How Much Longer Can Apple Ignore the Needs of App Developers?
The mobile app ecosystem is booming. A report from data.ai shows global app downloads across iOS and Google Play grew 11% year over year, reaching 37 billion in the first quarter of 2022. Consumer spending also hit a record high in Q1, reaching $33 billion.
Google and Apple continue to try to win over app developers. For instance, Google’s decision to allow Spotify to offer its own in-app payment option is a move that could support Google’s strategic desire to make Android the preferred ecosystem for app developers. Historically, both Google and Apple have exclusively routed in-app purchases through their own payment systems, charging developers a 15-30% commission. Spotify and other app developers, including Epic Games, have pushed for regulatory investigations and changes to the existing billing systems and structure.
Developers long favored iOS as it offered the best ability to monetize, the most valuable audiences, and the highest revenue per thousand impressions (RPM) in the app ecosystem. But are the scales now tipping in Google’s favor? Google’s recent billing move puts new pressure on Apple — an added pressure that may have contributed to the lack of new anti-tracking rules announced at Apple’s recent Worldwide Developer Conference.
To see what might lie ahead, let’s look back at recent history.
ATT sent Android CPMs skyrocketing
In April 2021, Apple released an iOS update that introduced App Tracking Transparency (ATT), a privacy-focused framework that requires app developers to gain user consent for tracking and accessing its advertising identifier, the IDFA.
Given that it’s used for ad targeting, measurement, attribution, and fraud prevention, the lack of IDFA availability majorly impacted the mobile ad ecosystem. Seemingly overnight, in-app CPMs, demand, and overall monetization potential in iOS fell.
In effect, app developers have been left holding the bag since this release. And while Apple has offered a scarce amount of innovation in the form of SKAdnetwork, recently announcing updates to SKAdNetwork 4.0, CPMs in the ecosystem are still nowhere near where they were at the start of the ATT rollout.
Of course, this isn’t the end of the story. Earlier this year Google announced plans to also limit its mobile advertising identifier, the Android Ad ID, in favor of a Privacy Sandbox solution. It remains to be seen how this solution will perform, but one would assume that Google will take note of the lack of performance to date, and address this in any planned solution to mitigate the impact to app developers.
Mobile apps could follow the same path as web browsers
The scales may be tipping toward Android for a preferred developer experience, and Google may be tapping into a familiar playbook.
If you look back just over a decade, the biggest audience on the web by far was on Microsoft’s Internet Explorer. The developer experience slowly decayed, and Google spotted an opportunity to improve it with Chrome. As a result, the web became better on Chrome (some publishers literally asked their users to switch to Chrome to experience their websites in a more performant way) and consumers eventually moved to Chrome enmasse. Marketers—and their ad dollars—and developers subsequently followed suit and left Internet Explorer behind.
Apps are critically important to consumers today—they spent 4.8 hours a day on mobile apps last year. And if the developer experience continues to be less economically viable in iOS, we could see the same series of events repeat, where Android is able to grab more market share. Now, the switching costs of a phone are markedly higher than a browser. However, what is a phone without a thriving app offering?
So, what does this mean for ad tech and the mobile app ecosystem?
Right now, much remains to be seen in this clash of the titans. If app developers continue to favor the Android ecosystem, that could decay offerings in iOS, which will put further pressure on Apple. The question from there is how exactly will Apple respond.
One possibility is that Apple might change its cool stance toward ad tech and consider leaning back in.
It’s unlikely that Apple will willingly give up its app store fees by altering its payment terms. That leaves developers unhappy on both sides of the equation as ad revenues continue to be suboptimal and commissions are undesirable. That is not a sustainable equation for the long term.
If Apple does indeed recognize the importance of investing in and contributing to a thriving ad tech ecosystem, it could bring a very positive boost to the mobile app community.
Steve Roach is Head of Mobile App Sales at Index Exchange.