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I think most people forget that Apple is paying the merchant processing fees on all of these transactions. On a $0.99 sale typical rates are 3% + $0.30. I’m qui

I think most people forget that Apple is paying the merchant processing fees on all of these transactions. On a $0.99 sale typical rates are 3% + $0.30. I’m quite certain Apple doesn’t pay full rate, but it’s entirely probable that they lose money on smaller transactions. They have soft costs for app review and distribution but I can’t imagine they are significant whatsoever relative to merchant fees. This is a fantastic loss leader to build marketshare and nurture app growth. They will probably have a lot of fledgling devs plow that incremental money right back into ads in a ‘virtuous’ cycle.

reader_mode 6y ago
Thing is none of this would be up to guess work if we had competition enabled. If you could offer "Pay with Stripe" alongside "Pay with Apple" and eliminate the forced price equality you would quickly see the user preference and value of Apple infrastructure/security/convenience.
isthatsoup 6y ago
Apple wouldn't be paying anything remotely like that rate - if they are, everybody involved in negotiating it needs to be fired. You're off by several orders of magnitude, therefore your conclusions based on the wrongly assumed cost structure are baseless.
- crazygringo 6y ago
  Do you have any data to back that up? Off by "several orders of magnitude" means instead of Apple paying the standard $0.33 on a $1 app, they would be paying $0.00033 (that's three orders of magnitude smaller) or less, because that's how orders of magnitude work. Which is nonsensical considering it's easy to get a credit card that pays back $0.02 in rewards, which sets a reasonable floor. Sounds like your claim is the baseless one here, sorry. I would be curious to know what large online retailers do negotiate paying on single $1 purchases from someone who knows, though.
  - isthatsoup 6y ago
    I don't have any data I can share because obviously negotiated rates are confidential... what planet do you live on? Apple is going to be among the very largest merchants in the world by card processing volumes - it's actually ludicrous/naive/cute that you think they would have the same rate as a random family corner shop. I'll give you a hint: the flat rate component definitely goes away over a certain volume. The % component then shrinks significantly too. I would recommend you stop talking confidently about things you clearly have no experience with - card processing rates for large merchants. That's about as much detail as I feel able to divulge.
  - ineedasername 6y ago
    $0.99 or $1 is a pretty common price for small single-purpose apps or for an in-app purchase. I think it's fair to say there's no way Apple is paying anything close to $0.33 for those many, many, many transactions, losing $0.03 on each one. If I had to take a wild shot in the dark, I'd guess Apple is paying $0.05 to $0.10 for those. Of course this is part of the problem: We can't even properly evaluate the situation because this side of it is an opaque black box.
newhotelowner 6y ago
I have less than 0.0001% of the Apple's volume and I pay roughly 2.75% (includes everything). With apple's volume, I am sure that the merchant is a subsidiary of Apple. They probably only paying the interchange fees.

reader_mode 6y ago

Thing is none of this would be up to guess work if we had competition enabled. If you could offer "Pay with Stripe" alongside "Pay with Apple" and eliminate the forced price equality you would quickly see the user preference and value of Apple infrastructure/security/convenience.

isthatsoup 6y ago

Apple wouldn't be paying anything remotely like that rate - if they are, everybody involved in negotiating it needs to be fired. You're off by several orders of magnitude, therefore your conclusions based on the wrongly assumed cost structure are baseless.

crazygringo 6y ago
Do you have any data to back that up? Off by "several orders of magnitude" means instead of Apple paying the standard $0.33 on a $1 app, they would be paying $0.00033 (that's three orders of magnitude smaller) or less, because that's how orders of magnitude work. Which is nonsensical considering it's easy to get a credit card that pays back $0.02 in rewards, which sets a reasonable floor. Sounds like your claim is the baseless one here, sorry. I would be curious to know what large online retailers do negotiate paying on single $1 purchases from someone who knows, though.
- isthatsoup 6y ago
  I don't have any data I can share because obviously negotiated rates are confidential... what planet do you live on? Apple is going to be among the very largest merchants in the world by card processing volumes - it's actually ludicrous/naive/cute that you think they would have the same rate as a random family corner shop. I'll give you a hint: the flat rate component definitely goes away over a certain volume. The % component then shrinks significantly too. I would recommend you stop talking confidently about things you clearly have no experience with - card processing rates for large merchants. That's about as much detail as I feel able to divulge.
- ineedasername 6y ago
  $0.99 or $1 is a pretty common price for small single-purpose apps or for an in-app purchase. I think it's fair to say there's no way Apple is paying anything close to $0.33 for those many, many, many transactions, losing $0.03 on each one. If I had to take a wild shot in the dark, I'd guess Apple is paying $0.05 to $0.10 for those. Of course this is part of the problem: We can't even properly evaluate the situation because this side of it is an opaque black box.

newhotelowner 6y ago

I have less than 0.0001% of the Apple's volume and I pay roughly 2.75% (includes everything). With apple's volume, I am sure that the merchant is a subsidiary of Apple. They probably only paying the interchange fees.