Apple’s ecosystem is notoriously known for being a walled garden. That is especially true when looking at the framework of their app store. In fact, Apple is currently battling out in court against Fornite publisher Epic Games for rules Apple imposes upon developers who host their apps through its app store. Apple has expressed many times that their reasoning behind their stringent app store rules is rooted in protecting consumer privacy as well as maintaining app integrity. However, new information brought to light by Forbes suggests that Apple has been buying Google Ad space and using it to advertise the highest valued apps on their platform without the knowledge of the developers effectively stripping those developers of would be profits.
According to Forbes, this “ad arbitrage,” as they put it, has been taking place for approximately two years. How it works is that Apple purchases Ad space from Google, so, for instance, when someone does a Google search for a popular streaming service like HBO Max a whole list of results populate. Of those results (always near the top) is a link with the option to purchase a subscription to HBO Max through Apple’s App Store. On the surface, this advertising seems completely harmless. However, in actuality, developers are potentially missing out on profits.
The reason why developers would be missing out on profits if a person happens to click on Apple’s advertised link, as opposed to a direct link to, in the case of HBO Max, the service itself, is because of what is known as the “Apple tax.” Essentially, every time an app (or subscription) is purchased through Apple’s app store they take a 30% (for those making $1 million or more a year in profit) cut of whatever the cost is. Thus, every time a person goes through the app store to make a purchase instead of that company getting 100% of the profit, they only see 70%. It’s a shrewd move on Apple’s part being that it is entirely legal, but at the same time morally questionable.
One Forbes source said “Apple is trying maximize the money they’re making by driving in-app purchases that people buy through the Apple Store,” and that “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.” What’s more, is that it looks like a plethora of high-profile apps are being subjected to Apple’s seemingly strategic deception. In addition to HBO Max, Tinder, Bumble, Plenty of Fish, and Babbel are also featured in Apple’s Google Ads.
Apple taking profits away from these businesses can potentially have a negative effect on the end-user as well. Had they not been taking potential profits away from those companies then it’s possible that those businesses could afford to offer their users better subscription rates or lower app costs. For instance, instead of HBO Max costing subscribers $14.99/month (ad-free), they could charge the with-ads price of $9.99/month across the board.
In rebuttal to Forbes’ accusation, Mac Rumors reported that Apple responded by saying that the “…allegation that it is ‘secretly’ or ‘quietly’ purchasing ads for developers without their knowledge or consent is an overt mischaracterization…” and that in contrast to what Forbes is positioning as intentional deceit developers are, in fact, fully aware and Apple has long had a running dialogue with them regarding this matter. Mac Rumors also pointed that Apple indicated that their business model in no way differs from brick and mortar retailers who advertise the products that they offer in their stores.