Apple is actually asking for 100% of SaaS mobile revenue

This whole app store thing has me worried. Not just about how Apple’s policies affect content access, but regarding how they affect my business, the online software as a service (SaaS) business.

It appears to me that the new “give Apple 30% of revenue” policy will apply to software subscriptions just as well as it appears to content. Many companies that offer a web service provide a mobile client. They charge on the web, and customers can access their service via mobile if they wish. Its a free option.

But now it appears that that will not be acceptable to Apple. Because if you offer a subscription *anywhere* you have to offer it through in app purchasing as well. This seems crazy to me for a bunch of reasons.

As an example, it sounds to me like for SalesForce to continue to offer their service, they will need to give Apple 30% of their subscription revenue for all customers that want to access SalesForce via mobile. So if SalesForce charges $50 per seat per month (I don’t really know what their prices are right now), Apple wants $15 per month. They want their 30% cut of *all* of the SalesForce revenue even though the mobile product only offers a fraction of the value that the customer is paying for.

Think about it this way. Would the customer really pay that $50 if all they got was the mobile product? Lets say that, on average, the mobile product is 30% of the value of the product. The other 70% is the web based product, access to customer support, backup services, etc. If this scenario is even roughly correct, then what Apple is doing is asking for 100% or near 100% (perhaps more or less) of the value of the mobile experience. This analysis applies to any multi-platform SaaS product.

Extracting 100% of the value of the mobile product is a total non-starter, and if Apple enforces their new policy against SaaS businesses, I think most of the multi-platform ones will leave because the economics just won’t work. The thing is, because Apple has so capriciously changed their policy, affecting companies like Amazon, and companies like SalesForce that have made a significant investment iOS investment, one has to wonder whether building iPhone apps is safe even if they don’t initially enforce this policy against them. Because they could. If you always have to worry whether the platform vendor is going to figure out a way to put you out of business or extort you, it just may not be worth the risk. Damn I feel like I am writing about the Gambinos!

I am particularly worried about this because my company is going to launch a new service in April and we are busily working on an iOS application and we can’t really turn back now. The main reason we chose iPhone is because I have an iPhone and an iPad and because the iPad currently leads the tablet market. But I am now worried that we may have made the wrong choice and should have gone the Android way.

If this doesn’t get cleared up or changed, there will still be plenty of games and and productivity tools for the iPhone, but new multi-platform SaaS application developers won’t touch iOS with a 10 foot pole. And existing companies will pull their iPhone apps in droves.

Well one thing for sure, the Android team must be kvelling!

Post Author: Ruby H. Rosenbaum

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