Apple App Store policy updated: Facebook, Instagram must pay 30% in-app purchase fee for promoted posts

In an updated Apple App Store guidelines, Facebook and Instagram must pay 30% in-app purchase fee to Apple for promoted social media posts.

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The cold war between Apple and Meta seems to be far from over. Ever since Apple updated its iOS 14 privacy policy and introduced its App Tracking Transparency (ATT) feature on iPhones, Mark Zuckerberg, CEO – Meta (firmly known as Facebook), has been criticising these privacy changes.

The social media giant generates the majority of its revenue from advertisements and targeted advertising plays a crucial role to generate the desired ROI for advertisers. However, to serve the targeted ads a platform/website/app needs to collect users’ personal data including their internet behaviour. With Apple’s ATT, it’s no more an easy task to track the data of iPhone users, and this has affected Facebook’s ad revenue book, drastically.

To make the situation worse, Apple has recently updated its App Store review guidelines, mandating iOS developers to use in-app purchases and thereby giving Apple 30 percent on the sales of promoted posts on a social media platform.

Digital purchases for content that is experienced or consumed in an app, including buying advertisements to display in the same app (such as sales of “boosts” for posts in a social media app) must use in-app purchase.

It is the first time ever that Apple has directly taxed advertising in iOS apps

All social media platforms, including Facebook, Instagram, Twitter, TikTok, and others, allow their individual users and brand pages to boost their posts (including images, videos, text posts) to amplify the reach. However, it is important to note that Apple’s updated App Store policy will have a direct impact on Facebook and Instagram, unlike other social media companies like Twitter and TikTok. This is due to the fact that Facebook and Instagram DO NOT use Apple’s in-app purchase system for boosting posts whereas Twitter, TikTok, and others do. It’s interesting to learn that just a several years ago Facebook turned down Apple’s request to route the payments for boost posts through Apple Store.

Meta attacks on Apple

Meta (parent company of Facebook) has, several times in the past, publicly expressed its rage against Apple. In December 2020, Facebook released a full-page advertisement, arguing how Apple iOS 14’s privacy changes are bad for small businesses. In early 2021, The Information reported that Facebook has been preparing an antitrust lawsuit against Apple over its App Store rules.

“Apple continues to evolve its policies to grow its own business while undercutting others in the digital economy. Apple previously said it didn’t take a share of developer advertising revenue, and now apparently changed its mind. We remain committed to offering small businesses simple ways to run ads and grow their businesses on our apps,” a Meta spokesperson said.

It’s difficult to say whether Apple is legally allowed to do so or taking advantage of owning the complete ecosystem, but the decision to pocket a cut out of advertising revenue is in contrast to Apple’s earlier stand. During the Epic vs Apple antitrust trial in May last year, Phil Schiller, the man responsible for leading Apple Store and Apple Events to growth, claimed that the Cupertino giant had never taken a cut of iOS developer ad revenue. The claim, however, would no more remain true.

The new guidelines may not have a concerning impact on Facebook’s revenue book, but the company is quite concerned about it having a far-reaching impact. This could just be the tip of the iceberg as Apple would like to bind Meta’s standalone ads manager app with the same rules in future. According to Apple’s own guidelines, an app is currently exempt from having to use in-app purchases for boosts because the ads that are bought aren’t displayed in the app itself

“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. 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,” Apple spokesperson Peter Ajemian said in an interview with The Verge.

Experts believe that Apple’s new guidelines will largely affect individual advertisers – mainly influencers and small brand advertisers – who boost posts on Instagram or Facebook not very frequently. Facebook will pass over the charges to them to attain the same level of distribution via the boost post feature.

Impact of Apple iOS privacy changes

Apple’s privacy changes in the App Store, known as App Tracking Transparency (ATT), have boosted its search ad business, eventually breaking the Facebook-Google advertising monopoly in the online search market. According to InMobi’s Appsumer, Apple Search Ads (ASA) adoption increased nearly four percent points year-on-year to 94.8%. On the other hand, Meta’s ad adoption declined three percent points to 82.8% during the same period. The trend was also evident in share-of-wallet as Apple’s search ad business gained 5 percent points to reach a 15% share, while Meta declined four percent points, still leading ahead with a 28% share.

In February this year, Facebook’s chief financial officer, David Wehner estimated a total loss of $10 billion in 2022 that Facebook may occur due to Apple iOS privacy changes.

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