Apple has been removing Iranian apps which facilitate transactions for businesses or entities based in Iran. Apple also recently removed DigiKala’s app from the App Store. In this post, we are going to explore why Apple is removing these applications.
Iranians are gadget oriented people, they love their gadgets and tend to buy the latest products. There are 40M smartphones in the country and if you are wondering about the number of iPhones, there are 6M iPhones in the hands of Iranians right now. iPhone Market is that big to the point that we have reports of 100K smuggled iPhones each month into the country. That’s about 1.2M new iPhones being imported illegally into the country each year which is a Billion dollar market in Iran. This number is only for iPhones and it doesn’t reflect the market from after-sale services, accessories, in-app purchase and many other revenue models around the main product. So with such a big market in Iran, why is Apple removing some of the Iranian apps from the App Store?
Apple’s Cut and In-App Purchase
One of the main problems that Iranian startups are dealing with is the In-App Purchase feature. Since Apple’s cut in the In-App Purchase is usually 30% (it varies in different countries), it’s important for them to get their commission. Some might think that these apps are getting blocked since they’re bypassing Apple, but this is not the story with the Iranian startups. According to Apple:
You can use In-App Purchase to sell content, app functionality, services and subscriptions:
- Content includes digital books, magazines, photos, artwork, game levels, game characters, and other digital content that can be delivered within your application.
- Functionality products unlock or expand features you’ve already delivered in your application. For example, you could ship a game with multiple smaller games that could be purchased by the user.
- Services allow your application to charge users for one-time services, such as voice transcription. Each time the service is used is a separate purchase.
- Subscriptions provide access to content or services on an extended basis. For example, your application might offer monthly access to financial information or to an online game portal.
And you can’t use In-App Purchase to sell real-world goods and services or to sell unsuitable content:
- Real-world goods and services: You must deliver a digital good or service within your app when using In-App Purchase. Use a different payment mechanism to let your users buy real-world goods and services in your app, such as a credit card or payment service.
- Unsuitable content: You can’t use In-App Purchase to sell content that isn’t allowed by the App Review Guidelines—for example, pornography, hate speech, or defamation.
With these facts in mind, we have a good overview when we should and when we shouldn’t use In-App Purchase.
As we mentioned the story for Iranian startups is different. We don’t have international payment in Iran yet, that means no credit cards or any other method of international payment. So if a startup wants to sell its app or uses In-App Purchase, it has basically no choice in Iran. There are a few startups in the country that have In-App Purchase feature or are selling their apps on App Store, but they’ve registered their companies outside of Iran to be able to do this. So both Apple and these apps are losing money in the absence of the international payment. But in the recent cases, the problem doesn’t lie within the international payment but with the sanctions.
Iranian Transactions and Sanctions Regulations
So why Apple is removing the Iranian apps from the App Store? This has been causing many startups a lot of problems in the past years. Even Digikala, the biggest Iranian e-commerce with millions of users has its app removed from the App Store. The problem lies with Iranian Transactions and Sanctions Regulations (31 CFR Part 560) issued by the U.S. Department of the Treasury. Apple in response to one of the Iranian startups wrote:
“Unfortunately, there is no App Store available for the territory of Iran. Additionally, apps facilitating transactions for businesses or entities based in Iran may not comply with the Iranian Transactions Sanctions Regulations (31CFR Part 560) when hosted on the App Store. For these reasons, we are unable to accept your application at this time.
We encourage you to resubmit your application once international trade laws are revised to allow this functionality.“
It’s not yet clear that if the U.S. sanctions are for the governments or the people. The people who want to use a simple app or a startup which wants to offer its services to ordinary people has nothing to do with the sanctions. The transactions that startups such as DigiKala have, is just a domestic transaction using the Shaparak system which is completely isolated from international payment systems. So how could this possibly be any threat to U.S.? we don’t know yet.
To wrap this up, we should mention that there are many methods that an app could bypass the ridiculous U.S. sanctions. Even the banks in Iran have their apps up and running on iOS without submitting them to App Store or asking users to jailbreak their iPhones.
It’s obvious that U.S. can’t close its eyes to Iran’s market. We have seen it before with Boeing Deal and we guess soon we’ll see something similar to the internet giants whether President Trump likes it or not. After all, he is a business man and he likes money.
[Update]: We got another tip that WeChat is also in talks to find a partner.
*Photo credit: Wired.com
I think it will be so much different because the whole sanctions are political and the new administration likes to grow USA economy to the world. So, fingers crossed, I guess!
I work in tech in the US (an Apple competitor), and our services are also unavailable in sanctioned countries. I believe Apple is held to the same rules. This applies to all monetary and account transactions, including individuals, not just governments. Users from these countries can’t even legally sign up for some of our services.