Coming back to the issues with app store purchases, there is one small decision that makes the issue more problematic than it needs to be: password caching has only one setting for both the App Store, and in-app purchases, and Apple has created a very strong incentive to turn this setting on: if you don’t, you must enter your password for every single app update.
We have basically three categories of apps: entertainment, social, and productivity. In general, only productivity apps are able to generate platform lock-in: entertainment is consumed, and rare are the games that keep our imagination for more than a few months, while social depends on providing the largest audience and so has a very strong incentive to be cross platform.
This makes productivity apps extremely important for platform owners, but we can see on the Apple App Store that they are playing second fiddle to games. The problem is that for such apps to thrive, they need recurring revenues, so that they can be improved to stay relevant, while the store has grown from selling songs, and so lacks upgrade pricing, and especially mechanisms to check out apps before committing to them.
I wonder what Apple’s thinking about it is. The complaints have been known for years, and not much has improved. Apple continues to dominate the productivity category with excellent apps sold for relatively low prices, and one wonders whether Apple is afraid of dominant apps emerging on the store, having been burnt when Adobe pretty much abandoned them for Windows.
This means that you need to work around a relatively hostile environment when you want to sell productivity apps into the mass market. The only category working well already are tax preparation packages, as you need a new version every year to follow tax changes, so it makes prefect sense to sell a new package every year. For all other software a subscription model would work best, but it is only tolerated as long as you have a server component with it as well; also there is the issue that customers do not want to pay a permanent rent to be able to access their own files.
What to do now
The only way you can get a trial version into the store is to provide a full version that can only handle one document (or for social apps be limited to 10 contacts). If this does not fit your app, your only chance is to provide a good video demonstration on the app website.
Upgrades are not supported, so you will need to put a new version into the store, and inform your old customers with a notification that the new version is now available, and that for the first weekend it is on sale to ease upgrades. This should be the only sale you are doing, so that people are not starting to wait for the price to drop again.
What Apple can do
Everyone would love to see upgrade pricing, but I doubt that Apple will provide this: they want software to move to the newest iOS for "free", so that users can easily upgrade to new hardware.
A great help would be the ability to provide upgrades to apps no longer on sale, as long as the same app is also made available for sale on a different sales ID. This would enable a slightly longer support cycle: For every major iOS release you put a new version on sale, and remove the older ones from sale. You provide the current version as an update to your old customers for two or three additional iOS revisions, before stopping with updates. Once you have provided your last update, say for 6.1.3, and 7.0 is out, you could then put the old version back on sale for old devices, with a clear statement that it will not see any updates anymore.
There is also quite some room to improve app discovery on the store, enough to warrant its own post later.
Now that Apple has presented iOS 7, we can start to speculate which hardware Apple will present in the fall. My guess is that the new lineup for iPhone and iPad will be:
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iPhone 6
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iPhone 5
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iPhone Touch
4" Retina display, $350 without contract, larger battery, 8GB -
iPad Retina
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iPad mini Retina
The iPhone 4, 4S and iPad 2 will be dropped, as Apple will want to stop selling 30pin connectors and non-retina displays. With advances in screen technology I believe that the mini can now support a Retina display, and the large iPad will loose 80g thanks to them. Also the large iPad will now come in sizes 32/64/128GB.
Now that Apple has presented its new iOS version, it is obvious that this update basically requires a retina display to function well. This shows especially in the reliance on fine typography, a feature that only works well on high resolution displays, and I believe it telling that OS X has not seen a similar update yet. The updated interface makes a very refined impression, apart for several icons which are visually too strong for my taste.
A few other thoughts:
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I believe there is a good chance that we will already see a retina iPad mini in the fall, with a lighter update for the full version and the removal of the 2, given the extent to which iOS 7 works better on a retina display.
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The Mac Pro depends a lot on how extensive Thunderbolt support will be to provide extension options, and how pricey they will be.
