem is a tremendous and phenomenal place for developers from all the different locations in the world, put something amazing and distribute that to 1.5 billion devices, and this was the case for us and how they changed our lives. Speaking of guidelines, I do believe that the guidelines were created some time ago, and the variety and breadth of whole different levels of the business models on how and different products. So the guidelines are not, sometimes are not catching up with those different business models, and having that public conversation and this kind of outcries, if you like, would affect and it would result in this conversation with Apple consumers and developers. And I believe this is very helpful for building a better ecosystem.
John Koetsier: Yeah, yeah. I could see that it’s also very painful, especially for Apple and other developers who are caught in the middle. But when some of the developers are very, very high profile people as they were with the Hey email app — which of course is by Basecamp which has a huge following, and its founders and leaders are massively influential on social. What was Apple’s key problem with the Hey email app?
Denys Zhadanov: The way I see that, is that as Phil [Schiller] stated — that was an interview with Matthew Panzarino at TechCrunch — he said that the main problem with that is that when a user comes to the App Store, he or she gets the app and then he or she cannot use the app, and that was the problem. And fundamentally I would agree with that, because I’ve heard many times of how my friends would trade an app that doesn’t do much, except you log in and they won’t let… Apple won’t let them in the App Store.
John Koetsier: Interesting. I mean, I did post one article on Forbes about there’s a lot of apps that for instance come along with an IOT or smart home device or something like that, and you can download the app any time, and of course it’s absolutely useless without the hardware. It’s a little bit of a niche situation, but there are thousands of apps like that as well. So that was at least, I thought, one example where Phil Schiller, Apple’s SVP of global marketing was perhaps wrong in what he said in terms of, hey, an app should have functionality immediately out of the box. How did you avoid that with Spark because of course you’ve got Spark email, it’s a paid service, it’s a different way, it’s a reimagining of how email works, especially for iOS and Mac. How did you avoid it?
Denys Zhadanov: So let me correct you that it’s not a paid service.
John Koetsier: Oh!
Denys Zhadanov: So we created Spark as a free email client. So we don’t host, we don’t have the service, so it’s just a client which you can connect all your different inboxes, whatever, whether you’re using iCloud, or Exchange, or Outlook, or Yahoo, or Gmail, all in one place. And that will kind of have the unified inbox with a different experience. So that was free for a couple of years and then we’ve added to this complimentary collaboration service for teams. So for example, if you do have a team, you can create email together, or you can delegate email to somebody who should take care of that from your inbox. And for that, we have introduced paid options, and we were looking for the best solution and we looked around and we saw that what Slack does, so we kind of followed the model where you can basically go and buy the subscription for the team on our website. And Apple was fine with that, except I think the review team has told us to remove all the links from within the app that would lead us to the payments page, and they had no problems with that.
John Koetsier: Yes, yes. Okay, so sort of similar to where a Kindle situation might’ve been a few years ago where you could buy a book on Amazon, but you couldn’t buy it in the app and they couldn’t link out to a place where you could buy it. So talk to us about the Apple 30% cut of app revenues. Do you feel that that’s fair? Are there places where maybe that isn’t so fair, maybe a Spotify, maybe a Netflix, or do you think that should be a sliding scale in the future?
Denys Zhadanov: Well, as entrepreneurs I’d love to, of course, to pay less. And if we could bring 30% to like 10% or 5%, that means like X amount of millions of dollars to our company. Of course, I would love that. Do I believe 30% is fair for the ecosystem that Apple has created and curates, and gives you an opportunity to market to 1.5 billion people? I’d say so, because Google does the same, it’s not Apple, right? So I think that must be done, some kind of research in other industries, how much the gatekeepers like Apple or Google are charging? I thought, well, for the first year it’s usually 30%, right? And for the second year, if you’re subscription base, you’ll pay 15% of that. I do believe that’s fine for some businesses for example, where the margins are super high, like for example, ourselves. When it comes to Spotify, right, it just makes or breaks their business.
John Koetsier: Yes.
Denys Zhadanov: I totally see why this is happening and it’s hard, and maybe having a different percentage there would allow different kinds of models and businesses to thrive on the platform. So let’s see how this whole antitrust…
John Koetsier: Yes, exactly. I mean, EU has opened some antitrust investigations into Apple, no word on where they’re headed or where that’ll go obviously, that’ll take months to develop. It’s interesting where I think a sliding scale might make sense because you have cases right now where Apple has opened certain special situations, for instance with Amazon, with a couple other players, where they are able to actually be on the App Store and to actually sell subscriptions, correct? But not pay that percentage.
