• California Court rules against Apple’s anticompetitive practices in Epic Games lawsuit
  • App Tracking Transparency (ATT) differences for iOS 14 third parties vs iOS 15 Apple’s apps
  • Insights into Apple’s anti-industry and anti-consumer practices

“…the Court finds that common threads run through Apple’s practices which unreasonably restrains competition and harm consumers…” 

Epic Games, Inc. v. Apple Inc.

 

Is iOS 15 Intentionally Confusing Customers?

Consumer Acquisition has been reporting on Apple’s anti-developer, anti-advertiser restrictions for months now. While our reports have primarily focused on devastating advertising revenue loss and impacts, two recent Apple developments have shown they are also anticompetitive to the disservice of consumers and developers.

Personalized Ads or You’re Being Tracked: Apple’s ATT Prompt 

Apple released iOS 15 on September 20 and according to iMore, the public beta showed some notable differences in the App Tracking Transparency (ATT) prompt for internal Apple products versus third-party ATT prompts. Their apps have been custom-designed to harm the mobile app advertising ecosystem and confuse consumers.

Any app distributed through the App Store that is now Apple’s is required to ask each consumer if they will allow having their activity tracked using the following language: Allow [App] to track your activity across other companies’ apps and websites? (See graphic below). Developers can add one customizable sentence to explain the value of tracking. Users must select “Ask App Not to Track” or “Allow” before continuing in the app.

Apple’s Inconsistent Privacy Language

For iOS 14.5, Apple automatically opted-in consumers to be tracked for Apple’s internal apps, which was troublesome considering their privacy rhetoric. With iOS 15, Apple is now showing an ATT prompt for their internal Apple apps; however, they use soft language that is designed to provide substantial advantages to Apple. In contrast to the terse, transactional prompt to permit tracking, for their own apps Apple asks you to “turn on personalized ads”. They also include a wordy explanation of all the benefits of said personalization, along with privacy protections and increased content relevance.

The difference in language cannot be overstated. One prompt is about empowering a user to do a positive thing while the other prompt is about preventing a negative thing. Personalization is delightful and sought out, while tracking is intrusive and objectionable. An empowered user can turn a feature on or off like a light. However, a disempowered user must ask for something negative not to happen to them.

iOS 15 anticompetitive behavior

Apple’s Unfair Standards

Apple’s behavior is custom-designed to give their products a strategic advantage over third parties like Facebook, Google, and TikTok. For all of Apple’s extensive privacy promises, the rhetorical spin-doctoring they have employed to persuade users to be tracked for Apple’s benefit casts a new light on their commitment to privacy. But, the end result is the same. If a consumer opts out of ATT they will not see fewer ads. Instead, the ads they see will not be personalized, essentially becoming unsolicited spam.

Why is it okay for Apple to use advertising-friendly language with their own apps and then use aggressive anti-advertising language for third parties? Aside from this language creating an inconsistent and confusing consumer experience, Apple seems to be building a walled garden of perceived consumer safety and security. At the same time, they are screaming like Chicken Little when third-party, AI-driven algorithms offer elegant, unbiased recommendations outside of Apple’s human-curated preferences. As app developers and advertisers are hobbled by IDFA loss, what resources do they have when the iOS rules are so blatantly different and unfair?

Monetary Impact

In Q2, 2021 earnings calls, both Applovin and Playtika shared that iOS 14.5+ adoption was over 80% and the ATT opt-in rate was only 35-40%. Zynga warned IDFA removal would have a material impact and H2 2021 bookings could be down by $100M. Consumer Acquisition is seeing a -15% to -20% average revenue loss for iOS broad audience games and a -35% revenue loss for heavy IAP/niche audience games.

anticompetitive behavior

September data from Flurry shows that worldwide, users being shown the ATT prompt have been opting in at a rate of only 23% week-over-week since August. In the U.S., the opt-in rate is an abysmal 16%. With these low ATT consent rates, custom and lookalike audience size has been reduced -77% worldwide (86% in the U.S.). As a result, effectiveness has dropped. Many mobile app developers have paused spending on iOS or shifted heavily to Android, inflating CPMs.

Epic v. Apple Ruling

Last week, a monumental ruling was made in the industry-shaking lawsuit of Epic Games v. Apple. Epic sued Apple “alleging violations of federal and state antitrust laws and California’s unfair competition law based upon Apple’s operation of its App Store,” with Apple disputing the allegations. While the court did not conclude that Apple was a “monopolist” or engaging in “antitrust conduct,” the trial did show Apple’s “anticompetitive conduct” under California law.

The evidence in the case demonstrated that gaming apps make up nearly 70% of all App Store revenue. And that revenue is generated by just 10% of all App Store users. The court found that Apple’s anti-steering restrictions—which prevented developers from communicating with users about lower prices on other platforms— “hide critical information from consumers and illegally stifle consumer choice” and called for “nationwide remedy.” You can read the full court findings here.

In the ruling, Judge Yvonne Gonzalez Rogers issued a permanent injunction declaring that Apple is “permanently restrained and enjoined from prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact, obtained voluntarily from customers through account registration within the app.”

The ruling takes effect in 90 days unless delayed or reversed. Then, app developers can add metadata buttons and external links for alternative purchasing mechanisms outside of the App Store. By offering users these alternatives, app developers can decrease IAP costs for users. They can also reduce their own overall App Store commissions by 30 percent. Increasing the diversity of the monetization ecosystem will ultimately benefit the entire mobile game industry.

 

Here is My Take on Apple’s iOS 15 Anticompetitive Behavior

Only 10% of all App Store users, mainly from games, are generating 70% of App Store revenue. Apple appears to be trying to corner the market of high-value spenders by:

  • Preventing users from accessing less expensive and less flexible alternative purchasing methods in the App Store. This is to maintain their high margins (i.e., the Epic Case)
  • Luring users out of third-party advertising platforms with privacy scare tactics (i.e., anti-advertising ATT language)
  • Making it very difficult for third-party platforms to identify top spenders and effectively build lookalike models (i.e., obfuscation of IDFA)
  • Reduced profitability of iOS advertisers by rendering A/B or multivariate creative testing useless.

Ultimately, this behavior is highly disruptive to the vitality of the iOS advertising market. It is having a negative impact on mobile app game developers, advertisers, and consumers.

 

For More Background On Our Perspectives Around Post-IDFA Loss

How We Can Help

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