Why an Apple App Rule Change Could Be a Big Deal for the Ad Business

If you spend much time at all monkeying around with game apps on an iPhone, you’ve seen them: Offers to gain an extra tank, or a health pack, or virtual coin or sheep or whatever — if you’ll just watch a video.

Sometimes the videos advertise other apps. Sometimes they advertise Pepsi or anything else you can advertise with a video.

Now some of them may be going away, at Apple’s command.

If that happens, and it sticks, it could be a big deal for developers, many of whom rely on “incentivized” videos to turn their free apps into money makers.

And the move also underscores how quickly the app industry can transform: If Apple or Google, which control the platforms the apps run on, want to change the ground rules overnight, they can. Perhaps Facebook, which has found a geyser of cash flowing out of app ads, should pay attention.

Because it’s Apple, we’re not going to get a lot of clarity — or any commentary — from official sources, so this stuff is a bit murky for now. But what appears to be happening is that Apple’s App Store managers have begun enforcing existing rules designed to prohibit gaming of its App Store rankings, and are interpreting those rules to include a prohibition on in-game videos promoting other apps. But in-game videos promoting things that aren’t apps, like soft drinks or makeup, seem to be fine.

The primary on-the-record source on all this is a post from programming site Stack Overflow that supposedly details an interaction with an App Store employee. But other developers and advertisers say they’ve been hearing the same thing since last week.

And for what it’s worth, an Apple PR rep didn’t take the opportunity to bat down the story.

So let’s assume it’s true. What’s Apple up to?

One theory, darkly muttered by people who sell video app ads for a living, is that Apple has suddenly become aware of the giant market in app advertising and wants to control it for itself. This seems unlikely to me, given Apple’s historical disinterest in advertising except as a way to reward and retain developers.

Another theory is that Apple believes the ads are either distasteful or worse, since many of the “incentivized” app ads conclude with very hard sells to download the apps. Perhaps Apple feels too many users are downloading apps they didn’t want to download, just because they think they have to — and by doing so are unfairly boosting an app’s popularity.

But you’d think Apple would have picked up on this much earlier, since the ads have been commonplace for the last couple years, as free-to-play game apps became dominant.

And if Apple wants to crack down on scuzzy ads, it could go much further and crack down on all incentivized video app ads.

When I play Modern Command, a tank-and-laser strategy game, and I get the chance to earn a free credit if I’ll watch a five-minute Revlon makeover ad, that can’t possibly be a good experience for me or for Revlon, right? (I watched it, by the way. More than once. Did not retain any makeover tips.)

Again, because it’s Apple, it’s possible that all of this is less considered than it appears, and could get reversed if Apple executives are persuaded that they’re in error. We’ve seen Apple go back and forth on app developer rules several times over the years.

But regardless of its staying power, the rule change should give everyone who wants to make money on apps a wake-up call: Like every other platform, this one could shift.

That could be particularly worrisome to Facebook, whose mobile ad success story is based in large part on app install ads, which didn’t exist a couple of years ago and should generate billions for it this year.

Facebook should be clear for now, since it doesn’t traffic in any incentivized ads at all. Facebook executives can also argue, convincingly, that its ads make for happier Apple users and developers, since they promote apps users might not see on their own.

Still, if Apple changed its rules in a way that handicapped Facebook’s install ads — intentionally or not — it could knock a big chunk of Facebook’s ad revenue offline, overnight. Scary.

This article originally appeared on Recode.net.

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