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Apple Asserts Its Dominance Over The App Store

The new App Store rules and ad placements have serious consequences for developers. However, as developers have discovered in the past, they don’t have much wiggle room. The most significant changes made by Apple this week were not new iPads or operating systems. The company also shook up the App Store with new rules and ad slots aimed at extracting more money from its stranglehold on the iOS ecosystem. The changes have significant implications for developers, forcing them to either share more of their revenue with Apple or deal with ads they don’t like. And, as developers have discovered in the past, they don’t have much wiggle room. Apple updated its App Store rules this week to give itself a cut of some advertising revenue in social media apps and purchase revenue from Web3 apps. The company also broadened the scope of its App Store advertising, infringing even more on the presentation of developers’ own apps. The most aggressive change was aimed squarely at Meta. Anyone who purchases an in-app ad from within the app — such as a Facebook or Instagram “boost” to better surface a post — must now use Apple’s in-app purchasing system, which takes a 30% cut of the payment. There is an exception for ad management apps, but the overall effect is that a key purchase funnel must now go through Apple. It’s especially aggravating for social apps like Meta, which are already dealing with the fallout from Apple’s “Ask App Not to Track” prompt. (Earlier this year, Meta estimated that the prompt would cost it about $10 billion in ad revenue.) With these new rules, Apple also takes a cut of NFT sales. If an app sells NFTs, Apple’s in-app purchase system must be used. NFT trading volumes have fallen dramatically throughout 2022, so this may not have as much of an impact as it would have earlier in the year. However, for those who are still trying to make NFTs a thing, selling them through iPhone apps means you won’t make as much money as you would have before. Because most people purchase NFTs in order to profit from them, this naturally stifles NFTs on iOS. However, if the NFT market booms again, Apple will be well-positioned to profit. The rule changes demonstrate that Apple is spotting and exploiting new profit opportunities. And, as developers try to build businesses around their apps, they now have even more reasons to be concerned about Apple taking a piece of the pie.

Already, the new ad placements are causing issues

Ads are also appearing in more places, including within developers’ own apps. Ads used to be limited to the search tab, appearing in the “Suggested” section when you first tapped the tab and at the top of search results. They can now be found in the Today tab (the one with the big cards with things like apps and in-app events) as well as the “You Might Also Like” section of individual app listings. It’s a significant step toward expanding Apple’s burgeoning advertising business. Developers are frequently advertised against their own names in searches, and the latest change means that competitors or fraudulent apps can now appear on their actual page as well. When the new ads went live, several people reported seeing poorly matched ads, such as gambling ads appearing in listings for apps that help with gambling addiction. Part of the reason for this mismatch is that developers can place app ads in listings that aren’t relevant to the app itself, as demonstrated by Overcast developer Marco Arment. The situation was so bad that Apple paused advertisements for gambling and “a few other categories” on App Store product pages just one day after they went live. We don’t know how long that pause will last, and Apple will still show ads on individual App Store listings, implying that this isn’t the first time the company has had to respond to bad ads in inappropriate places. The changes reflect Apple’s growing desire to increase revenue from the App Store. Finding new areas of apps and the App Store to take a cut are just more levers Apple can pull to add to its bottom line as the company focuses on increasing its services revenue. Apple has been willing to make unpopular decisions in order to boost its service figures, such as raising prices on Apple Music, Apple TV Plus, and Apple One this week, and the App Store changes are likely to add to that pile as well. And, frustratingly, developers may not be able to do much about it. While Meta, Twitter, and TikTok may choose to remove boosts from their apps, smaller social networks that want to experiment with a similar model may be forced to accept Apple’s terms. NFTs are unpopular for a variety of reasons, and with this week’s changes, developers may have to charge more for them in their apps, which appears to be a barrier to NFTs regaining popularity. Ads directly in-app listings may continue to show unexpected suggestions or ads for apps that aren’t very reputable, which will undoubtedly be a source of frustration for developers.

Apple has used these levers aggressively because it can

Because it can, Apple has aggressively pulled these levers; it flips a few switches, updates its App Store rules, and suddenly makes more money. However, because Apple controls one of the world’s two most popular mobile app marketplaces, developers are forced to comply with its policies or risk losing access to a large number of customers via Apple’s lucrative App Store platform. And, while criticizing the company on Twitter appears to have worked for the gambling ads, Apple shows no signs of backing down from its other changes. The updates only add to the general dissatisfaction with the App Store. Spotify, a vocal App Store critic, claimed this week that Apple is “choking competition and the imagination of app developers” in the midst of a dispute over the app’s audiobook functionality. Meta reacted angrily to Apple’s boost changes, claiming that the company “continues to evolve its policies in order to grow their own business while undercutting others in the digital economy.” However, developers cannot simply walk away because they will lose access to the many, many people who use iOS. Most developers simply have to deal with Apple’s onerous terms while the company laughs all the way to the bank.

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