Brief:
- Apple plans to end its affiliate program for iOS apps, Mac apps and in-app purchases on October 1, according to an announcement made by the company.
- Apple said its App Stores for iOS and macOS, which were redesigned last year, increased the ways that people learn about mobile applications. The company is maintaining its referral rate of 7% for music, movies, books and TV programs.
- The company's affiliate program shares a small percentage of revenue generated by third-party links to purchase apps or in-app content. Last year, the tech giant cut the commissions for app referrals from 7% to 2.5%.
Insight:
As services like the App Store become a bigger part of Apple's business, the company may want to be less dependent on independent reviewers and focus more on strengthening the business from the inside. Apple’s plan to cut affiliate payments will likely have a negative impact on independent app reviewers that earn revenue by linking their recommendations to Apple’s App Store, per VentureBeat. But the company isn't obligated to support reviewers that aren't building other sources of revenue, such as advertising, paid subscriptions or even direct patronage. Publishers that were too reliant on Facebook traffic also have lost business when the social network has made changes to its algorithms that determine what people see in their news feeds.
Meanwhile, third-party reviewers benefit from driving traffic to the App Store, which looks like a conflict of interest with readers who are seeking unbiased advice about which apps to download. The elimination of app referral payments should be a warning to any company that makes money from referrals for other content like music, movies, books and TV. As Apple builds up its content business, it may eventually decide to add more in-house reviewers.
The services business has been a real growth engine for the company as it seeks to reach $50 billion in yearly revenue by 2020 from the App Store, Apple Music, Apple Pay and iCloud storage. Services revenue jumped 31% to $9.6 billion last quarter, putting the company on track to easily reach its goal. "Apple Pay had well over 1 billion transactions last quarter, triple the amount from just a year ago," said CEO Tim Cook.
The elimination of affiliate payments isn't likely to have a major effect on Apple’s revenue. The tech giant reported record sales for its fiscal third quarter — usually the company's weakest time of year — due to higher iPhone prices and its growing services business. Apple's iPhone sales rose 1% to 41.3 million units, and a higher price point meant that iPhone revenue jumped 20% to $29.9 billion.
