This post has a mind-blowing Update at the end.
I’ve argued earlier that Apple must turn iTunes into a platform.
Apple would make more money that way. Because the margins on charging businesses for goods (server hardware, merchant platform software) and services (maintenance, consulting) is much higher than those for consumer goods and services.
Also, it would propagate the Apple Method of sales throughout the Internet, making it a universal standard. And I do mean “universal” — as a platform vendor, Apple wouldn’t care what was being sold. Merchants could sell items for Android and webOS. Apple still collects its money no matter what. (And think of that money being based not only on a flat fee but also including a small — say 1-3% — fee for each transaction. As shown by Switzerland, neutrality pays.)
Why the current in-house all-by-Apple iTunes Store/App Store model will fail is a simple matter of business. It’s the missing link I never thought of, brought to my attention today by @KatMeyer on Twitter.
The current Store model separates sellers from their customers.
There is no way for any business to know who has bought something. Apple keeps that data.
There is no way for a business to find out what someone has bought when more than one item is being offered. In other words, did someone buy only A — or A and B? Apple keeps that data.
There is no way for a business to ascertain if its customer base is a bunch of one-off fluke sales or hard-core repeat buyers — the “true fans” that form the foundations of business. Apple keeps that data.
What sellers wind up with when Apple sends them a statement is a sales figure and a check.
If you’re selling X, Y, and Z, you don’t know if there are any overlaps between those who bought each one of those things. There could be 100% overlap. There could be 0% overlap. This is an important thing to know because it’s the basis of product marketing.
Without the fine-grained customer information that a seller gets from direct sales, a seller is left blind. There’s no possibility of true marketing. There’s no way to determine where marketing should be emphasized. There’s no way to tell if current sales are a fluke or indicative of any kind of trend.
Who can run a business blind like that?
Although I’m certain it’s part of Apple’s Ultimate Strategy to turn iTunes into a platform, I think well before that happens we’ll be reading accounts in the Me-Too Media from iTunes Store/App Store sellers venting about how they can’t do any strategic planning due to the current set-up.
This will especially start to happen as the Big Six book publishers come on board. They will quickly agitate for the kind of customer information that’s necessary to keep themselves in business.
iTunes Store as a universal merchant platform? Yep. I believe it’s coming.
I just hope it gets here faster than it took the
Update, February 1, 2010. Go read this post: Subscriptions are the New BLACK. (+ why Facebook, Google, & Apple will own your wallet by 2015) Briefly: iTunes ID as a universal purchasing ID. That is what will make the Apple Merchant Platform possible. You can sign in using one iTunes ID and buy at any store running on the Apple Merchant Platform. This is the Missing Link. This is also why Steve Jobs showed this slide (twenty seconds in, this YouTube video clip):
That is how Apple gets its per-transaction fee (as I mentioned above, but didn’t make the connection to an iTunes ID as universal ID).