Apple's App Store Screw-Ups Are a Strategic Danger

Watching the Apple (AAPL) app store game of ping-pong: Zip! Your app is denied. Oops. Boom! It's approved! The back-and-forths are dizzying. A match has been in full swing this week with news that Apple turned down an app from Pulitizer Prize-winning editorial cartoonist Mark Fiore. Why? Why? Because his satire "ridicules public figures."

After a couple of days came news that Apple had backed down and invited Fiore to resubmit the app. That's corporate-speak for, "Oh, we really screwed up in public, so we'll make nice." The long list of App Store incidents, from arbitrary turndowns to draconian controls on independent software developers, raises the question of whether Apple's operation has gone beyond a PR black eyes and now poses a significant danger to Apple's ongoing strategy for its mobile platforms like the iPod, iPhone, and iPad.

The Fiore incident was particularly bad for Apple because the subject was political speech by someone who had just landed the top prize in American journalism. But this isn't the first time that the App Store's clumsy operation turned Apple into a walking PR blunder (and to do that at at an image-obsessed company like Apple takes an enormous amount of effort). Let's review some of the

• Last summer, refusal to approve the Google (GOOG) Voice app brought on a Federal Communications Commission inquiry -- and lots of bad press when Apple allowed the Vonage (VG) app, which was similar in many ways.
• Apple releases App Store download numbers but refuses to address questions of what percentage are iPhone OS or firmware updates, music files, or updates of previously downloaded apps, making the claims suspicious.
• The company has imposed maximum e-book prices on publishers, based on prices of print equivalents, even while claiming to let publishers set their own prices.
• Apple has app developers over a barrel by not letting them go to market through any other channel than the app store.
• Now Apple, not satisfied with iPhone OS compatibility or even software standards, wants to completely control how they write their apps.
• Apple has gone back and forth on whether to allow sexual content. The current position is to say no, and that includes pictures of women in bikinis -- unless in a Sports Illustrated app, which shows how completely arbitrary Apple enforcement is of its claimed standards.

But public embarrassment is the least of the company's problems. The inconsistent, arbitrary, and draconian operation of the app store has already started to anger business partners, particularly among smaller developers who are often responsible for the bigger hits on the iPhone OS platform. I've also heard from numerous Apple product fans who've found the entire app approach to be off-putting.

To some degree this seems to be a result of the App Store's raging popularity. The staff clearly cannot keep up with the incredible volume of apps passing through the App Store -- in part, because Apple has made itself the only sales game in town.

That gets to the bigger part of the problem: the high-level decision to control every aspect of app creation, sales, and deployment. It has already begun to backfire and will only get worse. As that happens, Apple will do exactly the opposite of what it wants and open a window of opportunity for Google, Microsoft, Motorola (MOT), RIM (RIMM), and many others to lock down large segments of the growing smartphone buyer market. Yes, out at Apple headquarters it seems to be 1990 all over again.