How strong is Apple’s position in the market?
$Apple(AAPL.US$ Based on revenue, it's second in the tech industry after $Amazon(AMZN.US$, which had $386 billion in 2020 sales to Apple’s $275 billion. It was first in 2020 by profit, with $57.4 billion in net income. So Apple’s overall position in the tech industry is very strong. It has the largest market cap of any tech company and this position is supported by profit.
However, that very fact puts Apple at risk of antitrust action. Part of the reason why Apple collects so much revenue is because it takes a steep 30% cut of app store sales and markets its own software to users. Both of these practices are being challenged. Epic Games recently won a partial victory over Apple in court, which gave it the right to collect payments outside of Apple’s payment system. If the court ruling holds up on appeal, then other developers will be able to bypass Apple’s payments system, depriving Apple of its revenue cut.
There's also the matter of app tracking. This year, Apple started forcing app developers to allow users to opt out of being tracked. These deprived advertisers access to valuable insights, such as customer location, web browsing history, and more. This was framed by Apple as a pro-privacy move. However, a recent Oxford study showed that iPhones were no better for privacy than Android devices.
Brian Bowman, CEO of industry-leading ad agency Consumer Acquisition, talks about the effects of Apple’s iOS changes across the industry.
We are seeing a loss between 15% to 30% of revenue for iOS apps. It's for the most part irrecoverable.
According to Bowman, iOS is putting third-party developers at a disadvantage. By forcing them to let users opt out of tracking, it deprives them of revenue. But there’s more than that. In addition to putting other companies at a disadvantage, Apple (according to Bowman), is giving its own apps special treatment:
For all third parties Apple forced developers to ask consumers whether they wanted to be tracked across companies and websites. It didn't show the same pop up for Apple apps.
In other words, third-party developers had to let people opt out of tracking, Apple didn’t. Eventually, Apple relented on this, but Bowman says it still gives its apps preferential treatment on framing:
For third parties, Apple forces them to ask whether they want to be tracked, it is purposely aggressive language that doesn’t show you the benefits… for Apple products, they didn't use the word tracking and they showed the benefits of opting in.
If Bowman is right about this, then antitrust could become a major liability for Apple. Just recently, $Meta Platforms(FB.US$ took out full page ads in the New York Times criticizing the app tracking changes. There's a real possibility that this will lead to legal action. Epic Games already won a partial court victory over Apple on antitrust grounds, and the app tracking issue deals with similar concerns. So Apple’s competitive position is very strong, but there's significant legal risk here.
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wither rose circus : Just for clarification, Epic lost on all of their causes of action related to antitrust. They won a partial issue dealing with anticompetitive conduct related to contacting consumers to bypass payments through the App Store.
poorlydrawnmcyt : However, the injunction issued by the court will in all likelihood be set aside as it was a California Statute that cannot be imposed nationwide as that violates the US Constitution Commerce Clause.
logosbot : After all is said and done, Epic will owe Apple millions and lost on every issue they sued upon.
ksdesign logosbot: The issue they lost on is somewhat anti-trust like. the judge didn't say that apple is a monopoly but did say that the anti-steering rules were anti-competitive.
the rose crest : What's keeping them from sharing some of that cash with investors? Such a stingy divvy.