Apple and Developers: An Improved Relationship with the App Store Changes?

For years, Apple’s App Store has been a platform to discover new apps and see what’s trending. Never did we expect to see ads in this sacred little space. Well, they arrived and everyone is talking about them. It’s a huge change for the technology giant who reportedly makes less than 2% of its revenue from the App Store. There are tons of questions, reactions and assumptions. Apple has tried to reassure smaller and indie developers that because there is no minimum bid for advertising in the App Store (along with other reasons), they have no reason to worry. However, common sense, and many tech commentators are saying that this is just another capitalistic move that keep the top dogs at the top and smaller companies will suffer. Google reacted immediately with a beneficial change to Google Play, that we will discuss a bit later. What is really going on and what does it mean for the future of app distribution?

What exactly happened?

Last month, Apple announced three major changes:

  • Improved app review times for developers
  • Allowing any app category to use subscriptions while rewarding developers an additional revenue stream if users maintain a subscription for over a year
  • The roll-out of search ads to the App Store

App review times

Historically, Apple reviewed apps in five working days, however they typically took a lot longer, creating a backlog that caused constant friction between Apple and developers. The announced target is to have 50% of apps reviewed in 24 hours and about 90% in 48 hours. Apple has hired more staff and put procedures into place to ensure these targets will be met. The obvious benefit is for the developers to get their app in the App Store quicker, making the relationship with Apple a bit friendlier.

Subscriptions

This is a big change which also prompted Google’s lightning fast response. Historically, developers who instituted a subscription fee from their users received 70% of the revenue, and Apple took home 30%. Now, developers will see 85% of the profit in the second year of the subscription, with Apple taking the remaining 15%. On top of that, Apple now allows any app category to use subscriptions. App users will also be able to easily upgrade, “side-grade” (moving from one app to another from the same developer) and “cross-grade” (moving from a competitor’s app or receiving a generous discount). The improvement in the subscription model encourages developers to keep their apps in top condition, resulting in less apps in the app graveyard. It incentivizes developers to continuously improve apps from the backend, so users will want to maintain the subscription.

Google’s announcement the day after Apple’s was an obvious attempt to one-up Apple. Google announced the same 85/15 split for developers in Google Play with subscription-based apps, but developers will see that revenue model immediately rather than after a year like Apple. The upside is clear, and the downside is that Google runs the risk of encouraging everyone to run subscription-based apps, even if it’s not appropriate for that specific app.

Search ads

There’s a lot of panic about Apple Store search ads, but let’s first get the facts straight. First off, relevance is the most important factor that will determine the placement of the ads. This starts with an app’s metadata and pre-approved listing, both used to create the ad. Developers will pay Apple based on click, not on impression. An app add will be determined “relevant” to the user’s search based on a few factors- keywords, reviews, downloads and more.

Apple is attempting to make this change easier and beneficial to indie developers. The ad building tool will essentially set up the creative for the developer. It will ask them their keywords, budget and credit card details. Then, Apple does its magic and voilà! You have yourself an ad. Apple has also made it impossible for the large developers to buy out a category, leaving room for the small developers to stay in the game.

Where do we go from here?

The short answer is, to be determined. The roll out of Apple Search Ads is a huge change that will have a domino effect that we can’t quite see yet. Apple has invited developers to be beta-testers, and they will officially start the program in the fall. For now, we know that the changes in app review times and subscriptions seem to be improvements for developers, rather than hindrances. Competition between the App Store and Google Play is still head to head, as Google adapted to the App Store changes right away. Even though these changes seem promising, it is unclear how the Search Ads will work for both large and small developers. Since it seems riskier for small and indie developers, the smartest thing to do is cover yourself with more than just Apple Store Search Ads- spread out your ads to different networks and publishers and don’t put all your eggs into the Apple basket.

This post first appeared on the Appnext blog

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