Forbes: Apple secretly funnels millions away from developers and to the App Store

From John Koetsier’s “Apple Quietly Buying Ads Via Google For High-Value Subscription Apps To Capture App Publisher Revenue” posted Friday on Forbes.com:

Apple is secretly buying Google ads for high-value apps to collect potentially millions of dollars in subscription revenue, multiple app publishers have told me. Apple is placing the ads without the app developers’ consent, and Google won’t delete them, they say.

The cost: potentially millions of dollars in lost revenue. Plus, high advertising costs for their own campaigns.

It’s a form of ad arbitrage, they say, and it’s been going on for at least two years.

Impacted businesses include major brands such as dating apps like Tinder, Plenty of Fish, and Bumble, media giant HBO, education and learning publisher Masterclass, and language learning service Babbel. The ads don’t disclose that they are from Apple and would, to most observers, simply look like ads from the brands and app publishers themselves that happen to go right to the App Store.

“Apple is trying maximize the money they’re making by driving in-app purchases that people buy through the Apple Store,” one source, who asked not to be named for fear of retaliation, told me.

“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.”

My take: Pretty serious charge, if true. I’ve asked Apple for comment because Koetsier is not your run-of-the-mill Forbes clown-car contributor.

UPDATE: No reply to my request (whinging complaint sent, nice apology received), but someone at Apple PR did speak on background to MacRumors and AppleInsider:

Apple clarified the situation on Monday, telling AppleInsider that allegations of the company “secretly” or “quietly” — words used in the report — buying ads without app makers’ knowledge is a mischaracterization. The company is in regular communication with developers about the advertisements and said many are appreciative of the support.

28 Comments

  1. Robert Varipapa said:
    Unfettered capitalism at it’s finest!

    (What’s happening in heath care is ten times worse but that’s another issue!)

    1
    November 13, 2021
  2. Timothy Smith said:
    Apple is cheating app developers by enticing new customers to buy their apps. Am I missing something?

    7
    November 13, 2021
    • Gregg Thurman said:
      Am I missing something?

      Yes, you aren’t a cynic that believes anything Apple does is bad.

      1
      November 13, 2021
  3. Jerry Doyle said:
    “…. This source did agree, however, that placing ads for other companies’ products and using their trademarks was a little underhanded.”

    If the above was occurring where other companies were doing similarly to promote Apple’s products and concomitantly using Apple’s trademark to do so, then I can say with a rather high degree of certainty that Apple would oppose such practice vehemently through the filing of lawsuits to stop such practice. There seems to be, or at least appears to be, something unethical about Apple’s practice here that is inconsistent with its own public advocacy about privacy and with its own litigious practice targeted at others who promote anything related to using the Apple’s trademark without Apple’s permission.

    0
    November 13, 2021
    • Gregg Thurman said:
      The only thing unethical here is the display of ignorance by the author.

      I can’t imagine Apple, or any firm for that matter, placing ads like the ones purporting to have been done by Apple, with first getting permission from the beneficiary of the ads.

      The author can claim anything he wants with impunity by attributing his source as an knowledgeable insider who wishes to remain anonymous (if such a person even exists).

      It’s no wonder journalists rank down there with used car sales people. They’ve earned it.

      3
      November 13, 2021
    • Robert Paul Leitao said:
      Jerry: I disagree. Looking at the referenced ad in the article, there’s no mistaking Apple’s unique link or the promotion of the App Store.

      0
      November 13, 2021
  4. Kathy Corby said:
    Help me out here. So Apple buys ads from its own pocket, promoting popular apps, which are presumably then downloaded more frequently. Apple’s opportunity for recouping its investment comes only when in-app purchases are made, which return 70% or more to the app developers, and 30% or less to Apple. And these developers are harmed— how? Is there something here I’m not understanding? How can this be a dirty secret or a serious charge?

    16
    November 13, 2021
    • Gregg Thurman said:
      Thank you Kathy. Reason and logic prevails over emotional cynicism. How quaint.

      4
      November 13, 2021
    • Precisely Kathy! To the benefit of the entire ecosystem, especially the 3rd party app developers getting the lion’s share. Apple promotes their best sellers, so does Simon & Schusters & Amazon et al. No news here, just elaborate clickbait. Going back to the slopes, er lodge, now.

      1
      November 13, 2021
    • David Drinkwater said:
      I was thinking along the same lines: I mean, how could Apple possibly do something for another company that that (not) be OK?!? It’s a win-win-win to anybody who isn’t a total loser.

      0
      November 14, 2021
  5. Gary Morton said:
    Say it is a secret. Impute a malicious intent. Create a conspiracy. Could be true, could be totally fabricated, but such stories tend to sell.

    4
    November 13, 2021
    • Gregg Thurman said:
      because Koetsier is not your run-of-the-mill Forbes clown-car contributor.

      He’s a trained journalist. That makes him just as susceptible to writing a man bites dog story (true or not) if it furthers his cash flow, as it does a writer for the National Inquirer.

      2
      November 13, 2021
  6. Gary Gouriluk said:
    Stores selling Apple products advertise AirPods etc. to increase their sales. They don’t need Apple’s permission to advertise. Apple’s App store advertises their products for sale to increase App Store sales. What is the difference? Should Apple tell Apple retailers they can’t advertise so Apple can increase its direct sales? With these guys, Apple is evil if it does anything except give money away.

