Some Assistance with Voice Assistants

Amazon, Apple, and Google are focused on growing the use of their voice assistants (Alexa, Siri, and Google Assistant, respectively). Like with more traditional apps, the business model that companies are pursuing is to drive ubiquity of the platform, and allow developers to create the real value by building voice apps (called “voice skills” for Alexa) or adding voice compatibility to their existing products. The expectation is that over time, users will become increasingly comfortable with voice technology, and voice will replace touch as the default means of interacting with technology. It will replace the touch screen, that replaced the mouse, that replaced the keyboard.  The platform owners will benefit by capturing enormous amounts of data that they will find ways to monetize.

Think about it this way – today, when one of your users goes into your app, that’s a black box to the platform. They know the user is in there, but they generally can’t tell what the user is doing. With the addition of a voice layer, every time a user gives a command the device maker gets a peek into the black box, and learns a bit more about your user.

To a large extent, both developers and platform companies are learning on the fly. It’s hard to predict what types of voice skills people will come up with, what will resonate with consumers, what problems they may encounter, and how courts will resolve those issues. As a result, it’s likely that the voice assistant section of each platform’s developer agreement will be an area of frequent change.

 

The “Apple-Tax”

The Apple App Store is the second largest app store globally, but for developers of apps in the United States, maybe the most important. The agreement that governs the App Store, Apple’s Developer Program License Agreement (or “DPLA”), is high-profile in it’s own right because of the way it impacts corporate decision-making, customer experiences, and the economics of the internet.

Of the nearly 100 pages worth of provisions that make up the DPLA, the only one that has gained public notoriety is the provision outlining the 30% share that Apple retains on any sale made in-app. The Google Play Store and other platforms have similar provisions, and these commissions should be a key strategic consideration. Will you simply sacrifice 30% as the cost of doing business with giants like Apple and Google? Do your margins allow it? Will you charge your customers 30% more for the convenience of purchasing through your app? Is there a demand for your product at that price? There’s no right or wrong answer to these questions, only what’s right for each app developer, CEO, or strategist.

In 2015 Spotify famously decided that it would charge its customers a premium for the convenience of being able to subscribe to its music streaming service on an Apple device. They were very open about it, going so far as to provide instructions on how to sign up at a lower price, or switch a more expensive subscription to a less expensive one. Generally it’s not a good idea to answer the question “how much does your service cost?” with, “it depends what device you buy it on,” but Spotify had already established a loyal fan base of millions, and could afford to muddy its marketing message a bit.

Spotify also has real costs. If you sell additional features in your dating app, or virtual currency in your game, the 30% commission probably won’t kill your business. If you sell subscriptions to a music service, and have to pay music labels for their artists’ most popular content, 30% might put your business underwater. An alternative to consider is building a companion website where your customers can transact and manage their accounts. While a companion website is great for avoiding the Apple tax, it adds a considerable amount of friction to any purchase flow. Attention spans are short, and if your slot machine gamer just spent his last virtual dollar and is jonesing for another pull, taking him out of your app to enter credit card information on a website will result in less money spent.

The moral of the story is to carefully consider your app’s user experience, margins, and brand loyalty before deciding whether to accept in-app purchases and pay the “Apple tax,” or not.

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