Tuesday, November 29, 2022

Elon Musk threatened war on Apple's app tax, then deleted his tweet, but the gauntlet is out of the bag: he can win this, just needs to separate antitrust issues from advertising budget allocation

After repeatedly criticizing Apple's app tax and even raising the prospect of a Tesla Phone, Elon Musk crossed an important line yesterday by giving Apple the choice between exempting Twitter from the App Store's usurious app tax or an outright antitrust war. In a series of tweets taking Apple to task over different issues, Mr. Musk shared the following image (but later deleted the tweet):

A near-simultaneous tweet about the app tax can still be found:

Actually, Mr. Musk was "generous" in the sense that Apple's app tax even exceeds 30% (except for those who fall under the Small Business Program, but that's a negligible share of total App Store revenues). Apple passes on parts of its taxes (which app developers would not owe in most cases if they could transact directly), makes app discovery ever more expensive, and Apple makes billions just with its base developer program fees (charging about four times per year as Google charges Android developers as a one-time fee). And some believe--credibly so--that Apple will soon run its own in-app ad platform on iOS, meaning Apple would take a cut of in-app ad revenues as well (after kneecapping the existing networks).

Mr. Musk can win this war if he has to wage it. There is only one concern--not a huge one, but worth mentioning: conflation of issues can backfire.

Yesterday's tweets addressed a trio of issues: the app tax; Apple's app review (from a freedom-of-speech angle); and Apple's decision to slash its Twitter advertising budget. The first two are reasonably closely related, and would be remedied the same way: by means of alternative app stores and direct installs ("sideloading"). Apple allegedly threatened to Twitter with ejecting its app from the App Store, but didn't clarify over which issue or set of issues:

So I would agree that app review and app tax are manifestations of the same problem of monopoly abuse. But the third issue--ad spend--is the odd man out. It is easy to predict that in a hypothetical scenario where Mr. Musk takes that highway exit to the war zone and seeks a temporary restraining order and preliminary injunction to have the Twitter iOS app reinstated on the App Store, Apple is going to hold it against him that he started his Apple criticism yesterday with a reference to advertising budget allocation:

Apple will then foreseeably tell the court that a few weeks before, Mr. Musk had threatened renegade advertisers with a "thermonuclear name & shame":

Arguably, Apple is now the first company to have been exposed as a company reducing its ad spend on Twitter. Apple may have been Twitter's single largest advertiser until then. But other companies even withdrew entirely.

I'm not saying that Apple could reasonably spin all of this as "he's suing us over the App Store because we exercised our right to advertise where we want." Mr. Musk could point to his long-standing criticism of the app tax. The hypothetical removal of Twitter from the App Store would raise far more important issues, and any judge or juror could easily see what the case is really about: Apple's monopoly abuse. But there would be an unnecessary smokescreen for Mr. Musk's lawyers to deal with.

As an app developer who brought his own complaints over Apple's and Google's tyrannical censorship, I obviously hope there will be further escalation and that Apple (and preferably also Google) will be sued, just like I can't wait to see a cross-platform Microsoft app store compete with the incumbents as well as other future entrants like an Epic Games Store.

The attention that the App Store monopoly would get if Mr. Musk went to war would far exceed what Epic Games' "Project Liberty" achieved in the summer of 2020. Mr. Musk and Epic's founder and CEO Tim Sweeney would be perfect comrades in arms. An anti-monopoly-abuse alliance made in heaven. In fact, after last year's district court judgment, Mr. Musk expressed sympathy for Mr. Sweeney's fight. Where? On Twitter, of course.