    13
    November 13, 2021
    • Alessandro Luethi said:
      This a worthy consideration, thanks!

      0
      November 13, 2021
    • Gregg Thurman said:
      Most excellent post Gary. You forced me to up vote it.

      0
      November 13, 2021
  7. Lalit Jagtap said:
    @Philip I am more skeptical and cautious about journalists at big media companies like Bloomberg, Forbes, WSJ etc. instead I trust small and independent journalists and analysts. In my view, the USA would not have experienced sever “subprime crisis” if our financial journalists and experts would have done more research and asked questions before 2008. Similarly now these media experts and pandits are busy fabricating stories based on half baked information instead of doing the real deep work.

    3
    November 13, 2021
  8. Aaron Belich said:
    Uh… HBO brings in more revenue from a long term Apple App Store subscriber, than what they collect from their own website subscriptions.

    They know this. Apple knows this.

    0
    November 13, 2021
  9. Kirk Burgess said:
    I believe every app developer agrees in the terms and conditions that Apple can use their app for promotional purposes when submitting it to the App Store.

    But I really struggle with any developer that has an issue with this – Apple isn’t portraying the apps to be ONLY available via the App Store so it isn’t being deceptive.

    The developers offer these apps on the App Store with the payment options, so it isn’t like they don’t want new customers to sign up via the App Store.

    Lastly, and most importantly, acquiring a new customer is the most valuable part of the process for a developer – acquiring a customer is something developers, depending on the app pricing, will pay many dollars per new user to enable, sometimes tens of dollars. APPLE IS INSTEAD PAYING FOR THE CUSTOMER ACQUISITION ITSELF (if this report is true) – which is truly a remarkable situation and a massive benefit to the app developer. Its such a good deal that I struggle to believe its real. It wouldn’t surprise me in the least if it turns out this is a pre-arranged deal between Apple and the developers where they are either splitting the cost, or has been done with explicit agreement between the two companies in exchange for having the app/service on the App Store at a particular commission rate.

    8
    November 13, 2021
  10. Kirk Burgess said:
    I also have to add: for stores that sell other companies products, advertising those companies products to bring people into the store is completely normal. The Forbes article even points this out specifically:

    “And Google’s ad policies state that ads may use other companies’ trademarks if they are “primarily dedicated to selling (or clearly facilitating the sale of) products or services, components, replacement parts, or compatible products or services corresponding to the trademark.””

    This is no different to Walmart advertising iPads for sale, or your local supermarket advertising 6 packs of Budweiser, or your local cinema advertising the new Disney movie. THIS IS HOW COMMERCE WORKS.

    5
    November 13, 2021
  11. David Emery said:
    Would it be the view of Koetsier that Wal-Mart, if it runs an ad for Campbell Soup, should mention that it’s cheaper at Target?

    1
    November 13, 2021
    • Robert Paul Leitao said:
      David: Point made. There is no price difference between what a consumer pays for a subscription through the App Store and what a consumer would pay if they somehow wandered onto the HBO site. It might have been a slow day for impactful news. In addition to using “unnamed sources,” the author mischaracterized the ruling in the Epic case. Again, Apple did not disguise itself or spoof a link. Apple is a legitimate distributor for HBO through the App Store.

      1
      November 13, 2021
  12. Whoa! This is definitely NOT a case of Miracle on 34th Street where Macy’s Santa sent people to Lit Bros, Wanamakers, Fox & Co., Filenes or Strawbridge & Clothier! No, no!

    0
    November 13, 2021
  13. Rodney Avilla said:
    Very interesting and informative comments. PED, would you like to modify your “My Take”? Or is there a perspective that is being missed?

    0
    November 13, 2021
  14. Tom Farris said:
    Is it possible that the un-named source is a disgruntled App developer (or more) who are not getting similar free advertising benefit?

    Kind of why them and not me? It’s just not fair! /s

    0
    November 14, 2021
  15. Darren DMW said:
    I am a veteran advertiser on Google Ads (nearly 20 years). This kind of arbitrage happens in many industries, including mine and often it is a source of frustration.

    Firstly, 2 companies bidding on the same keyword drives up the auction price. So the developer ends up paying more to acquire customers to their own site. If the developer wants to be above apple in the rankings they may have to pay even more. Some customers might get confused when they don’t turn up on the developers site and blame the developer, thinking shenanigans or incompetence.

    Secondly, using HBO as an example they would want people to sign up to their streaming service through their website so they retain 15%. They shouldn’t have to pay more to google to get on top of apple’s ad to keep their margin.

    I am more than happy to see apple’s service revenue keep growing as this might be the most important determinant in maintaining/increasing the rating of apple shares, however this makes me feel uneasy. Apple already makes a decent return from the developer ecosystem and doesn’t need to be clever to extract every little cent possible, at the expense of developers.

    2
    November 14, 2021
  16. Kirk Burgess said:
    Apple confirms its app advertising effort is business as usual. from Macrumors:

    “Apple has now clarified that it has placed ads to promote products it distributes for five years now, and these ads are clearly marked as being from the App Store.

    Apple indicated that this is no different from retailers running ads for the products they sell, and is a very standard business model. Apple is granted conventional legal rights to advertise in this way in the agreements it has with developers.

    Apple says that the allegation that it is “secretly” or “quietly” purchasing ads for developers without their knowledge or consent is an overt mischaracterization. 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.

    Apple says that it is committed to providing developers with the resources they need to be successful on the ‌App Store‌. These resources include compilers, testing and debugging tools, technical support, SDKs, libraries, APIs and more, but they also include advertising both inside and outside the ‌App Store‌.

    Apple’s advertising for developers’ apps, such as via email, online ads, and social media, achieved over 70 billion impressions in 2020. The company has also featured over 130,000 apps on the ‌App Store‌ and across various Apple channels, and is currently spending to support more than 100 apps across platforms such as Google, YouTube, Snapchat, Twitter, and TikTok.“

    0
    November 15, 2021

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