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The App Store launched on July 10, 2008 one year and a half after the announcement of the iPhone. Previously there had been no 3rd party apps on the iPhone, only Apple-made native apps and 3rd party web apps. In that context, Flash's absence needed to be explained. Nevertheless, it took another 2 years for Jobs to write his screed, "Thoughts on Flash". By that time, Apple was well aware what a cash cow the App Store was

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If the app store appeared 1.5 years after the first iPhones, it was already conceived and development well underway when the iPhone launched. I don't have any firsthand knowledge of who blew off whom, but I'd guess it was Apple doing the blowing because that's traditionally what they do.

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I'm not sure that Apple intended to exclude Flash from day 1. I imagine there were difficult technical integration issues, never mind any other business interests. But once the App Store was launched and Apple commanded a 30% share of every single application sold on the platform, I cannot imagine why they would allow Flash to give away comparable applications for free.

The argument has merit that Apple wanted a more precise control over user experience, and badly written Flash apps could disrupt that, but I honestly believe that was a secondary concern compared to protecting their App Store revenue stream.