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Apple Addresses App Developers' Complaints

Industries Dow Jones Newswires

Apple wants to make its developers happier. 

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The company said Wednesday that it would implement a series of changes to its App Store, including allowing more apps to charge customers via subscriptions. Apple also said it would start running ads with App Store search results. 

The moves address complaints from developers who have said it was difficult for smaller, independent apps to get noticed among the millions in the App Store and it was hard to support some types of apps, such as those for workplace productivity, with only a one-time upfront fee. 

Previously, Apple limited subscriptions to certain categories of apps such as music-streaming services, news publications or dating services. Apple said it would now allow all apps, including games, to bill via subscriptions. 

Apps with longtime subscribers would pay Apple smaller commissions. Under the standard revenue split in the App Store, Apple keeps 30% of the fee with the rest going to developers. After a customer subscribes for more than a year, the revenue split would change to 15% for Apple and 85% for the developer. 

"The economics will be better for developers. It opens up new business models and makes developing for the App Store more attractive," said Jan Dawson, founder of Jackdaw Research LLC, a technology research firm. 

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Apple opened the App Store in 2008, a year after it introduced the iPhone. By 2015, annual billings topped $20 billion, meaning the store generated more than $6 billion in revenue for Apple. While Apple focused on creating one-size-fits-all devices, millions of app developers created software that made the hardware more useful, more entertaining and, in overseas markets, more localized. 

It is essential for Apple to keep its developers happy or risk losing them to Alphabet Inc.'s Android operating system, which runs about three-fourths of the world's smartphones. Google parent Alphabet generally offers developers the same 30%/70% split of revenue, though for the past year it has allowed developers of some subscription-based apps to keep 85% of the revenue, according to a person familiar with the matter. The company plans to offer the more-favorable rate to more developers, the person said, though it is unclear if it will become a blanket policy for all apps. 

Apple now operates App Stores for the iPhone, iPad, Mac, Apple Watch and Apple TV. All are affected by the billing changes. 

The changes come at an important moment for Apple, as sales of the flagship iPhone fall for the first time in its history. Among several moves to counteract that decline, Apple is pushing to expand its services business, which includes revenue that it generates from the App Store. 

Apple revamped the App Store's management in December, putting Phil Schiller, senior vice president for marketing, in charge of the store. Previously, the role was filled by Apple's services head Eddy Cue, whose responsibilities have expanded in recent years with the company's move into streaming music and mobile payments. 

Apple also said it would start displaying ads when a user searches for apps in the store. The ads would appear as the first listing when a customer conducts a search and would be marked as an advertisement. Apple said it would prioritize the "relevance" of the ad over how much the developer spends, so no developer can dominate the search queries. 

Apple said it would test the search ads on Monday. The company said it would handle the ads itself, using some of the infrastructure from its iAd business. 

The company said it is also making progress in shortening its app-review process, another longstanding complaint of developers. Apple reviews every update of apps, regardless of whether they are minor or major releases. In the past, this process could take a week or longer. By comparison, apps usually go up into Alphabet's Google Play store in a matter of hours. 

Apple said it has cut review times so that about half of app submissions are reviewed in 24 hours and 90% of submissions in 48 hours. 

Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com