By now you’ve likely heard how Apple ended their app affiliate programp and you’ve probably seen hot takes which have called the move “a massive middle finger”, mean-spirited, a gut punch, just about the money, and “hostile and petty”. The Loop even said “Apple’s stated reasoning for this action is utterly ridiculous and complete bullshit.” The universal agreement was that it’s bad for Apple’s ecosystem of writers and bloggers and that the move was a bad one by Apple. However, I haven’t seen any analysis that attempts to see why Apple actually made the move–at least an analysis that doesn’t assume it’s all about a tiny amount of cash. I think there’s more going on, though, and so this is my attempt to understand the problem Apple was trying to solve. Surprisingly, this analysis actually suggests its in Apple’s best interest to revise the affiliate program rather than end it. To reach this conclusion, I’ll look at the problems with the affiliate program, how the program can be fixed, and why it’s in Apple’s best interest to revise rather than end the app affiliate program.
Why Apple ended the app affiliate program
We have to start by understanding why Apple ended the app affiliate program. On the one hand, this isn’t a hard question to answer: in the announcement itself, Apple explained that “with the launch of the new App Store on both iOS and macOS and their increased methods of app discovery, we will be removing apps from the affiliate program.” The new app discovery methods Apple speaks of is primarily the new App Store “Today” feed, though possibly also the introduction of paid search.
On the other hand, there is clearly more going on than just this. Apple clearly wants app discovery and the affiliate program certainly aids discovery more than it hurts it, so you’d think Apple would keep it along with their methods (even if theirs are better). After all, since the program pays a percentage of app sales, the 7% it costs Apple can’t be proportionally greater than the 23% of each sale it generates for Apple. So unless there is a compelling reason to close the program, it’s in Apple’s interest to keep apps in the affiliate program.
Therein lies the rub: I suspect there is a compelling reason to end the program in that the cost of the program does not actually produce a 23% benefit to Apple. That is, if 3rd parties were actually creating sales–causing people to pay for things they wouldn’t otherwise buy–then I believe Apple would keep the program. But as an active participant in the affiliate marketing scene–I run MDM Deals where I curate the best deals on just fantastic apps–I believe a huge percentage of affiliate link activity is not actually creating sales but is actually costing Apple money. For the following examples to make sense, remember that Apple pays 7% of any sale made within 24 hours of clicking an affiliate’s link; even if an app was free, if someone purchased a movie with 24 hours, Apple would still pay 7% of the movie.
Here’s how people abuse the affiliate program:
- Apps, especially games, that give a reward for downloading another (free) app. The users don’t actually care about the second app and likely delete it, but Apple pays the app developer 7% for any purchase within 24 hours, even though the developer did nothing to cause that sale.
- Affiliate marketing sites ask users to “support the site” by downloading a free app, even telling users they can delete it after. No sale is created here, yet Apple pays 7% for subsequent purchases unrelated to the free app
- Dozens of sites spam out a garbage heap of trash apps which no one should download, but anytime someone clicks a link and purchases somethign later, Apple pays them.1
- Large accounts were also utilizing affiliate links in social media advertising campaigns, creating situations where thousands of users downloaded apps (typically free) and then Apple paid those affiliates for all purchases later made by users who clicked those programmatic ads.
Further, there are also ways people use the affiliate program which are absolutely not abusive, but which don’t create new sales for Apple. Instead, the affiliate links cause Apple to pay for activity the marketer would already have done or a purchase that would already have been made.
- Affiliate marketers use their own affiliate links to buy items for themselves or family. These sale would have happened anyway and were not caused by the affiliate link, yet Apple still pays for them.
- Developers use affiliate links on their own websites and promotional material. The sales through these promotional materials would have happened anyway–as would the app promotion–yet Apple pays for each purchase even though they are not uniquely caused sales.
- A huge amount of affiliate revenue–I would guess 30% of MDM Deals’ revenue–comes from people downloading free apps and then buying something else. I am highly confident that MDM Deals is causing people to buy quality apps they wouldn’t have otherwise, but Apple still pays me for subsequent unrelated purchases.2
What do these examples have in common? In each, a “sale” and promotion was going to happen to which the affiliate contributed nothing…and yet Apple pays 7%. In the process, Apple enables–and even perversely incentivizes–spammy apps, affiliate marketing, and programmatic ad campaigns. The reason Apple is ending the program may be not the unknown-but-surely-small financial cost to them but the cost to the app ecosystem of having these abusive and spammy markets out there. Incidentally, this makes sense of why they would keep the book/music/TV affiliate program because that content is almost always paid content and, as static content, can’t be manipulated into getting users to download other content.
