“A 30% revenue share can easily be the difference between a company that can afford to scale, hire new employees, and reinvest in its product, and one that is perpetually struggling to stay afloat.”
This brought up a fun thought exercise for me. Pretty sure that Y Combinator would argue that giving away 7% of one's company for access to intangible (but beneficial) things like funding, advisors, etc, is completely worth it for a company. Pretty sure that they also fund companies that pay salespeople fairly significant commissions on sales.
Interesting to see them argue that asking a company to give up 30% "commission" on revenue for access to a large market stifles competition and innovation.
Is Y Combinator's forcing companies to give up 7% of their companies for access to advisors and funding stifling innovation and competition? (Spoiler: I don't think so. I think both Y Combinator and apple should be able to capitalize on the access they provide.)
Far be it from me to defend Y Combinator or VCs in general but IMO the situation is a bit different because of the monopoly (or at least duopoly) power that Apple and Google hold as gatekeepers over the only practical way to sell to iOS and Android device users.
Of course, I'd also assume most or all the people associated with YC were part of the "fire Lina Khan because our whole business model is actually just taking advantage of FAANG acquihire panic" squad, making them hypocrites (in a slightly different way) for helping to prop up these monopolistic gatekeepers and then acting put upon by the results of that.
I thought the standard advice is to target 80-90% gross margin at early stage so you can easily eat 30% CAC. It probably starts to hurt as you scale though.
This is a very good argument. We would also learn what features of an App Store add marketable value, and what features are trivial. I imagine the front end isn't very important, but some kind of build certification/verification is. That requires branding, infrastructure and labor. Maybe its easier than I imagine to verify that apps aren't lying about what they do, but as far as I can tell that could well account for some 5% at cost.
On the other hand you trust your bank, for example, so you follow the link on their website and install the App, and the trust came from their own brand.
Startup founders can choose between many models of funding, VCs, etc. Starups cannot choose between different ways of accessing willing customers over iOS, they have to comply with a %30 cut and a jungle of regulations that act in Apple's interest.
These two examples aren't the same, even just on the basis of market power.
Equity and revenue share are fundamentally different things. YC could be asking for 30% equity and it'd still be more reasonable than the 30% revenue cut modern gatekeepers demand.
I'm not sure how offering an investment in a highly competitive market (dozens of incubators, thousands of vcs) is comparable to raising the cost of payment processing 900%. Alongside all the other bad acts that Apple does, mostly inhibiting your ability to provide good customer service to your customers. Or even continue a billing relationship if they migrate from ios -> android/pc.
Time to see what the next move for Apple will be if they lose the appeal. Because I doubt Apple will be content to lose money on the ruling and will look to collect the fees elsewhere. Without the ability for developers ship iOS apps with no business relationship to Apple you're still pitching your tent on someone else's land.
> “Y Combinator — and the larger venture capital community — have long been hesitant to back app-based businesses that were poor investments due to the Apple Tax,”
This could be good, if it encourages people to re-learn the value of open standards, like Web is supposed to be, rather than helping to perpetuate the proprietary app stores.
Also, I think it's noteworthy that, once a company gets customers locked into a proprietary app store, they show their true extremely greedy, abusive, and indifferent side to third-party developers. No matter how warm and fuzzy a brand they craft for consumers.
Are Bay Area libertarian techbros ironically going to try to rely on government regulation to keep the awful proprietary app stores tolerable, or will they rediscover what industry has known for decades about the value of open standards, and direct their efforts consistent with that?
I don’t know. You could just as well say, “A 3% merchant fee can easily be [… ruinous to a bunch of companies]”, and I’d be talking about Stripe, a Y Combinator company. In Europe they manage to cap interchange fees at 10x less, and there’s no less “payments innovation” or more “fraud” or whatever some nice red headed LISP brothers or some insightful patio furniture guy will say is eating into the 3% merchant fees.
People struggle with this: Stripe and Apple do the same thing wrt to the fees. They get all into a knot trying to explain how 3% of all revenue, successfully capped at 0.3% in Europe, is somehow different than Apple taking 30% of App Store IAP. We already live in the world where nice, red headed LISP brothers and insightful patio furniture guy is wrong. You don’t even need to talk about it or file a brief.