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No MacBook updates, is Apple waiting on 4K display support? Or has Intel supply issues and Apple wants to concentrate on the one model that would profit most from the new CPU?
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The added support for game pads for iOS/OS X could be the first step to make Apple TV also into a gaming console.
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600 million iOS devices is a huge installed base, and more than large enough to support a vibrant app ecosystem. Actually the higher prices Apple charges are a good way to self select the best paying customers, and help iOS attract the best developer talent.
Samsung convinced the ITC to issue an import ban of older iPhones. Which feels pretty strange: Samsung could not (because they are standard essential patents) demand that nobody else use their patents, so they were restricted to demanding an extortionate FRAND rate (about 2.5% of sales). So it would have been sufficient, until a court determines a reasonable rate, to demand that Apple should post a bond covering their demands, and enforce the ban only should Apple be incapable of providing the money. After all, SEPs cannot be used to exclude someone wanting to license it, the only discussion will be about the appropriate rate. So as long as the licensee can guarantee that it will be able to meet a court determined rate, there is no legitimate interest in an import ban for the holder; it is useful only to extort a much higher license fee than otherwise possible.
If we compare Android and iOS security, we see that Google has copied Apple’s approach quite extensively, so that only two important differences remain:
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iOS uses the 256bit version of AES, while Android uses the 128bit version
In theory this is not such a large difference, because the key schedule for 256bit is not especially good, but 2^65 bits are still 4 million terabytes working memory for the shortcut.
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iOS has a unique device AES key fused into the hardware.
It prevents people from easily using a specialized computer for cracking, and you can only check one key every 80ms on device. You could extract the device key by checking with an electron microscope, but this is very expensive, error prone, and destroys the chip. Or you can still brute force it, but then you will search for a random 256bit key. 2^128 operations would need 10^19 years on a parallel cracker doing 1000 GigaOps per second.
This means that in practice iOS is much more secure than Android, because almost all passwords have much lower entropy than 128 bits; a password consisting of random letters and numbers would need to be 25 characters long to achieve it.
Dave Addey has written a nice piece about App Store pricing. The pricing is not much of a problem with games, where Apple allows developers to make progress painfully slow unless you regularly fork over some money: Real Racing 3 is such an example.
Productivity apps should copy this model, and ask for gold for every document you create. Then give everyone one free document, and offer 5 document, 50 document, and infinite document packs as IAP options. Or for your social apps limit the amount of people you can connect to. The few apps that do not fit are either conceptually simple enough that you can make a convincing video demonstration or they live off data for which you can sell a subscription.
Interestingly Apple permits quite a bit on the App Store which I regard as clear violations of the developer agreement: in game currency violates section 2.1 of the IAP addendum (it is a prepaid account), the Perspective app violates section 2.3 as a subscription service. I suspect these are a symptom of Apple looking to allow people to make money, and hopefully will mean some official changes coming in the future.
There is also a more fundamental problem in app discovery: The App Store is so large that it is quite hard to find what you want. What you want in addition are curated stores that only carry the best software, say one for teaching science. They should not replace the main store, but be a complement, a specialist that is allowed to drop stuff it finds irrelevant, while the big store carries everything.
The earnings for this quarter are in, and we essentially see cheaper iPads fueling unit growth, with a corresponding loss of gross margins, while the more expensive models show no or maybe even negative growth.
The iPhone numbers are a strong indication that we are approaching a stable level in high end unit share, with people now feeling that they have mostly enough iPhone in their pockets. Still when we look at the Verizon numbers, which show a roughly even split between iPhone 5 and older models this quarter, we see that there is a large segment that strongly prefers a two year old iPhone to a current Android phone for roughly the same price. This indicates that the Apple ecosystem still commands a significant premium, but it is more for overall ease of use, instead of for new features, essentially saying that older hardware is already enough phone for most.
