Apple (AAPL); Match (MTCH); Duolingo (DUOL); PayPal (PYPL) & App-based businesses in Europe – Half-Hearted App Store Reform – January 27, 2024

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Apple (AAPL); Match (MTCH); Duolingo (DUOL); PayPal (PYPL) & app-based businesses in Europe – Half-Hearted App Store Reform – January 27, 2024

Apple’s app store is gearing up for some big changes in Europe. This is in response to the Digital Markets Act, which will go live in March. This legislation designated all mega-cap players as “gatekeepers” who are prohibited from doing things like unfairly promoting their own products vs. competition, blocking competitors or using customer data without permission.

For the first time ever, in the EU, Apple will allow users to download iOS apps through 3rd party app stores (called sideloading). These app stores must be approved by Apple, but after approval, customers can download whatever they want with them. That includes apps currently banned by Apple. This news also frees 3rd party developers to utilize 3rd party payment processors rather than solely Apple’s ecosystem.

With these new changes, Apple’s take rate of 30% would fall to 17% for those using other processors, and 20% for those using Apple’s. Still, there’s a very important caveat. Apple will also charge half a euro per download after the millionth download for any app. According to Spotify, which does compete with Apple, 17% paired with the new fee leaves the company no better off or worse off than before. Match and Duolingo would likely be in the same boat.

There’s another interesting aspect to this news. Apple will open its near field communication (NFC) tech to other apps besides Apple Pay. This will free players like PayPal, Square, Shopify and many others to more directly offer mobile tap-to-pay. They’ve been able to stitch together integrations to indirectly offer this to date. That will no longer be necessary and should bolster ease of use (and so conversion rates).

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