The reason the Epic case is tough is because the fee doesn’t matter. Like what is the right fee? Say a number. Clearly it doesn’t make sense to take a fee at all! Apple is doing something valuable - they are concentrating wealthy, good customers who overwhelming choose iPhones instead of Android phones - and instead of making iPhones more expensive they take from app developers. But if you did the sensible thing - force the platforms to charge the cut they are taking from the end user up front, when they buy the phone - nobody is going to do that.
It’s exactly the same problem as Europe saying Facebook has to be ads free. Nobody chose to pay for a Facebook subscription. The truth is the regulators are in between a rock and a hard place if they try to make changes to one number in the midst of the status quo. In the past, regulators took more drastic steps, they split up the monopolies, and once you understand how weak these regulations that people are litigating are, suddenly you will be much more sympathetic to the idea that the App Store and the iPhone have to be different businesses, or that private digital payments companies shouldn’t exist at all.
But I also, I guess, kinda just have a dumb thought about this whole ordeal. Broadly speaking, we are in a position where we, the general public with the backing of the government, want to change how a private corporation uses it's products that it sold to us. Not for any other reason that would shield us from harm or prevent risk, but rather because the corporation's products are so successful a lot of people use them too much! But wait! That's not actually true because there's enough products on the market that we don't actually need to use this product...but we like it because its incrementally the best and the chat bubbles are blue and applications run better and seem higher quality (which is a selling point of the product we are now actively dismantling but I digress...)
I know its tiring to use food cliches, but imagine if like, I make a business selling apple pies and my apple pies are incredibly successful and everyone eats them all the time and now all of a sudden I need to also guarantee that my business can make cherry pies because my apple pies sell so damn well. But truth is, its not really about the apple pies at all. It's about my baking trays. We actually just want to make sure that the baking trays of my business are now capable of also cooking for cherry pies even though that's got nothing to do with my fucking business. I sell apple pies. I'm so confused
I wonder what Apple's bigger fear is - losing that ~30% cut, which is massive, or when they have to compete with alternative app stores and when finally people see how forward "software finesse" has come to in 2025 and how pathetic Apple's software/service ecosystem has been, losing most of the remaining whatever reduced cut it was; i.e. getting hammered at both ends. I think that's why they are fighting tooth and nail to keep the curtain as it is on the grand stage of privacy theatre.
> But people should also be able to get apps from whatever store they want.
I agree with you. But, as devil's advocate, why not suggest that Apple should be allowed to run as crappy a store as they want, while people should be free not to buy Apple?
If there was more than a duopoly in smartphones, I'd say Apple should be able to have whatever horrible app policy they want, so long as it is clearly communicated to everyone including customers. Let the market decide.
But that's not where we are. I think it makes sense to treat both Apple and Google as de facto monopolies with respect to the smartphone market, and impose some regulation on what they have to allow and how much they can charge for it.
Agree. I think all the discussions often missed the main problem. Apple App Store holds far too much power, and they alone decides letting or stopping other business. All Banks, Finance, Ecommerce, Retail need to kowtow to Apple or Google for access. And that is not the power and responsibility you want to hold.
People argue you have Website too. But Website does not provide the same level of experience and is at disadvantage compared to Apps.
I have long argued Apple should have given up this power since 2013 / 2014. And Apple should split Games to Game Store, that keeps their 30% cut and would have kept at least 70 - 80% of their current App Store revenue.
For what ever reason last time I said this in 2018 and 2020 I was devoted to oblivion on HN.
Is this the civil rights struggle for middle-men and compradors? You lack a preference that your money go to people who work as opposed to people who don't work and stand between you and the people who do, collecting tolls?
People here miss the value of a tightly moderated walled garden: I don't have to worry about downloading things that are misleading or are chock full of dark patterns, because it has been vetted by an App Store that I trust. And when I download an app with a subscription through App Store, I can see any time how much it costs, I can cancel it any time no fuss: https://www.iphonelife.com/sites/iphonelife.com/files/styles...
Meanwhile, any subscription I sign up for through another channel, I have to wade through a sea of dark patterns to reach a cancel screen.
This is why I choose to have an iPhone, because the garden is walled and I can relax. If you want freedom to have multiple different app stores, Android is a better option for you.
