Brief:

• Apple is introducing another way for software developers and publishers to offer promotional discounts on subscriptions to their apps. Offer codes will be part of iOS 14 and iPadOS 14, the next updates to the software that runs iPhones and iPads, per an announcement.
• App makers can create batches of offer codes to send in emails, hand out at events or distribute with physical products. They need to use App Store Connect to submit the offer details, an app icon, subscription display name, promotion duration and pricing to Apple, which handles the redemption experience.
• The offer codes aim to help app developers increase subscriptions while boosting Apple's bottom line as developers and publishers are seeking more favorable terms from the App Store. Offer codes expire six months from the date they're created, and app makers can only create 150,000 codes for each app every quarter, according to Apple.

​Insight:

Apple is giving app makers another way to promote app subscriptions with the introduction of offer codes, helping to support their respective monetization efforts. Offer codes give app makers more flexibility in how they publicize subscriptions in other marketing channels, including emails or printed materials distributed at events. While Apple already lets app makers use introductory and promotional offers to acquire new customers or retain existing ones, offer codes can be created for both kinds of marketing efforts.

The offer codes also can give app makers a way to test different kinds of promotional efforts to see which ones are most effective. Conceivably, an app maker could create different batches of offer codes with different price points or varying subscription periods in A/B tests to hone their future promotions. Because the codes expire after six months, Apple recommends marketers be mindful of the length of their promotional efforts when they generate batches of codes.

Apple's support for offer codes comes as publishers fret that its stricter privacy policies will negatively affect mobile advertising. The company last week said it would delay enforcement of a policy that requires apps to obtain permission to track users until early next year, giving publishers more time to adapt to the changes. The announcement came as companies that rely on mobile ad revenue expressed growing alarm about Apple's rules on granting access to its Identifier for Advertisers (IDFA), a randomly generated code that the company assigns to devices. Social media giant Facebook last month warned that Apple's policy may cause a 50% drop in revenue for its Audience Network that lets marketers use Facebook's data for in-app ad targeting.

For Apple, supporting subscription growth helps the company to boost revenue from the App Store, which charges publishers a 30% commission on the first year of a subscription and 15% a year after that. Giving app makers another way to promote subscriptions and generate additional revenue may help to defuse some of the criticism about IDFA blocking, though Apple also faces criticism for the fees that the App Store charges on subscriptions and in-app payments. A group representing news publishers last month asked Apple to cut its 30% fee on the first year of subscriptions, after documents released in an antitrust investigation of Apple revealed the company had offered lower fees to Amazon, CNet reported.

News publishers were the latest companies to seek more favorable terms from the App Store. Game publisher Epic Games last month sued Apple to prevent the company from removing its popular battle royale game "Fortnite" from the App Store after it had introduced a payment plan to avoid the 30% fee on in-game transactions. Apple had removed the game for violating its rules. Audio streaming platform Spotify also has criticized Apple's fee structure for allegedly favoring rival service Apple Music. Apple's control over the App Store has drawn scrutiny from antitrust authorities in the U.S. and Europe.