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Is Apple Secretly Buying Ads For Developer’s Apps?

Operations & Management

Isadora Teich wrote this article

0 Comments

Several large developers have accused Apple of buying ads for their apps without their knowledge.

Apple has said that this is a well-known standard practice of their company. According to them, developers should have already known about it.

Let’s take a look at what’s happened.

The Complaints

According to numerous major developers, like Tinder, Bumble, HBO, and Masterclass, Apple is essentially undercutting them. The company may be costing them millions of dollars by secretly running ads on their behalf.

So, how exactly are they doing this? Well, Apple essentially runs ads for these apps without the permission of their companies. These ads drive traffic directly to the App Store, rather than the developer’s own website.

As a result, users buy subscriptions as in-app purchases. This means that Apple gets its highly contested 15% or 30% cut.

Apple Tax Controversy

Lately, Apple has been fighting legal battles around the world centered around some big issues. One is the infamous Apple Tax, which has been highly contested for years. To keep it short and sweet, many developers and government officials feel that this up to 30% tax is extortionate and unevenly applied.

While some developers don’t have to pay it at all, it is a huge expense for others. In court, it actually came out that app store fees are the single largest expense of Match Group, the company behind Tinder.

When questioned in court by the US Government, Apple could not really explain why some developers have to pay these fees and others don’t. Senator Mike Lee even said in response:

“I feel like an unfrozen caveman lawyer. I’m not grasping it.”

Apple Vs Epic

Of course, Apple wants to keep collecting fees by charging this tax on all app store payments, and developers want to dodge them.

Recently, this resulted in an explosive trial between them and Epic Games, the company behind the game Fortnite. This trial may literally never end.

In light of all of this, it makes sense that developers are unhappy with this situation. Essentially, Apple is running ads without their consent that connect consumers directly with the Apple payment systems, so they can keep collecting commissions.

A source who asked to remain anonymous for fear of retaliation from Apple told Forbes:

“Apple is trying maximize the money they’re making by driving in-app purchases that people buy through the Apple Store. Apple has figured out that they can make more money off these developers if they push people to the App Store to purchase there versus a web flow.”

The Real Cost

Developers say that the negative effects of this are more complex than you might think. For one, Apple creates ad competition in spaces where these companies also advertise. So, in general, they raise the cost of ads, meaning that if Bumble wants to purchase ads for its own app, it will have to compete against Apple’s ads for them in the marketplace.

Also, keep in mind that some of these apps have relatively expensive subscription options. For example, a Premium Masterclass subscription costs $23 a month, billed all at once. That is a $276 yearly bill, excluding taxes and fees. If Apple takes 30% of this, that is about $82.

When you consider that the company may be taking this amount from thousands of subscriptions, all while making it more expensive and difficult for Masterclass to get traction with its own ads, you can likely see the issue.

More Than Financial Woes

Apple has been getting harsh scrutiny around the world legally for allegedly participating in anti-competitive behavior. These accusations will likely only pour fuel on that fire. According to developers:

When people buy access to a service via a subscription in an iOS app, they are essentially Apple’s customers. For privacy reasons Apple does not provide much information about them to the apps or businesses that run the apps. That means it’s hard to do customer service, address issues, or solve any problems.

Apple’s Response

The company says that while it does buy ads for third-party applications, they are by no means doing it secretly. They say that this is actually standard practice in the industry and they regularly communicate with developers about it.

Apple told 9to5Mac that it has actually been openly doing this for more than 5 years. They say that the ads simply promote products in the Apple store, similarly to how other retailers function.

For example, the makeup retailer Sephora may use mobile ads showing the Fenty or Gucci products they offer, even if they did not make those items themselves, because they are a storefront.

Apple says that this is far from a secret and it is even permitted under the standard Apple Developer Program agreement. At the moment,the company says it is running advertisements that promote more than 100 third-party applications across a variety of networks. These include Google, TikTok, Twitter, and YouTube.

Are They Doing Something Unethical?

Ultimately, is Apple running ads for other developers in secret? No. However, here we run into the same issue with them that developers repeatedly have.

Developers say that the company takes too much money from them and finds loopholes with which to exploit them, and Apple says that it doesn’t. There are really two main ways to look at this.

One: Apple is a business with rules. If you don’t want to follow its rules, don’t do business with them. Developers really have no right to complain.

Two: The company harms other businesses with unethical anti-competitive practices, and intervention is necessary.

The Vilification of Apple

There is some truth to the fact that Apple has become quite vilified in the news cycle. At this point in time, anyone could accuse Apple of almost anything, and many people would uncritically accept it.

In the midst of global litigation and investigation into whether or not they are a monopoly, Apple’s reputation has taken some hits. However, this does not mean that every report that comes out about them is true. In this case, them doing something that almost all retailers do on some level has been making the rounds as a nefarious plot.

In general, if you want to sell a physical good at a brick-and-mortar retailer, they will take about 60% from you. While this can vary widely depending on a wide variety of things, including how popular your product is and what exactly you are selling, Apple takes half of that or less from developers.

Final Thoughts

There is a lot to think about here. And there is not necessarily a correct answer. Of course, Apple wants to keep collecting its fees. And, of course, developers do not want to pay them.

Rather than the initial accusation, what may be more worth exploring is how Apple makes it more difficult for companies to advertise for themselves, or how they withhold information about app use from developers, so they can’t address problems or understand their audiences.

What do you think? Comment below.

 

About ChopDawg.com: Since 2009, we have helped create 350+ next-generation apps for startups, Fortune 500s, growing businesses, and non-profits from around the globe. Think Partner, Not Agency.

 

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