The brief is not particularly compelling; it mostly assumes what it is trying to prove. It says:
But the Injunction requires Apple not to prohibit linking-out period,
full stop. It does not permit Apple to condition the right to
link-out on the payment of a fee.
In fact, the injunction is silent on the matter of fees for linking out.
Similarly, the simplicity of the alternative world of just clicking a button fails to incorporate any additional risks (hence the "scare" screen).
Courts generally permit companies to charge what they want. It may be justifiable to force alternative markets for something close to a monopoly, but it's not clear they can force the alternative to be cheaper.
If you look at the table of authorities, it's basically Epic itself, and some 50+ year-old cases. There's just nothing really in support.
Currently, a tiny, tiny percentage of very large developers make virtually all of the profits from selling Apple apps. Apple's 30% rate has been in place longer than most of them have existed, so there's been no surprise. Price discrimination is legal, and Apple's choice to make larger companies pay more seems supportive of small businesses. So there's not even a compelling argument that Apple's fees are evil; it's just that big, maximalist players see a way to get more profit.
So yes, Apple fees limit profits for Y-combinator startups. The brief would have been more compelling had it listed the startups that were passed on due to the fees (rather than listing the successful ones). That's the only new data point in this argument, and would have been direct evidence of impact to small companies. But because the brief didn't make this argument factually, the court can fairly assume there are no such cases, and the brief may have done more damage than good to its cause.
Epic's argument is very understandable: they don't want to pay the same kind of platform fees to Apple for having Fortnite in the App Store that they are paying Nintendo for having Fortnite in the eShop, etc. Makes a lot of sense.
36 comments
[ 0.29 ms ] story [ 81.3 ms ] threadhttps://www.magiclasso.co/insights/apple-development/
Good to see VCs and Y Combinator now supporting and pushing for change.
This brought up a fun thought exercise for me. Pretty sure that Y Combinator would argue that giving away 7% of one's company for access to intangible (but beneficial) things like funding, advisors, etc, is completely worth it for a company. Pretty sure that they also fund companies that pay salespeople fairly significant commissions on sales.
Interesting to see them argue that asking a company to give up 30% "commission" on revenue for access to a large market stifles competition and innovation.
Is Y Combinator's forcing companies to give up 7% of their companies for access to advisors and funding stifling innovation and competition? (Spoiler: I don't think so. I think both Y Combinator and apple should be able to capitalize on the access they provide.)
Of course, I'd also assume most or all the people associated with YC were part of the "fire Lina Khan because our whole business model is actually just taking advantage of FAANG acquihire panic" squad, making them hypocrites (in a slightly different way) for helping to prop up these monopolistic gatekeepers and then acting put upon by the results of that.
On the other hand you trust your bank, for example, so you follow the link on their website and install the App, and the trust came from their own brand.
These two examples aren't the same, even just on the basis of market power.
So different in fact that the comparison doesn't hold water.
Capitalizing, to the detriment of your competition (other paid software services) when you have a monopoly or duopoly on app distribution isn't legal.
This could be good, if it encourages people to re-learn the value of open standards, like Web is supposed to be, rather than helping to perpetuate the proprietary app stores.
Also, I think it's noteworthy that, once a company gets customers locked into a proprietary app store, they show their true extremely greedy, abusive, and indifferent side to third-party developers. No matter how warm and fuzzy a brand they craft for consumers.
Are Bay Area libertarian techbros ironically going to try to rely on government regulation to keep the awful proprietary app stores tolerable, or will they rediscover what industry has known for decades about the value of open standards, and direct their efforts consistent with that?
People struggle with this: Stripe and Apple do the same thing wrt to the fees. They get all into a knot trying to explain how 3% of all revenue, successfully capped at 0.3% in Europe, is somehow different than Apple taking 30% of App Store IAP. We already live in the world where nice, red headed LISP brothers and insightful patio furniture guy is wrong. You don’t even need to talk about it or file a brief.
