Apple announced this morning that it is reducing its commission on paid apps and in-app purchases from 30% to 15% for qualified small businesses and independent developers. This move obviously has plenty of implications for competition policy and business models.
But from the perspective of macroeconomic recovery, this commission reduction comes at just the right time to simulate post-pandemic job growth.
It’s important to remember that the App Economy has been a potent source of jobs ever since Apple opened the first App Store in July 2008. In a September 2020 research note, we estimated that from the App Store’s opening in July 2008 to the pre-pandemic economic peak in February 2020, the App Economy generated a total of 2.4 million jobs. That’s relative to the 15 million nonfarm payroll jobs created by the whole U.S. economy over the same period. The implication is that an estimated 16% of net job growth since the creation of the App Store in July 2008 has come from the App Economy.
The App Economy gains have continued through the pandemic recession, with our research showing that App Economy employment rising by 12% from April 2019 to August 2020, despite the weak economy. Employment in the iOS ecosystem and the Android ecosystem, respectively, are up up 15% and 14% from the April 2019 estimates. (Note that many App Economy jobs belong to both ecosystems).
The commission reduction will build on these long-term trends, stimulating hiring by the “long tail” of small app developers and startups. Apple’s announcement says that the reduced commission will apply to existing developers who made up to $1 million in 2020 for all of their apps, as well as developers new to the App Store. So if you are a small business that is earning $500,000 in the App Store, the commission reduction may very well tip the scale for bringing on a new app developer, an extra sales person, or both.
It’s difficult to quantity the effect of the commission cut, but it certainly will make small businesses more willing to take chances and expand even in an uncertain economic climate. Climbing out of the pandemic, any action that encourages small business hiring is good news for the U.S. recovery.