How Apple should fix the app affiliate program
Since there are significant problems in the app affiliate program and yet it would benefit Apple to keep it around, I propose that Apple change the program in the following ways rather than ending it:
- Only pay commission on sales of the item actually linked. That is, if someone clicks on an affiliate link for app A, the affiliate would receive no commssion for app B, song C, or movie D.
- Link the affiliate program ID to developer IDs and Apple IDs, then make no payments for sales to oneself, others with the same billing address (i.e. family), or for one’s own apps. Once again, these are not “caused” sales for which Apple should pay.
These changes would eliminate virtually all of the abuse in the app affiliate program, as most abuse relies on getting people to download a free app in hopes that they will generate money for the affiliate by later buying paid content. If affiliate links only monetize for the actual item linked, however, then a free app would never monetize and Apple would never pay for purchases unrelated to the affiliate’s work.
Why revise the program, though? Ending it also solves the problems–and without the work of making the above changes. Why should they take the time and effort to revise things instead of ending it?
Why Apple shouldn’t end the app affiliate program
(Alternate heading: an open letter to Phil Schiller)
There is much about which I could write, including how this is the right thing to do for the Apple community, but there are three business reasons why Apple should revise the app store instead of ending it: (1) Apple’s discovery can never be enough, (2) Apple benefits immensely from affiliate-enabled ecosystems, (3) Apple benefits from a business model that aligns 3rd party interests’ with its own.
Apple’s discovery can never be enough
Benedict Evans has often said that all curation grows until it requires search and all search grows until it requires curation. With millions of apps on the App Store and over a billion active iOS devices, Apple needs both. The App Story Today feed has improved discovery tremendously: in the week before writing this article, the Today feed included 188 apps.3 This simply is not enough, for three reasons:
- Even if Apple included even more apps in the Today feed–200 a week–then in one year’s time, they would include half of 1% of all apps on the store. That’s hardly sufficient coverage for the number of quality apps the store has nor is that enough to serve the needs of over a billion active devices. This is even more problematic since research by Creative Strategies shows that just 52% of sampled users browse the App Store each week.
- The best apps are often specialized on a niche and thus shouldn’t appear in a Today feed that needs to serve hundreds of millions of people. Niche websites, though, have no limitation and can specialize in areas relevant to hundreds and thousands of people.
- The vast majority of apps in the Today feed–over 70%–appeared in a list of apps without even a sentence of explanatory text, which is hardly comparable with app review websites. Further, of the roughly 250 apps/year that feature explanation, Apple doesn’t compare apps to each other or point out weaknesses of apps. This means that the most reliable information won’t be on the App Store, which may be why research from Creative Strategies reveals that just 16% of sampled iOS users use App Store search as a primary means of app discovery. Instead, 35% said that online searches gave better results.
The current App Store discovery methods are simply incapable of providing effective app discovery for hundreds of millions of users on over one billion devices looking at App Stores with millions of apps–and they never will be able to. Apple thus needs 3rd parties to provide discovery of apps, to serve niche audiences, and to review software. Apple recognizes the need for this diversity of voices in music, books, and movie content–which is why those affiliate programs remain–but the reality is that Apple needs those voices for apps as well.
Apple benefits immensely from the 3rd party ecosystem
Apple does not exist to keep 3rd parties in business and so the fact that significant publishers are questioning their very existence, while regretful, doesn’t necessarily make Apple wrong. I could argue that it’s worth the cost of revising the program to keep goodwill among Apple’s most loyal evangelists, but there is a better argument for Apple: the app reviewing community has a value to Apple far greater than is evident in the number of apps downloaded via affiliate links. To understand why, though, I need to tell you about the Small World Experiment.
