App stores are hugely lucrative – and under attack

SINCE the first iPhone landed in people’s pockets in 2007, apps have steadily become the portal of choice to the digital world. The mobile devices on which they run now account for two-thirds of global web traffic. Inhabitants of rich countries spend about five hours a day, roughly a third of their waking lives, staring at apps. Globally, some 3.5 billion people use them each month.

That has made the app stores that distribute them a lucrative business for Apple and Alphabet, the tech titans whose iOS and Android operating systems power the vast majority of mobile devices around the world. That, in turn, has drawn the attention of governments, which are leaning on the duopoly to limit access to disfavoured apps while also working to loosen its stranglehold over the market. They risk irking consumers on both counts.

Apple and Alphabet keep the financial details of their app stores close to their chests. These make money in a variety of ways. The biggest chunk comes from charging a 30 per cent fee on the sale of digital goods, such as snazzy outfits and supercharged weapons for avatars in video games. The stores also take a cut of app subscriptions, though usually at the lower rate of 15 per cent. Sensor Tower, a data firm, estimates that Apple took in US$27 billion and Alphabet US$13 billion from these types of commission last year. Analysts reckon the pair also made several billion dollars each selling ads that appeared next to app-store search results.