This Week in Apps: App Store advertising expands, Google Play plans for safety, Epic v. Apple trial begins

 Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry continues to grow, with a record 218 billion downloads and $143 billion in global consumer spend in 2020. Consumers last year also spent 3.5 trillion minutes using apps on Android devices alone. And in the U.S., app usage surged ahead of the time spent watching live TV. Currently, the average American watches 3.7 hours of live TV per day, but now spends four hours per day on their mobile devices.

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Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In 2020, investors poured $73 billion in capital into mobile companies — a figure that’s up 27% year-over-year.

This week, we’re looking at the Apple-Epic trial, Apple’s App Store advertising expansion, App Tracking Transparency opt-in rates, TikTok’s new SDKs for third-party apps, Google’s plans for its own take on privacy labels, and more.

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Top Stories

Apple-Epic Trial kicks off

This was the first week of the Epic Games antitrust lawsuit against Apple over App Store fees, and already it’s yielding some interesting content — mainly thanks to the internal Apple emails that have become part of the trial’s exhibits. So far, we’ve learned how Apple thought about App Store fees in the past, have gotten a peek inside internal conversations, learned of special deals it cut for Hulu and how it thought about punishing Netflix for ditching IAP, among other things.

Here are some of the highlights you may have missed.

Fees

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Apple’s App Store head Phil Schiller, previously Apple’s marketing chief, a decade ago questioned if the 70/30 split would last. In an email to Eddy Cue, he suggested that once the App Store reached $1 billion in profitability, Apple should cut its fees to 20-25%.

Despite having said he’s fighting for all developers, Epic CEO Tim Sweeney in court admitted he would have accepted a special deal for a lower commission if Apple had offered one.

Apple is disputing testimony from financial researcher Ned Barnes, which said the App Store had operating margins of almost 78% in 2019. Barnes said he had access to P&L estimates for fiscal year 2020, and statements from 2013-15, which aided in his calculations. Apple rebutted that it doesn’t allocate costs for the App Store so any documents discussing it wouldn’t have included expenses.

Competition

Apple’s App Store VP Matt Fischer was questioned over a 2016 email where an employee said Fischer felt strongly about not featuring competitor apps on the App Store. Fischer said the employee who wrote the email was “very misinformed” and Apple has promoted competitors long before he joined the team in 2010.

App Store rejections

Apple said it rejected 33-36% of apps submitted to the App Store from 2017-2019. Despite the number of rejections, less than 1% of developers appeal Apple’s decision. Most of the decisions about rejections are still upheld.

2017: 5.177 million submissions, 1.69 million rejections (33%)

2018: 4.79 million submissions, 1.7 million rejections (35%)

2019: 4.8 million submissions, 1.74 million rejections (36%)

Juicy emails

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Apple offered Hulu and others special deals that gave them App Store API access. In a 2018 email, an Apple exec confirmed Hulu was one of the whitelisted developers that had been given access to the subscription cancel/refund API which they had been using since 2015 to support instant upgrades using a two-family setup before subscription upgrade/downgrade capabilities were built.

Emails revealed Apple tried to convince Netflix not to drop support for IAPs and questioned whether it should take punitive measures when Netflix’s tests were underway.

Apple emails revealed internal conflict over the launch of App Store ads before launch, saying that ads would be at odds with Apple’s statements that it makes products without monetizing users.

Other tidbits

Fischer said he was “blindsided” by the payment update that kicked off Epic’s battle with the App Store, noting the developer and Apple had a good relationship previously. He recalled dropping everything to promote Fortnite’s Travis Scott concert on the App Store, which he described as a “really cool concept.”

Fortnite made more than $9 billion in 2018 and 2019. It made $5.1 billion in 2020.

Fortnite may be returning to iOS through Nvidia’s cloud streaming service GeForce NOW.

It was revealed that Epic paid Sony additional royalties beyond the 70/30 split to compensate for cross-play. Apple’s argument is that it’s being singled out over the 30% cut, when Epic was actually paying more to Sony but didn’t go after the console maker with the same complaint.

Apple and Epic had once planned a subscription bundle that would have offered Fortnite Crew, Apple Music and Apple TV+ in a $20/mo package. The cut of subscription revenue each would take would have been based on whether the user signed up through Apple or through Fortnite.

Google to add a “Safety” section on Google Play in 2022

Months after Apple’s App Store introduced privacy labels for apps, Google says its own mobile app marketplace, Google Play, will follow suit…sorta. The company this week pre-announced its plans to introduce a new “safety” section in Google Play, rolling out in Q2 2022, which will require app developers to share what sort of data their apps collect, how it’s stored and how it’s used.

This includes what sort of personal information their apps collect, like users’ names or emails, and whether it collects information from the phone, like the user’s precise location, their media files or contacts. Apps will also need to explain how the app uses that information — for example, for enhancing the app’s functionality or for personalization purposes — and include their privacy policy, otherwise face “policy enforcement.”

But where Apple’s labels focus on what data is being collected for tracking purposes and what’s linked to the end user, Google’s additions seem to be more about whether or not you can trust the data being collected is being handled responsibly, by allowing the developer to showcase if they follow best practices around data security. It also gives the developer a way to make a case for why it’s collecting data right on the listing page itself. And Google says developers can showcase if their labels have been independently verified.