The New Web Tax
There’s been quite a lot of interesting news in the past days that together paint the picture of a not so pleasant future for the web and digital economy. Let me explain what I’m talking about:
In july 2008 Apple launched the App Store with an interesting new business model: “We provide a curated exclusive market for our troves of iDevice users to buy apps in the easiest possible way, and we give developers 70% of the profits”. At first, it sounded like a great deal. Make an app, Apple markets and sells it, if it doesn’t sell, no fee (just the $99 a year dev license), if it does, you get 70%, Apple gets 30%. And a lot of developers made, and are still making, a lot of money. In the small sequestered economy of things this is the perfect business model. Everyone is happy.
The success and popularity of the Apple 70/30 model has since led to it becoming the industry wide standard, used now by well known services such as Amazon Kindle, Blackberry App World, Windows Marketplace, and also Apple’s Mac App Store. Apple has made people use to the concept, so now others can adopt it. What’s worrying me about this is the most recent company that has announced it will adopt this revenue split model: Facebook. Facebook taking 30% cut whenever users purchase anything with Facebook Credits and is, effective this July, making Facebook Credits mandatory for all Facebook games. Facebook gaming is huge, as you know, but when it becomes a worldly concern is when you think about Facebook’s next probable move, as Jason Kincaid from TechCrunch writes:
…but it’s very likely that Facebook will eventually begin allowing third-party websites to offer a ‘Pay With Facebook’ option, and that may include everything from digital content to physical goods. The more credit cards Facebook has in its system, the more appealing this option will become, and the more publishers and retailers will be willing to pay that 30% fee.
With the App economy becoming bigger and bigger, which includes Apple just having extended their 70/30 model to apply to everything that ever flows through an app (subscriptions, e-books, movies, etc), and Facebook being 600m users strong and basically beeing “the internet” for a lot of people in the world, what we’re seeing here is essentially a new 30% VAT on every transaction made on the web. That is a crazy development.
One could argue that this will never happen. That the Apple model will fail before it growing too big a concern, that disgruntled developers or publishers on other platforms could take their wares elsewhere if they want, and that merchants wouldn’t need to use Facebook Credits. But the problem here is that the users/customers are doing the deciding, not the merchant, developers or publishers. And if selling your wares elsewhere is the equivalent of putting your hot dog stand in the middle of the woods instead of right outside Rose Bowl before a big game, where are you going to be?
Update: As I was writing this, TechCrunch’s MG Siegler published a great post on the Apple 70/30 model that’s well worth a read.
Update 2: Jason Kincaid seems to agree with me.
