Whether it’s good news or bad news is a matter of perspective. But, the buzz is that Apple Inc. (AAPL) is considering a rework of how its App Store’s search function works.
It’s good news for iPhone and iPad owners who’ve been unpleasantly surprised at how inelegant the usually elegant Apple service is. But it has been an annoying problem since iOS was unveiled — complaints of App Store’s clunkiness have only continued to grow as its mobile devices proliferated.
Any improvement in finding apps would be welcome by users.
It’s bad news, however, for any app developer without deep pockets … which is arguably most of them. See, as part of the revamp of the App Store, Apple reportedly intends to add a paid-search element to the new search function, promoting first the apps created by those willing to bid the highest for preferred search placement.
It wasn’t the solution most users and developers were hoping for. And, in a more philosophical sense, it may be yet-another clue Apple is losing its edge.
AAPL owners may want to beware.
The App Store Is a Sore Spot for Apple
Bloomberg was one of the first to break the news, sourcing unnamed “people familiar with the plans.” The news and rumor is that Apple has assembled a team of roughly 100 employees to overhaul its current app-search architecture, adding a paid-search element in the process.
Some AAPL shareholders may recall this isn’t Apple’s first rodeo with a better App Store experience. An issue from its very inception, Apple finally came to grips with its shortcoming in February of 2012 when it acquired Chomp, which specializes in app discovery. It didn’t work, in light of the fact that the Chomp aspect of the App Store was shut down by in October of that same year.
Apple finally tried again, in earnest, in November of last year with the unveiling of a new search algorithm. However, users have remained unimpressed.
If It’s True…
While most revamps of the App Store would be welcome, this unconfirmed turn of events raises more questions than it answers.
At the top of that list is this crucial question: Can Apple actually implement a successful paid-search system within its App Store when it has yet to even master the free-search basics?
That’s not to say it can’t be done; Alphabet Inc (GOOG, GOOGL) has been able to do it with its Google search engine for years. It’s what Google was built for though, and it has had years to perfect the art and science of paid search — it can charge premium prices for preferred ad placements specifically because advertisers know Google brings a highly-focused customer to an advertiser’s table.
Apple has yet to prove it’s able to even meaningfully connect apps and browsers for free, calling into question its capacity to charge for such a service.
And then there’s the small matter of the fact that Apple also takes a healthy 30% of the sales price for a paid app. If an app developer has to pay for preferred placement as well as pay Apple its commission, the use of the App Store may simply become cost-prohibitive.
None of these impasses are insurmountable; it’s possible Apple has already thought these things through. On the other hand, it has yet to create an App Store people truly love, casting a shadow of doubt on the potential of this latest idea.
Bottom Line for AAPL
In the grand scheme of things, the paid-search premise is likely irrelevant to the long-term value of AAPL. That is, it may not help, though it won’t hurt either. The tool may simply feature apps in ads that ultimately go ignored, as there’s a good chance the ads themselves will be as irrelevant as the free search results have been thus far.
The whole notion, however, waves a distant red flag … why is Apple trying to monetize something that arguably shouldn’t be monetized?
Not that the Steve Jobs “way” was bound to be the right way forever, but one of the reasons the iPhone soared to greatness under Steve Jobs’ tenure was the collection of free reasons for consumers to pay for an iPhone.
Music, movies and television programs aren’t free at the iTunes store, but they shouldn’t be free — premium products merit a premium price. The same goes for some apps and games. However, none of its apps or digital content venues expects some sort of payment for mere presence at the venue AND from the developer or consumer via the sale of apps.
That’s what this maneuver may well lead to though … placement payment, and then a commission from the sale of the app itself.
While participating in such a program appears to be voluntary for the time being, it may effectively become mandatory if a smaller developer is to maintain any kind of presence at the Apple App Store; the big always crush the small when given the opportunity. Perhaps that’s the intent. Perhaps not.
Whatever the case, the fact that Apple may well start nickel-and-diming its partners at a venue that — frankly — wasn’t all that great to begin with may be just another sign the company is no longer magical.
The question is: What’s the next annoying toll-booth Apple is going to set up? It won’t take very many to nag users and developers into going elsewhere.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