The reason the Epic case is tough is because the fee doesn’t matter. Like what is the right fee? Say a number. Clearly it doesn’t make sense to take a fee at all! Apple is doing something valuable - they are concentrating wealthy, good customers who overwhelming choose iPhones instead of Android phones - and instead of making iPhones more expensive they take from app developers. But if you did the sensible thing - force the platforms to charge the cut they are taking from the end user up front, when they buy the phone - nobody is going to do that.
It’s exactly the same problem as Europe saying Facebook has to be ads free. Nobody chose to pay for a Facebook subscription. The truth is the regulators are in between a rock and a hard place if they try to make changes to one number in the midst of the status quo. In the past, regulators took more drastic steps, they split up the monopolies, and once you understand how weak these regulations that people are litigating are, suddenly you will be much more sympathetic to the idea that the App Store and the iPhone have to be different businesses, or that private digital payments companies shouldn’t exist at all.
But people should also be able to get apps from whatever store they want.
(Ground rules all app stored would have to follow based on technical, security, and legal concerns would be fine too, IMO.)
Of course Apple would never go for that, so we'll end up with whatever mess legal processes can wring out of them.
But I also, I guess, kinda just have a dumb thought about this whole ordeal. Broadly speaking, we are in a position where we, the general public with the backing of the government, want to change how a private corporation uses it's products that it sold to us. Not for any other reason that would shield us from harm or prevent risk, but rather because the corporation's products are so successful a lot of people use them too much! But wait! That's not actually true because there's enough products on the market that we don't actually need to use this product...but we like it because its incrementally the best and the chat bubbles are blue and applications run better and seem higher quality (which is a selling point of the product we are now actively dismantling but I digress...)
I know its tiring to use food cliches, but imagine if like, I make a business selling apple pies and my apple pies are incredibly successful and everyone eats them all the time and now all of a sudden I need to also guarantee that my business can make cherry pies because my apple pies sell so damn well. But truth is, its not really about the apple pies at all. It's about my baking trays. We actually just want to make sure that the baking trays of my business are now capable of also cooking for cherry pies even though that's got nothing to do with my fucking business. I sell apple pies. I'm so confused
They do in EU, because they were forced to.
AltStore PAL https://altstore.io/
Buildstore https://builds.io/
Aptoide https://en.aptoide.com
.. and so on
I agree with you. But, as devil's advocate, why not suggest that Apple should be allowed to run as crappy a store as they want, while people should be free not to buy Apple?
But that's not where we are. I think it makes sense to treat both Apple and Google as de facto monopolies with respect to the smartphone market, and impose some regulation on what they have to allow and how much they can charge for it.
People argue you have Website too. But Website does not provide the same level of experience and is at disadvantage compared to Apps.
I have long argued Apple should have given up this power since 2013 / 2014. And Apple should split Games to Game Store, that keeps their 30% cut and would have kept at least 70 - 80% of their current App Store revenue.
For what ever reason last time I said this in 2018 and 2020 I was devoted to oblivion on HN.
Our current governments love monopolies, though. Easier to control.
Meanwhile, any subscription I sign up for through another channel, I have to wade through a sea of dark patterns to reach a cancel screen.
This is why I choose to have an iPhone, because the garden is walled and I can relax. If you want freedom to have multiple different app stores, Android is a better option for you.
Similarly, the simplicity of the alternative world of just clicking a button fails to incorporate any additional risks (hence the "scare" screen).
Courts generally permit companies to charge what they want. It may be justifiable to force alternative markets for something close to a monopoly, but it's not clear they can force the alternative to be cheaper.
If you look at the table of authorities, it's basically Epic itself, and some 50+ year-old cases. There's just nothing really in support.
Currently, a tiny, tiny percentage of very large developers make virtually all of the profits from selling Apple apps. Apple's 30% rate has been in place longer than most of them have existed, so there's been no surprise. Price discrimination is legal, and Apple's choice to make larger companies pay more seems supportive of small businesses. So there's not even a compelling argument that Apple's fees are evil; it's just that big, maximalist players see a way to get more profit.
So yes, Apple fees limit profits for Y-combinator startups. The brief would have been more compelling had it listed the startups that were passed on due to the fees (rather than listing the successful ones). That's the only new data point in this argument, and would have been direct evidence of impact to small companies. But because the brief didn't make this argument factually, the court can fairly assume there are no such cases, and the brief may have done more damage than good to its cause.