There is still a strong incentive for carriers to push phones using the 4G networks, as they are much more spectrum efficient, but after that the incentive for subsidies is gone unless a new model creates fresh bandwidth demands, and this will mean increasing pricing pressure on the iPhone.
There are three behaviors affecting the iPhone:
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people would keep their phones for longer, maybe replace the battery after a while, but still remain loyal to the iPhone.
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people will switch over to cheaper, good enough alternatives.
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people will decrease spending on the iPhone because they now own an iPad for mobile computing.
Because of the huge margin on the iPhone, Apple has quite some room to reduce prices and still maintain 30% gross margins. And their quality is still sufficiently better than the competition to maintain these margins, after all we are only talking about a few hundred dollars for people spending $1000 or more every two years for phone service.
Parental Controls are still very broken in iOS 6. They should enable a quick and easy way to control what children can use on their devices, but are hampered by a complete lack of support for the multi use nature of the device.
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no password is needed to activate controls, so if you forget you can get partially locked out of your own device
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no reasonable option for IAP exist, you want password free updates and caching in the App Store, with the password caching stopped when you switch out of the store. And asked every time for IAP.
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no global read only switch for your data and permissions.
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no page based access control: you really want to have creative and consumption apps separate, so your kids could spend hours playing with GarageBand, but only half an hour each day with games.
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no restrictions sets, so that you can easily change between different usages.
As it is, I suspect the best solution is to have one game free iPad for each children, and a pure games iPad shared with maybe the parents. But this looks pricey.
We repeatably see people racking up incredible charges on in-app purchases on iOS, sometimes even into the thousands of dollars. (Not that other systems are immune, they are simply too unattractive now)
Many of these titles use mechanisms that are explicitly designed to exploit gaming addiction, and as with every other title they have been approved by Apple, sometimes even promoted by Apple. As such Apple is actively colluding in the exploitation of gaming addiction for their own benefit, the well known 30% cut from the App Store.
The consumable model for freemium games is actually a reasonable approximation of a software rent model, but to make this work, it must be controlled better to ensure that it is close to impossible to rack up insane charges:
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Consumables should be either directly time related (the classic subscription), or there must be a hard limit to how much in game currency you can buy per day.
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In app purchases must be separated between permanent buys, and consumables. Ideally every single in game currency purchase should need to be confirmed with the account password.
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Apple should set a 50$ per month limit on in game currency purchases. Raising the limit needs to incur a cool off period of a day, after which you need to reconfirm your raise before it starts. We can also stipulate that such a raise can no more than double the limit, and include the do not raise answer (accepted with no waiting period), which would force you to trigger a new request with a fresh wait should you change your mind. As a further bonus, the limit could start to lower itself automatically again, for example when less than 25% of the limit was used in a month, it would halve for the next month.
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Apple should add support for upgrade pricing as well as trial periods to decrease the incentive for freemium.
With these changes implemented it should become nearly impossible to go broke accidentally, it would even include a pretty powerful break for people becoming addicted, and intentionally racking up the bills. Until these are implemented, there are ways to help immediately:
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Every single in app purchase must be confirmed with the account password.
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Apple should implement a wait period before an in-app purchase can be repeated. This should depend on the sum spent, say a day for up to 10$, a week for up to 50$ and a month for anything even larger, with in game currency purchases limited to at most 50$. Since all purchases go through Apple, this should be possible server side. But if technically impossible, Apple needs to force publishers to implement those, and remove any offending titles from the store after a grace period of a month.
I do not understand why there are no fraud prevention measures kicking in when such large purchases are being made. Spending more than a hundred bucks a month on games is such a rare occurrence that the extra annoyance of verifying them with the purchaser would be more than compensated for by the removal of bad surprises for other people.
Also I do believe that it is in Apple’s long term interest to start removing the worst in-app offenders from the store. The brand Apple is based on the presumption that they filter out the bad stuff to keep things simple. And not acting will undermine our trust in their curation, giving us reason to leave.