A researcher gave 160 letters to students in Nebraska and told the students to get the letters to a stockbroker in Boston whom they didn’t know. The catch was that they could only send the letters to someone within their social network who would do the same, hopefully getting to someone who knew the stockbroker. Interestingly, all the letters eventually went through the hands of the same three people before they got to the stockbroker. The researchers concluded that there are some people who are “connectors,” that is, they have an outsized influence on the rest of the population due to their relationships.4
Not all affiliate marketers are connectors, of course, but they do have outsized–and untraceable–influence on others. For example, when I promote an app via MDM Deals, Apple can see how many people bought the app through my link. What they can’t see or track, though, is how many people saw the app through my site and, in turn, spread the word and how many of those people also spread the word. Sites that use affiliate links have an outsized influence on the app-buying community, but it is untraceable by Apple. I obviously can’t have stats on this–it is literally impossible–but if my non-techie friends and family are any indicator, an enormous amount of app discovery happens a step removed from affiliate links and the App Store.
I suspect Apple thinks that most of these sites will stay in business without the affiliate program–and those which die are typically less important. If so, then Apple could reap the benefit of this ecosystem without paying for it, but there is reason why it’s best for Apple to pay: because it aligns the interests of Apple and 3rd party affiliates.
Apple benefits from aligning affiliates’ business models with its service revenue
It goes without saying that Apple wants people to buy and use apps. Each additional app purchase not only makes the App Store the best place to sell apps but it also creates additional “lock-in” for users in the Apple ecosystem. There is a virtuous cycle here that benefits Apple: the more people buy apps, the more likely they are to stay with Apple and continue buying apps and, in turn, the more people buy apps, the greater the incentive for developers to build quality apps which, in turn, attracts and retains users. Everyone wins in this scenario: users get quality apps, developers get paid, and Apple gets loyal users, quality apps, and profit from all sales a loyal customer makes, building up their Services revenue which is an area of strategic focus.
The app affiliate program aligns the interests of the Apple ecosystem with Apple’s Service revenue growth, contributing to the virtuous cycle above. This can be seen by considering what happens to app review and discovery sites. Here are alternatives:
- Affiliates go out of business. Honestly, some business should close and this might be a beneficial thing for some to close. However, Apple certainly doesn’t want all to close.
- Utilize sponsors and ads. This is a good business model (and one MDM Deals uses), but the problem from Apple’s perspective is that there is no reason a website would feature ads that help Apple. In fact, I’ve seen sites feature sponsors that are direct competitors to Apple.
- Use an alternative affiliate program (like Amazon). This is a common business model. The problem from Apple’s perspective, again, is that it incentivizes reviewers to sell products that are not Apple’s—and, in the case of Amazon, send business to one of Apple’s competitors.
- Memberships. This is the best model for app review sites, but only for sites that already have significant followings. Sites used to be able to bootstrap their growth through app affiliate revenue–this is how Macstories got its start–but without the affiliate program, new writers and voices will either have to promote app discovery for free OR they will be pushed into the business models above that are undesirable for Apple. I’ve already canceled plans I had for an app discovery method precisely due to this reason.
If Apple wants 3rd parties to contribute to app discovery—as I argued above that they need—then they should care about the business models supporting that discovery. The app affiliate program directly aligns the interests of 3rd parties with Apple’s Service revenue, their most strategic segment to grow.
My proposed changes would not be popular—indeed I would lose significant revenue from them—but these revisions are far better than ending the app affiliate program. They’re also hard to argue with, as it more properly aligns payout with sales caused by affiliates. And from Apple’s perspective, if they know with high confidence that the affiliate is actually causing sales and not manipulating the system, then they should be excited to pay large amounts of revenue to people who are creating large amounts of sales! It’s hard to overpay a salesperson who works on commission, assuming you can know if the salesperson is making a sale. With these changes, Apple could know.
Apple may not think it worth their time to implement these changes—after all, doing so would take time and money. But when the alternative is Apple-promoting websites using words like “a massive middle finger,” “mean-spirited,” “hostile and petty,” “utterly ridiculous,” and “complete bullshit,” then perhaps Apple needs to take a step back and rethink their approach. I’ve argued that revising the app affiliate program will actually benefit app, but not alienating the Apple community is also the right thing to do, regardless of the bloody ROI.
1. Incidentally, this drivel of a business model is why I started MDM Deals, focused only on high-quality apps worth your time and money. Shameless plug, but you can sign up to get a daily email of a curation of deals–or follow deals on every social media network out there. ↩️
2. I once had someone download a free app and they then bought a $100 movie bundle; Apple paid me $7 for that even though the movie bundle sale had nothing to do with my site and affiliate link. ↩️
3. Data taken from App Store Today feed July 29-August 5, 2018. ↩️
4.To read more about this study and it’s fascinating implications, I highly recommend The Tipping Point by Malcolm Galdwell. ↩️