Denys Zhadanov: Hmm, can you give an example for that? The Amazon…
John Koetsier: Amazon just got a special exemption from Apple and there’s — Canal+ has it as well — other streaming providers. Apparently there’s been this program which has not been that well known and documented, that basically large streamers can get into the iOS App Store and have not had to pay a subscription fee. So that was actually, that story was breaking probably about a month, month and a half ago or so, I talked about it a little bit as well. And so then my perception of that is that if you’re big enough and Apple actually needs you on the platform then there’s a way around the rules, but we can talk about that a little bit later as well. I mean, the other interesting point that you brought up was the antitrust one, right, around the EU and is Apple characterizable as a monopoly on its own platform? In spite of the fact that, of course, it’s a minority mobile operating system. Any thoughts on that?
Denys Zhadanov: That’s a very good question … so what I see Apple has really been doing a lot of progress to kind of adjust, and accept, and welcome other apps that might be competitive for their native apps.
John Koetsier: Yes.
Denys Zhadanov: And we all have seen them being used that are quite exciting for us as well. Two days ago at WWDC, they’ve announced that you can set up email and browser apps as default apps on your iOS devices, which is a big deal. And that’s definitely not antitrust. I think Apple has renewed their App Store page description about competitiveness of apps and that’s of course also the app that was antitrust. We as an email client we’ve, and also not just an email client because we have a whole variety of productivity apps as of course as you know, the Scanner Pro that they introduced as a part of iOS 11 or 12, I believe, I guess it was 11. Then we do have the Documents app which was the first file manager, and then they’ve introduced Files app later on. All our apps that are competing with them are usually featured in different segments on the App Store. So Apple is, I think, is trying to promote third-party alternatives to their native apps and I’ve seen this happening all across the App Store for the last year, for sure. And it’s not just us, it’s also like any camera apps or … providers. Or you take it any kind of a big competition to their native apps. And of course, I think that that’s coming from the top of the company, right? And speaking of antitrust, I think Apple is accounted for about 8% of smartphones, something like that. I think they know that better, and is this a monopoly of a smartphone? No. Is it a monopoly of the App Store? Yes. Is this a problem? Maybe, because some companies like Spotify cannot build a sustainable business model. But I do believe that Apple is genuinely trying to find a better way for everybody. And with the case with us, for example, they’ve been very supportive. Like all these last years we’ve got a great relationship with them, and they really tried to support our business and help us grow. So that’s, I think that’s happening not just with us, but if this is like the push that’s happening from Apple development relations teams and App Store business teams and seeing that across the board.
John Koetsier: Well, it is really interesting because of course, in terms of market share for smartphones, you can’t call it anything close to a monopoly. The interesting part for me is when you look at the, not just the divide on percentage of smartphones, but the divide on revenue share in the industry from in-app purchases, from app purchases themselves, and media purchases in apps, and that sort of thing. And so App Annie came out with some numbers just recently and basically Apple is almost double, iOS is almost double Android’s share globally in Q1 2020 for revenue. The interesting thing for me is that Apple just before this antitrust thing kicked off and WWDC released that major report about a week ago saying, hey, here’s the whole ecosystem impact of iOS and it’s massive, and we’re actually only capturing a small slice of that. I think a lot of these challenges that we’re having right now is that we’re trying to shoe horn 18th century, 19th century monetization, productization retail models into this modern digital economy, which is just different. What does shelf space mean in this digital economy? What does it mean to have the expenses of having a “retail operation,” which essentially the App Store is, and yet it’s a gateway to this device that we carry around. Where do you see that all going in the next couple years?
Denys Zhadanov: That is a very good question. I think fundamentally, if there was a way to find a different way, that would be very interesting. I don’t have a solution that will cater to all of the audiences and all the companies, but I’d love to hear what you think on that. And I don’t think that in the next couple of years we’ll see a fundamental change on the Apple Store and Google Play. But it’s very interesting and I think after this outcry and the public, kind of public maybe the amount of press and conversations, I think more people will be thinking about that and we might see good ideas and solutions. And if you have any, please do share … how do we rethink this whole retail like shelf place, right? Because what we witnessed, since if you guys don’t know, we’ve been on the App Store literally since day one or two back in 2008. We built a sizable business around that, never raised any capital from anyone and built …
John Koetsier: What was your very first app, by the way, your first app?
Denys Zhadanov: It was called “Readdle Docs.” So the Readdle Docs was the first file manager on the iPhone. So you can carry around your PDFs, your books, your images, your video, and now this Readdle Docs has become Documents, and this is like the most popular app that we have with millions of users.
John Koetsier: Denys, this is amazing. I mean, you were on the App Store on like day one or day two, and it wasn’t a fart app. It was a real app with real capability
Denys Zhadanov: Yeah, we’re focusing on things that are useful.
John Koetsier: That’s a good thing, not everybody is.
Denys Zhadanov: So, yeah. So I was saying that basically, rethinking the whole model around that and the shelf space, and it was more of a discovery platform. So back in the day, people would go in the App Store and think, wow, like, let’s see what’s there. Let’s discover new stuff, let’s see how I can super crash my phone. Right now, it has transformed into a distribution model, it’s not about discovery anymore. I mean, a small part of it is discovery, of course, but mostly the majority of the downloads is distribution and mostly they see those big brands like Facebook, Google, or Microsoft, or chat apps, or right now with Zoom and Skype being just distributed to the end users.
