Apple Blinks in Apps Fight
Facing Regulatory Heat, Tech Giant Stops Barring Google and Adobe Technology
SEPTEMBER 10, 2010
By YUKARI IWATANI KANE And THOMAS CATAN
online.wsj.com
In an uncharacteristic about-face, Apple Inc. loosened its control over software development for its iPhones and iPads as the company feels heat from a U.S. antitrust investigation and rising competition from mobile devices powered by Google Inc.'s Android software.
The move gives software developers more freedom to decide how to build their applications, or "apps." It will relax restrictions Apple introduced in the spring that had effectively blocked use of programming technology from Adobe Systems Inc. and potentially impeded Google's AdMob ad network from serving ads to Apple apps.
The concession comes after the Federal Trade Commission launched an inquiry around June to determine whether Apple had violated antitrust laws with the earlier policy. It isn't clear if Apple's move Thursday was in response to the FTC's investigation, but it will likely be carefully scrutinized by the regulatory agency, said people familiar with the situation.
An Apple spokeswoman didn't respond to requests for comment about the FTC probe. The FTC declined to comment.
The change comes in the wake of a vicious public relations battle between Apple and Adobe, creator of a widely used technology called Flash that manages video and animations on many websites. Apple's revised policy will now allow apps to be written using a Flash-based tool, and also removes restrictions on what other programming languages developers may use.
But the revised policy still won't allow iPhone and iPad users to access Flash-based content on the Web. Those websites rely on running Adobe software code that doesn't reside on a user's device, which Apple's revised guidelines still prohibit. Still, Adobe investors embraced the news, driving shares up 12% to $32.86.
"We are encouraged to see Apple lifting its restrictions on its licensing terms, giving developers the freedom to choose what tools they use to develop applications for Apple devices," Adobe said in a statement.
Google also welcomed the change. "Unlike the previous version, these new terms ensure that Apple's developers have the choice of a variety of advertising solutions (including Google and AdMob's) to earn money and fund their apps," Omar Hamoui, Google's vice president of product management, said in a statement.
For consumers, the implications may be less evident. Apple still plans to review every app submitted to its App Store, and Flash-based video still won't be viewable on its mobile devices. And some prior restrictions, such as the one that affected AdMob ads, weren't being enforced by Apple.
Yet the change means more apps—which range from videogames to news feeds to financial tools—may be available sooner on multiple devices. It may also bring in new developers to the iPhone and iPad, who have been reluctant to comply with Apple's restrictive policies in the past.
"They're opening up the platform to a much broader community of development," said Krishna Subramanian, co-founder of mobile ad company Mobclix Inc., which works closely with iPhone app developers. Mr. Subramanian added that it could particularly energize the mobile advertising market because ad developers are most familiar with Adobe's Flash programming software.
Apple on Thursday also published its app-review guidelines for the first time, addressing a longstanding complaint by developers about the lack of clarity in the process. The guidelines suggest, for example, that an app could be rejected if it isn't useful or doesn't provide lasting entertainment or other value.
The language in the guidelines seems to emulate the direct style of Steve Jobs, Apple's chief executive. "We have over 250,000 apps in the App Store. We don't need any more Fart apps," the document reads.
Another section says apps that look like they were "cobbled together in a few days" could be rejected. "We have lots of serious developers who don't want their quality Apps to be surrounded by amateur hour," it says.
Some analysts said the changes show how threatened Apple is by the increasing momentum of Google's Android Market. App development for Android could heat up with the introduction in coming months of several Android tablet computers that will rival the iPad.
"They're trying to make sure they stay the most interesting and most important development platform," said Jeffrey Hammond, an analyst with technology firm Forrester Research.
Apple's App Store is still the biggest app marketplace with over 250,000 applications, but Google's Android Market—which doesn't vet apps—has increased its number to more than 80,000 from 30,000 just six months ago.
Smartphones that run on Google's Android operating system also are expected to outsell iPhones this year. IDC, another tech research firm, estimates that by 2014, Android devices will hold world-wide market share of 25% while the iPhone's share will drop to 11% from 15% this year.
A number of software developers still see Apple's App Store as the most important market and many are devoting the majority of their resources toward it, but they also have been unhappy with the company's seemingly arbitrary rejection of apps.
Joe Hewitt, a Facebook Inc. software engineer, caused a stir last November when he announced he would stop developing for the iPhone because of Apple's review process. He said in an email that Apple's policy change is "a wonderful improvement" that shows Apple has improved the tone of its relationship with app developers.
Mr. Hewitt, who developed Facebook's iPhone app, said he was working on other projects but would probably develop for Apple's App Store again "when I do have time someday."
Forrester's Mr. Hammond said some developers also are starting to develop apps for the Android Market first, so they can start making money immediately while they wait for the App Store version of the app to go through Apple's approval process.
"Customers are saying, 'You know what, I don't have to do the iPhone. I have a lot of other viable choices,'" said Dave Wolf, vice president of strategy at Cynergy Systems Inc., a Washington, D.C., software design firm that builds software using Flash and other programming languages. "I think Apple saw that writing on the wall."
The publication of the app review guidelines could also help get new apps into the marketplace sooner and minimize some of the clutter.The FTC is investigating complaints that Apple had unfairly blocked developers from using Adobe's tools, as well as whether Apple's restrictions on applications sending data to third parties unfairly disadvantaged AdMob and benefited Apple's own mobile ad network, according to people familiar with the matter.
Meantime, the Justice Department is looking at Apple's iTunes music store and new Bookstore to see if agreements Apple has reached with music and book publishers improperly limit competition, said people familiar with the matter.
Apple has attracted increasing scrutiny from antitrust enforcers in the U.S. and Europe as it expanded from its minority position in personal computers to a major force in markets for smartphones, music, movies, TV and publishing.
In the U.S. it controls around 70% of online music sales and has more of the overall music market than Wal-Mart Stores Inc., according to market research firm NPD Group. It recently surpassed Microsoft Corp. in market value.
—Cari Tuna contributed to this article.
Write to Yukari Iwatani Kane at yukari.iwatani@wsj.com and Thomas Catan at thomas.catan@wsj.com
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