July 17, 2024

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Apple’s critics have hit out at its latest App Store changes, arguing that small businesses will suffer from what Facebook parent Meta called the iPhone maker’s scheme to “grow their own business while undercutting others”.

Apple this week updated its App Store rules to require advertisers to use its in-app purchase system when “boosting” their posts on social apps such as Facebook and Instagram. The change means social platforms will have to pay 30 per cent of the revenue from those ads to Apple, in line with its standard commission for digital content bought within an iOS app.

It will mark the first time that Apple demands a cut of other companies’ advertising revenues within iPhone apps, just as it expands its own App Store ad business.

Most ads on social media apps are bought through a marketing dashboard for desktop computers, which would not be caught by the new rules. But advertisers say in-app boosts are most often purchased by individuals with a large following of fans online — so-called influencers — and small businesses.

Meta, which has already lost billions of dollars in ad revenue from privacy changes that Apple introduced last year, led the criticism of Apple’s move.

“Apple continues to evolve its policies to grow their own business while undercutting others in the digital economy,” Meta said. “Apple previously said it didn’t take a share of developer advertising revenue, and now apparently changed its mind.”

Tim Sweeney, chief executive of Fortnite maker Epic Games, which last year sued Apple over its App Store policies, wrote on Twitter: “It’s quite shocking that, in the presence of antitrust lawsuits and greatly increased legislative and regulatory scrutiny, Apple’s doubling down on brazen monopoly rent seeking.”

Advertising is a small but fast-growing source of revenue for Apple, adding billions of dollars in new services income that could help counterbalance pressure on hardware sales from inflation and the cost of living crisis, as well as what some analysts suggest could be a decline in overall App Store sales. Apple recently introduced new ad formats within the App Store, as it continues a hiring spree that would see its digital advertising team almost double in size.

Apple said its policy on boosts was consistent with its longstanding position on in-app purchases, which apply to mobile content from games to news and music subscriptions.

“For many years now, the App Store guidelines have been clear that the sale of digital goods and services within an app must use In-App Purchase,” the company said. “Boosting, which allows an individual or organisation to pay to increase the reach of a post or profile, is a digital service — so of course In-App Purchase is required. This has always been the case and there are many examples of apps that do it successfully.”

But advertisers and agencies have already started to grumble.

“Apple’s pricing change will have a disproportionate effect on SMEs — such as local coffee shops — who are less sophisticated advertisers and are most likely to use a mobile app to boost organic posts,” said Edward East, chief executive and founder of creative ad agency Billion Dollar Boy. “Suddenly, a 30 per cent share of their ad spend is going directly into Apple’s pockets.”

Vicky Simmons, founder of Mean Mail, a greetings card business based in London, said that Apple’s previous moves to restrict ad targeting on iOS had already “destroyed” several small businesses.

“It’s another blow in an already tough climate,” she said. “We are going to suffer from this while tech giants are trying to take a bigger slice of the indie pie, which is already small.”

Additional reporting by Patrick McGee and Hannah Murphy in San Francisco



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