Lecture Notes: The App Economy and the Role of Apple

Introduction to the App Economy

• Launch of iPhone (2007): Initially, Steve Jobs did not allow third-party apps on the iPhone.
• Reason for Control: Jobs wanted end-to-end control over the user experience, similar to original Macintosh and iPod models.

Initial Closed System

• Apple's Control: Initially, no third-party apps allowed; only Apple-approved apps.
• Comparison with Competitors: Unlike Apple, companies like Microsoft licensed their software to various hardware makers.

Shift in Strategy (2008)

• Pressure from Team: Jobs faced pressure from his team and board to open up to outside developers.
• Decision: In early 2008, Jobs decided to allow third-party apps but maintained certain controls.

Launch of the Mac App Store (July 2008)

• Controlled Openness: Developers could sell apps on iPhones but had to meet Apple’s specifications and revenue sharing model.
• Revenue Model: Developers kept 70% of revenues, no hosting fees; however, in-app purchases had to go through Apple.

Growth of the App Economy

• Rapid Expansion: From 500 apps in 2008 to 2 million apps today.
• Significant Impact: Downloads reached 25-30 billion per year; app economy valued at $155 billion.
• Economic Disruption: Creation of jobs and new business models despite technological disruptions.

Impact on Innovation and Business

• New Business Models: Enabled platforms like Uber, Twitter, and Netflix to thrive.
• Peer-to-Peer Economy: Facilitated by the iPhone and apps, leading to services like Airbnb and TaskRabbit.

Conclusion

• Platform for Growth: Apple's App Store became a crucial platform for businesses and innovation.
• Peer-to-Peer Digital Revolution: Reflects the digital revolution’s essence of decentralized, peer-to-peer interaction.

Key Takeaway

• Innovation Catalyst: The iPhone and App Store catalyzed unforeseen innovations and economic models, reflecting the transformative impact of technology on the economy.