Saturday, September 23, 2023

Apple extends its control over the App Store

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Shreya Christina
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Apple’s most significant changes this week weren’t new iPads or operating systems. The company also shook up the App Store with new rules and ad spaces designed to wring more money from its tight grip on the iOS ecosystem. The changes have major implications for developers, forcing them to either share more of their money with Apple or deal with ads they don’t like. And as developers have discovered in the past, they don’t have much room to push back.

In its changes this week, Apple updated its App Store rules to cut itself some of its social media app ad revenue and Web3 app purchase revenue. The company also expanded the scope of its App Store ads in ways that further intrude on the presentation of developers’ own apps.

A 10th generation iPad in an Apple Smart Folio on a wooden table.

Developers are now dealing with new rules for their apps.
Photo by Dan Seifert / The Verge

The most aggressive change was a direct shot at Meta. Now anyone who buys an in-app ad from within the app itself – such as a Facebook or Instagram “boost” to make a post more visible – will need to use Apple’s in-app purchase system, send a 30 percent discount on payment to Apple. There is an exception for ad management apps, but the broader effect is that a major purchase funnel now has to go through Apple. It’s especially frustrating for social apps like Meta, which are already experiencing the effects of Apple’s “Ask App Not to Track” prompt. (Meta estimated earlier this year that the prompt will) it cost about $10 billion in ad revenue.)

Apple is also taking a cut in NFT sales with these new rules. If an app sells NFTs, it must use Apple’s in-app purchase system. Trading volumes for NFTs have dropped dramatically in 2022, so this may not have as big of an impact as it was earlier in the year. But for those who keep trying to make something out of NFTs, by selling them through iPhone apps, you won’t get as much money as before. Since most people buy NFTs to try and make money from them, this inherently stifles NFTs on iOS. But if the NFT market skyrockets again, Apple is now well positioned to take advantage of it.

The rule changes show that Apple is seeing new places for profit and taking them. And as developers continue to try to build companies around their apps, they now have even more concerns about Apple getting a slice of the pie.

The new ad placements are already causing problems

Developers are also dealing with ads appearing in more places, including in their own apps. The App Store previously limited ads to the Search tab, which appeared in the “Suggested” section when you first tapped the tab and at the top of search results. She appear now in the Today tab (the one with the big cards with things like apps and in-app events) and in the “Maybe Also Like” section of individual app listings. It’s an important step to expand Apple’s growing advertising business.

Developers are regularly advertised with their own name in search results, and the latest change means that competitors or scammer apps can also appear on their actual page. Things went horribly wrong when the new ads launched, with several people seeing mismatched ads, such as gambling ads appearing in listings for apps that help fight gambling addiction.

Part of this mismatch is due to developers being able to display app ads in listings that are not relevant to the app itself, as shown by Overcast developer Marco Arment. The situation was bad enough that Apple paused ads related to gambling and “a few other categories” on App Store product pages just a day after the ads launched. We don’t know how long that hiatus will last, and Apple will still run ads in individual App Store listings, which likely means this won’t be the only time the company has had to respond to bad ads in the wrong places.

An iPhone 14 Pro showing the Dynamic Island making a phone call

Apple continues to find ways to wring more money from the App Store.
Photo by Amelia Holowaty Krales / The Verge

The changes broadly represent Apple’s growing desire to monetize the App Store. As the company focuses on increasing its revenue from services, finding new areas of apps and the App Store to cut back are just more levers Apple can use to improve bottom line. Apple was willing to make unpopular decisions to bolster its services figures — such as raising prices on Apple Music, Apple TV Plus, and Apple One, also this week — and the changes to the App Store are likely to add to the cash pile, too.

And, frustratingly for developers, there may not be much they can do about it. Meta, Twitter and TikTok could choose to remove boosts from their apps, but smaller social networks that may want to experiment with a similar model could be forced to accept Apple’s terms. NFTs are unpopular for a number of good reasons, and with this week’s changes, developers may have to charge Lake for them in their apps, which seems to be a drawback for NFTs ever regaining traction. And ads right in app listings can keep showing unexpected suggestions or ads for apps that aren’t very reliable, which will definitely be an eyesore for developers.

Apple has been aggressively pulling these levers because it can

Apple has been aggressively pulling these levers because it can; it flips a few switches, updates the App Store rules, and can suddenly make more money. But now that Apple is in charge of one of the two most-used mobile app marketplaces in the world, developers are forced to accept his policy — otherwise they’ll stop themselves from potentially reaching a huge number of customers on its lucrative App Store platform. Apple . And while criticizing the company on Twitter seemed to work for the gambling ads, Apple is showing no signs of backing down on its other changes.

The updates only add to wider frustrations with the App Store. Spotify, a vocal critic of the App Store, said this week that Apple is “stimulating competition and app developers’ imaginations” amid a tussle over the app’s audiobooks functionality. Meta opposed Apple’s boost changes, arguing that the company “continues to develop its policies to grow their own business, while undermining others in the digital economy.”

But developers can’t just walk away because they can’t reach the many, many people who use iOS. For the most part, developers are just dealing with Apple’s tricky terms, with the company laughing all the way to the bank.

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