Apple's developer conference underway as App Store scrutiny mounts

CNBC's Josh Lipton reports on the latest updates to Apple's software and controversy surrounding App Store fees.

Apple is facing an unprecedented backlash from software developers as it prepares to host its annual its Worldwide Developer Conference.

Developers have spoken out to say they are upset with Apple’s App Store policies, particularly the revenue cut that Apple takes and the requirement that users complete their purchases within the app.

“The App Store 30% tax is a massive pain and severely limits our profitability and long-term viability as a business,” said one start-up executive who spoke on condition of anonymity out of concern about repercussions from Apple.

“We have data that proves that customers don’t particularly like using in-app purchases to buy subscriptions (they prefer PayPal/credit card) and the 30% fee that Apple takes is insane when you compare it to the standard 2-4% charge that literally any other payment provider takes. ”

The person added that Apple’s in-app purchase platform has poor analytics, technical documentation and functionality.

“We have almost always been limited by Apple and IAP in what type of discounts, subscription types we can offer, because the developer time it takes to implement anything for IAP is at least 5x that of implementing features for a modern payment solution like Stripe or Braintree,” the person said.

Apple declined to comment when contacted by CNBC on Monday.

The App Store is the only way for most users to install software on the iPhone and iPad.

Some developers have also criticized Apple’s app review process, saying it lacks transparency. In order for developers to update apps that run on Apple’s products, an Apple employee must review them first.

The App Store is one of Apple’s most important platforms. The fast-growing unit brought in over $46 billion in 2019, making up nearly 18% of the company’s revenue.

Apple charges companies 30% from in-app purchases and 30% on subscriptions for the first year, then 15% thereafter. The Google Play store also charges 30% on in-app purchases.

Another co-founder, who spoke on condition of anonymity to avoid upsetting Apple, said the App Store “feels like a necessary evil because Google Play does the same.”

The person added: “What doesn’t feel fair is Apple curates the App Store, so if you’re trending and charting you still may not be visible unless they want you to.”

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