Apple flexes its control over the App Store

Apple’s most impactful changes this week weren’t new iPads or operating systems. The company also shook up the App Store with new rules and ad slots designed to wring more money out of its tight grip over the iOS ecosystem. The changes have big ramifications for developers, either forcing them to share more of their money with Apple or deal with ads they don’t like. And as developers have found in the past, they don’t have much room to push back.

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

The most aggressive change was a direct shot at Meta. Now, anyone who buys an in-app ad from within the app itself — like a Facebook or Instagram “boost” to better surface a post — will have to use Apple’s in-app purchasing system, sending a 30 percent cut of the payment to Apple. There’s a carveout for ad management apps, but the broader effect is that a key purchase funnel now has to go through Apple. It’s a particularly frustrating thing for social apps like Meta, which are already dealing with the effects of Apple’s “Ask App Not to Track” prompt. (Meta estimated earlier this year that the prompt will cost it about $10 billion in ad revenue.)

Apple also takes a cut of 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 fallen dramatically throughout 2022, so this may not have as big of an impact as it would have earlier in the year. But for those who are continuing to try to make NFTs a thing, selling them via iPhone apps means you won’t get as much money as you would have before. Since most people are buying NFTs to try and make money off them, this inherently stifles NFTs on iOS. But if the NFT market skyrockets again, Apple will now be well-positioned to profit from it.

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

Developers also have to contend with ads showing up in more places, including on their own apps. The App Store previously kept ads limited to the search tab, showing up in the “Suggested” section when you first tapped the tab and at the top of search results. They now appear in the Today tab (the one with the big cards featuring things like apps and in-app events) and in the “You Might Also Like” section of individual app listings. It’s a major move to expand Apple’s growing advertising business.

Developers regularly get advertised against their own name in search, and the latest change means competitors or scammy apps can appear on their actual page, too. Things immediately went south when the new ads launched, with several people observing poorly matched ads, like gambling ads appearing in listings for apps that help fight gambling addiction.

Part of this mismatch is due to the fact that developers can run app ads in listings that aren’t 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 pause will be in place, and Apple will still be showing ads on individual App Store listings, which likely means that this won’t be the only time the company has to respond to bad ads in the wrong places. 

The changes broadly represent Apple’s growing desire to make more money from the App Store. As the company focuses on increasing its services revenue, 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. Apple has been willing to make unpopular decisions to bolster its services figures — like raising prices on Apple Music, Apple TV Plus, and Apple One, also this week — and the App Store changes will likely add to the money pile as well.

And, frustratingly for developers, there may not be much they can do about it all. Meta, Twitter, and TikTok could make the choice to remove boosts from their apps, but smaller social networks that may want to experiment with a similar model might be forced to accept Apple’s terms. NFTs are unpopular for some good reasons, and with this week’s changes, developers might have to charge more for them in their apps, which seems like a detriment to NFTs ever gaining traction again. And ads directly in app listings could keep showing unexpected suggestions or ads for apps that aren’t very reputable, which will surely be a thorn for developers.

Apple has aggressively pulled these levers because it can; it flips a few switches, updates its App Store rules, and can suddenly make more money. But with Apple commanding one of the two most widely used mobile app marketplaces on the planet, developers are forced to put up with its policies — otherwise, they’ll be removing themselves from potentially reaching a huge amount of customers on Apple’s lucrative App Store platform. And while criticizing the company on Twitter seemed to work for the gambling ads, Apple shows no signs of backing down on its other changes.

The updates just add to broader frustrations with the App Store. Spotify, a vocal critic of the App Store, said this week that Apple is “choking competition and the imagination of app developers” amid a tussle over the app’s audiobooks functionality. Meta pushed back against Apple’s boost changes, arguing that the company “continues to evolve its policies to grow their own business while undercutting others in the digital economy.”

But developers can’t easily walk away because then they won’t be able to reach the many, many people who use iOS. For the most part, developers just have to deal with Apple’s onerous terms while the company laughs all the way to the bank.