Apple capturing developer revenue using ‘unethical’ ads

Apple has been buying up Google advertising space for a number of popular apps, according to the developers. They say the company has been doing this quietly – although it denies the accusation that it has done so “secretly” – and without their consent.

Free advertising isn’t usually something companies complain about. But in this case it’s not a friendly or charitable move; rather, Forbes reports, it’s a way for Apple to boost its own revenue at the expense of developers’ subscription income.

The apps in question – which include such well-known names as Babbel, Tinder, Plenty of Fish, HBO and Masterclass – have one thing in common: expensive subscriptions that can be bought either within the app (using Apple’s own in-app purchase mechanism) or directly from developers on the web. In the latter case, developers get all of the revenue, while in the former they have to share 15% or 30% of it with Apple.

So when Apple advertises a well-known app, and includes a tracked link that directs customers to the App Store, it’s a double-edged sword for the developer: it increases the chance of a customer signing up for the subscription, but significantly lowers the revenue they’ll get from them doing so. If the customer was going to sign up anyway – if they were Googling the name of the service because they’d made the decision and simply wanted to find the URL – then it’s a net loss for the developer.

It’s also, needless to say, a net win for Apple, which stands to gain far more in revenue than the advertising costs. Some of the subscriptions run into thousands of dollars a year.

App developers call Apple’s behaviour “ad arbitrage” and complain that, as well as reducing their subscription revenues, this strategy increases the cost when they try to advertise their own apps, and leads to a lack of connection with customers and weaker support.

“Anyone that understands the basics of arbitrage could invent this,” said one of Forbes’ anonymous sources. “We all know what Apple’s doing for its privacy stuff is for its own pockets. It didn’t sit right that in the background they’ve been doing this to developers… it’s not ethical.”

But Apple, somewhat unusually, has publicly responded to the accusations by saying this is “a very standard business model”, and denying the characterisation of the advertising as secret and non-consensual.

“Apple says that the allegation that it is ‘secretly’ or ‘quietly’ purchasing ads for developers without their knowledge or consent is an overt mischaracterisation,” reports MacRumors. “On the contrary, the company says that it regularly engages in conversation with developers about the ads it places and many developers express their appreciation for this support.”

The company also says it has been doing this for five years, and says the adverts are clearly marked as being from the App Store.

To be fair to Apple, a cursory investigation makes it clear that it is not the only platform owner to do this. When we asked our colleagues from Tech Advisor to search for “Plenty Of Fish” on their Android devices, for example, they reported that an ad appeared at the top of the search results and directed them to Google Play, rather than to the dating website itself.

(They found no such ads on a search for HBO, incidentally, while the ad at the top of search results for Babbel was one for Babbel itself, which directed the user to its website.)

Standard practice and old news this may be, but the Forbes article comes at an awkward time for Apple, which has been struggling to maintain both control of the App Store and a friendly relationship with its developer ‘partners’. Increasingly it risks being viewed as the enemy rather than an enabler, and revelations like this are a PR black eye.

This article originally appeared on Macworld Sweden. Translation (using DeepL) and additional reporting by David Price.