Excerpts from the notes we’ve seen. More as they come in.
Amit Daryanani, RBC: Multiple Changes To App Store, All Focused On Increased Monetization. Ahead of next week’s WWDC, Apple today announced several major changes to the App Store: 1) Search Ads: Apple will allow developers to promote their apps in the App Store in search results through Search Ads (improves App discovery process and adds a new revenue stream to AAPL); 2) Subscription Model & Auto-renewal: All apps will be eligible to offer subscription pricing and in-app purchases could be eligible for auto-renewable. 3) 85/15 Model: After Year 1 of auto renewal, the developer would get 85% of subscription price (vs. currently 70%) and 4) Price Elasticity: Developed will be able set territory specific pricing. In our opinion, these changes enhance Apple’s ability to monetize the App Store, entice developers to make users more sticky to the ecosystem and improve the services revenue stream.
Kulbinder Garcha, Credit Suisse: New App Store Drivers. We believe that the shift to a subscription-based model should result in a stronger sustainable recurring revenue stream from the App Store which we note is highly GM accretive at ~87% at the net level and should accelerate growth going forward… The paid search ads, launched only in the U.S. initially, will be chosen on an auction process similar to Google’s AdWords… Given Apple’s App Store generates ~2x’s as much revenue as Google’s Play Store and 65% of app downloads are driven by search, we believe this could represent a significant opportunity for both Apple and its app developers.
Jan Dawson, Techpinions: Schiller’s First Six Months Have Been Productive. Phil Schiller took over most of the responsibility for the App Store from Eddy Cue six months ago, shortly before Christmas. The scale of these changes is impressive but it’s a surprise we didn’t see some of them sooner. Developers have been clamoring for fixes to several of the problems these changes address for years and Apple should have dealt with them earlier. However, the pace Schiller has moved since he took over this responsibility reinforces the sense it was the right move and he’ll address pain points with more alacrity than Cue did.
Ben Thompson, Stratechery: App Discovery and Paid Search Ads. I’ll believe in meaningful improvements to organic app discovery and search when I see it; in many respects the poor quality of the App Store’s search shows how far Apple has to go when it comes to understanding and organizing large amounts of information (The Google equivalent would be scrolling a list view in Android!). So we’ll wait and see. Subscription-Based Pricing. Oh hallelujah! I cannot overemphasize what a win-win-win subscription pricing is for productivity apps.
John Gruber, Daring Fireball: The New App Store: Subscription Pricing, Faster Approvals, and Search Ads. For users, the benefit is that they should see more high quality productivity apps. And they’ll only have to pay for them as long as they’re actually using them. For developers, I think this is the first time the App Store supports a business model that sustains long-term ongoing development of deep applications. The proof of the pudding is in the eating, and so we’ll have to wait and see if this actually changes the economic dynamics of developing for the App Store… I would argue that the App Store has changed more in the last six months than it did in the previous eight years. Throw in a “finally” if you want, but again, I say better late than never.
Neil Cybart, Above Avalon: Apple Announces App Store Changes. Opening up subscriptions to the entire App Store is not going to usher in some type of reawakening in which the 700 million customers downloading apps on Apple devices begin to value software differently. Instead, much of the benefit associated with improved subscriptions will flow to a very small number of developers while everyone else sees little to no change… We discussed App Store search ads back in the daily update from April 18th, “Apple Contemplating Paid Search for App Store.” Bloomberg had the scoop that Apple was thinking of putting ads in the App Store, and it would appear that there are no major changes from what Bloomberg reported and what Apple will be launching.
Q*Bert, Daring Fireball with comments: Small/indy developers don’t have anywhere near enough cash to compete in this space, especially with only one ad showing up. So you’ll only be seeing EA, King, Disney, and Gameloft all day long and you will like it… Shame on Gruber for not calling Schiller out on it.