John Koetsier: Yeah.
Denys Zhadanov: So then that model will be changed to better reflect this change of the whole ecosystem and how people use their devices possibly, but I don’t have a solution at this point.
John Koetsier: It is really interesting. It is a challenging problem. Apple, of course, as being Apple, has chosen a vertical integration model and a controlled model, and that’s resulted in a more secure, a more moderated, a more let’s say “tame” ecosystem, and a safe ecosystem. Google of course, has not just that model, but also kind of a side-load model which you can do on Android, right? With some challenges or some big warnings or anything like that, and that’s resulted in an ecosystem which, hey, it’s vibrant and growing and amazing as well, but there are a few more challenges there. I don’t have the solution necessarily, but in and around your point around, hey, initially it was discovery, and Apple tried to reignite that a couple iOS versions ago with the re-imagining of the App Store. And now it’s distribution, which means sure, that’s distribution, but you’ve got to do your own sales, you’ve got to do your own marketing, you’ve got to do your own work to get people interested and excited in your app. And that’s just the place where they get it. And actually that might be an interesting key because if it once was discovery and now it’s distribution, you pay more for discovery than you pay for distribution, right? The store gets more percentage of your money than the warehouse, and so that might be interesting. Anyways, I have to, I’ve got you on TechFirst, I have to give you the TechFirst 10-in-5, the ten questions, five minutes, all about tech. Are you ready?
Denys Zhadanov: Okay, let’s go. Let’s do it.
John Koetsier: Awesome. Favorite piece of tech gear in your house?
Denys Zhadanov: That’s my new LG TV. I didn’t have a TV in like 15 years and now I have it and now I can watch something.
John Koetsier: Wow. Now you’ve got a big screen on the wall. Awesome. Can’t do without it tech that you wear?
Denys Zhadanov: Apple watch.
John Koetsier: Apple watch. Okay, excellent. This is a stupid one, but I have to ask it. I ask everybody… Android or iOS?
Denys Zhadanov: iOS.
John Koetsier: Okay, interesting. I’m going to guess you’ve also got an Android somewhere, you’re going to need it for testing other stuff like that and see what’s going on.
Denys Zhadanov: We have 10 or 15 of them to test Spark for Android.
John Koetsier: Exactly. EV or gas, electric vehicle or gas?
Denys Zhadanov: Ah you got me there, John. EV of course, but then I do have to have the long range, that’s why I still have the gas one to do the drive from Kiev to Odessa. Once the EV gets this range I’m going to switch to EV for sure.
John Koetsier: Excellent, excellent. I’m in the same scenario, I have both right now as well. This one is probably a given knowing you and where you develop, Mac or Windows?
Denys Zhadanov: Mac, but we are actually excited about Windows. We’re getting Spark for desktop for Windows, and that’s going to be, we expect this to be a massive growth of users.
John Koetsier: Interesting, interesting. Okay. This is a tough one. Make sure you have the right answer, GIF or JIF?
Denys Zhadanov: Haha, JIF.
John Koetsier: Oh, it’s the wrong answer!
Denys Zhadanov: No, why?
John Koetsier: Because it’s not giraffe-ics, but it’s all good, you are entitled to your own position, even if it’s wrong. No worries. Favorite guilty pleasure app?
Denys Zhadanov: Instagram.
John Koetsier: Instagram. Okay, okay, excellent. Haven’t graduated to TikTok yet.
Denys Zhadanov: I’m still, I have it, I follow two people and sometimes I do spend five or seven minutes a day watching those videos and people are so creative.
John Koetsier: I know, I know it’s very dangerous, TikTok. You can find that three to five minutes becoming three to five hours quite quickly. Self-driving cars, do you want one or do you want to drive yourself forever?
Denys Zhadanov: I do want one for sure. I believe that I can be doing something more interesting and mentally challenging than driving a car.
John Koetsier: Excellent. Elon Musk offers you a free trip to Mars. Are you in or are you out?
Denys Zhadanov: Is there a way back?
John Koetsier: Maybe.
Denys Zhadanov: I’ll stay here.
John Koetsier: Okay, excellent. And Alexa, or Hey Google, or Hey Siri?
Denys Zhadanov: I don’t use any of those to be honest, maybe for like a reminder or wake me up at 6:00 AM, that’s about it.
John Koetsier: Excellent. Well, Denys, thank you so much for being on TechFirst.
Denys Zhadanov: Thank you, John.
John Koetsier: It has been a real pleasure to chat with you and as well, all audience members, thank you for joining us. My name is John Koetsier. I appreciate you being along for the ride, whatever platform you’re watching on, please like, subscribe, share, comment, all the above. If you’re on the podcast later on and listening to this, please rate it, review it, that’d be a massive help.
Until next time, this is John Koetsier with TechFirst.