Gerard Hallaren's  Instablog

I've been an Apple bull for a long time.  From a trading perspective, I've run hot and cold on the stock but Apple's long term case and execution have been even better than my expectations.  Now there is a very real and new threat to Apple's App Store business. Do not expect this to affect Apple shares in the near term.  This is a situation that needs aggressively to be monitored.  It would be negative for Apple should HTML-5 adoption accelerate.

App Stores are serious business.  Since it opened in July 2008, we estimate that Apple has generated about $1.0 B of revenue, we would guess that costs were measured in the tens of millions.  Apple has done a magnificent, if not unpopular, job of reigning in developers and publishers to insure it gets every penny.  Claims on partner revenue could become harder to enforce as developers find work arounds by using the next iteration of HTML, imaginatively named HTML-5. 

These paragraphs from my friend Caroline Gabriel over at Rethink, caught my eye because it explained how HTML-5 enables developers and publishers to avoid Apple's 30% tax.

"The rise of HTML5 browsers on mobile devices will radically shift the balance of power in digital commerce. They will make it easier for developers to create a user friendly purchasing experience in the browser, rather than requiring a dedicated app, which has to work within the processes of an app store, and deliver a fee to the owner of that store.

The impact of HTML5 is already being seen on iOS since Apple barred content providers from providing a direct link from an app to an external ebookstore. That was designed to stop vendors bypassing the 30% fee, but companies like Kobo and the UK Financial Times are, instead, removing the purchasing buttons, and creating HTML5 services instead. Kobo said its forthcoming web app will have even more functionality than its native app. In HTML5, users go to a dedicated web address and can then place a direct link to the service on their homescreens."

Distributing iOS applications away from Apple's store will still be a challenge.  Do you really think you ever have played "Angry Birds" without the store?  Doubtful.  If you are a large publisher though, this HTML5 could help avoid, or reduce, the 30% tax.

Caroline's squibb mentioned the FT and Kobo, escaping.  It is probably safe to say there will be others and Apple's hedgemony from the App and Book stores will likely be challenged. 

While doing my fact checking for this piece, I found that on July 28th, Nick Clayton's TechEurope blog, published by the Wall St. Journal, provided a more technically oriented analysis of HTML 5 that amplified Rethink's comments.  You can find that article at http://blogs.wsj.com/tech-europe/2011/07/28/html5-poses-threat-to-flash-and-the-app-store/?mod=google_news_blog.

Disclosure: I am long AAPL.

Additional disclosure: The excerpt from Rethink's Facebook article is well within its terms of use. If you want to see these terms, www.rethinkresearch.biz/legal.htm ought get you right to them. Rethink's two proprietors are good friends. If you have other questions or issues, please call me at 303-309-0918. Sorry about the bad editing, I'd tortured the piece too much in word to see them. This one is much better. Thanks G