The Open App Markets Act: good for developers & advertisers, bad for Apple & Google

Understanding the proposed bill

Deemed the Open App Markets Act, the new bill could dampen the dominance of Google and Apple in the mobile and advertising arenas. The new legislation could change things; it would enable the introduction of third-party app stores on Apple devices, and allow developers to both offer more competitive pricing and use non-Apple payment systems. As it stands, Apple and Google require developers and advertisers to play strictly by their rules — Apple even restricts developers’ ability to tell users about discounts and promotions. The company also requires a 30% cut of sign-up costs for paid services within the App Store.

The Open App Markets App would, in essence, allow users to download apps from various marketplaces onto their devices. It would introduce a degree of competition by allowing new players into the ecosystem and breaking down stringent restrictions imposed on developers.

“The proposed legislation would be severely disruptive to the status quo for the platforms but unquestionably beneficial to developers and consumers,” says Eric Seufert, analyst at Mobile Dev Memo. “There are questions around how the provisions for privacy and fraud in the bill will allow platforms to sidestep some of its requirements. But broadly the bill will prevent platforms from operating in ways that are anti-competitive or, in some cases, hostile to developers.”

The antitrust movement gains steam

Major tech companies have been under immense fire in recent months for their near-monopolies in the industry. In particular, Apple is facing attacks from multiple vantage points over its App Store payment policies. Fortnite creator Epic Games has sued Apple over being kicked out of the App Store for using a non-Apple in-app purchasing system. After making their final pitches in a US District Court in California in May, both Epic and Apple await the decision of Judge Yvonne Gonzalez Rogers — though Epic won an appeal in Australian courts in July.

Meanwhile, project management software Basecamp’s email application Hey was similarly booted from Apple’s App Store over a payment system debacle. Basecamp’s chief technology officer David Heinemeir Hansson took to Twitter to say he’d rather “burn this house down” than supply Apple with the 30% cut it demanded — which he dubbed a “ransom. The June 2020 decision fell on the same day that the European Commission announced it was launching an antitrust investigation into Apple Pay and the App Store.

These and other cases have garnered widespread attention and have increased pressure on lawmakers to take action to increase competition in the space if not break up tech titans like Apple and Google altogether. Just last month, 36 US states and Washington, D.C. teamed up to sue Google in a major antitrust case challenging the company’s ironclad grip on its app store.

Since legislative action has yet to limit the reach of Google and Apple in any notable way, brands have stopped relying on app monetization for revenue and have turned instead to advertising. But the advertising landscape is not only dominated — but becoming increasingly restricted — by the same tech giants. Under new policies introduced by both Google and Apple, consumers enjoy greater control over how and when their data is captured, sold and used. However, when implemented, these rules will severely impede advertisers’ abilities to market effectively by limiting targeting and measurement capabilities.

“App stores have been the gatekeepers of the mobile app industry for almost 15 years,” says Hugo Loriot, partner and US managing director at data and technology firm fifty-five. “The toll they've been taking on in-app monetization has contributed to app developers' quickly shifting their focus to ad monetization, and now that Apple has stripped their ability to track most users with iOS14, the entire economics of app growth is in question. Forcing app stores to accept third-party payment systems would be welcome to give app developers more flexibility to monetize their audience beyond advertising.”

Loriot proposes that perhaps Apple should collaborate to approve a shortlist of technology partners who could be trusted to handle payment. He says that we need not give up privacy in this picture, so long as “there are other ways to monetize an app than tracking users for selling ad space.” If passed, the new legislation could improve competition in the mobile application space while preserving consumer privacy in alignment with the new policies introduced by Google and Apple. Indeed, the bill includes language specifying that operating systems will be exempt from certain violations of the law if the violations can be shown to protect user privacy or ensure greater security.

The dominion of data

Beyond enabling third-party payment systems, the Open App Markets Act could level the playing field in other important ways. For instance, it may limit Google and Apple in their abilities to collect data on installed apps behind closed doors and use such data to apply “preferential treatment to how apps rank in their app stores outside of clearly disclosed advertising campaigns,” according to Epsilon chief analytics officer Loch Rose. Rose says that these protections reflect many of the complaints made by Spotify when it levied a lawsuit against Apple in 2019, alleging that the company unfairly promoted its own streaming app in the App Store.

With such protections in place, app developers and advertisers could rest assured knowing that their data is not being used to create unfair advantages for the gatekeepers of the ecosystem. It would further validate the utility of developers’ first-party data — an issue that is becoming evermore pressing in anticipation of the sunsetting of the third-party cookie. “A takeaway is that this proposed legislation reinforces the value of first-party data, and app developers should feel encouraged that lawmakers are actively looking to protect their assets from usage by external parties such as the owners of operating systems,” Rose says.

Ultimately, if passed, the Open App Markets Act would chip away at the seemingly impenetrable control that Google and Apple currently hold on the mobile landscape and increase competition – a move that experts say will benefit not only developers and advertisers, but consumers, too. Ken Harlan, founder and chief executive officer at mobile-first advertising company MobileFuse, tells The Drum: “As long as the app stores continue to be incented to review apps for consumer safety and privacy, bringing more competition and options to the app marketplace is always a good thing for consumers.”

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