When the app economy becomes the real economy

As the lesson of the FT shows, the App Store isn't quite ready for the economic importance Apple see

When Tim Cook, CEO of Apple, announced the new iPad yesterday, one of his selling points was that the new retina display could print "text sharper than a newspaper". Three years ago, this might have sounded like a threat to publishers, but these days it's closer to a promise.

There is broad agreement that, where the internet disrupted journalism in a way that threatened the ability to make money from content at all, the second generation of digital news presents more hope.   Readers on smartphones, and especially tablets, have shown a willingness to pay for the journalism they read, even when it is available for free elsewhere. In turn this may allow the transition to digital to be -- if not quite painless -- then at least not as painful as it might have been.  

But with new territory has come new conflicts. One of the big promises of digital is the fact that it does away with the printer, the distributer, and the retailer -- and their financial cut. Yet new middlemen have sprung up to take their place. Why go through all the hassle of a switchover just to give Apple -- and it is invariably Apple -- 30 per cent of everything you take, which is what it demands to be stocked in its App Store.  

For the most part, publishers have grumbled, but accepted the company’s terms. After all, there isn’t so much a tablet market as an iPad market; it’s pay to play, or get out.

Last summer, however, the Financial Times took the latter option. It coded an app that ran entirely in the browser, thus skipping Apple altogether.  

At the Press Gazette News on the Move conference yesterday, FT.com managing director, Rob Grimshaw, went into a little more depth as to why his paper made that decision.

As well as avoiding the 30 per cent cut it would have to pass on to Apple, building a web app allowed the FT to consolidate its development process, moving from focusing on multiple platforms (not so much of an issue in the tablet market, but a major concern in smartphones) to just one. But the real issue for Apple was the FT's concern over subscriber data.

When subscribing to a publication through the App Store, readers are given the choice as to whether or not to share their personal details with the publisher, and a significant proportion opt out. This leaves the publisher essentially clueless as to who a lot of their readership are, which affects two major areas: advertising, and retention.

Ad sellers are willing to pay a lot more to deliver targeted campaigns (think how much more Rolex would pay to be certain to advertise to a fund manager than, well, me), and the FT need to encourage renewals -- a big deal when the cheapest subscription is £270 a year.  

Grimshaw estimated that the value to the FT of this information is between 25 to 30 per cent of the value of the subscription. In other words, a user coming through the App Store was worth between £145 and £160 a year less than one subscribing through the FT’s own website.

So the FT has a pretty big motivation to leave. What is interesting is how comprehensively this outweigh’s Apple’s motivation to retain the charges and restrictions.

The App Store is there to make Apple’s products more attractive, not to make huge amounts of money for the company. Seven years of the iTunes store generated just $1bn in profit -- the same amount the iPad made in just one quarter. An iPad with apps is more valuable than an iPad without; and apps with strong customer protection are more valuable still.

And yet, in doing so it has caused a very important developer to bail ship, and create an alternative experience that -- despite being a world-class example of what it is -- is unarguably worse for their customers. We can’t know the value of those restrictions to Apple, but it is unlikely to be anywhere near £150 per user per year.

It's not clear if there is an easy solution to this battle of wills, but it certainly seems like a market inefficiency. And with Apple loudly trumpeting its $4bn app economy, inefficiencies in its market are fast becoming inefficiencies in everyone's market. This isn't a cottage industry anymore, and it needs the scrutiny to ensure that.

The old FT app, before the company was forced to pull it. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.