tl;dr: state of ads in chatbots
Confused about the state of advertising in AI chatbots? Me too. I researched the latest, so you don’t have to:
Anti-monopoly verdicts coming fast, years too late
A federal court ruled Google’s AdX (Exchange) and DFP (SSP) created a monopoly and will seek to require selling off their third party advertising Network business. This ruling might have been a big deal 20 years ago when users spent most of their time on the open web and Google made 46% of their ad revenue came through the third party Network (source paywall) but as online usage has moved to logged-in “Content Fortresses”, the Network business has degraded in performance (and margin). Today Google makes closer to 10% from this business. Google will still appeal, but it’s probably a moot point.
This comes at the same time the DoJ is trying to force Google to sell off Chrome four years after they succeeded in a court claim Google has a search monopoly.
Chasing another bold verdict in the very same courtroom — also years too late — the Federal Trade Commission is (FTC) revisiting its 2019 revisitation of its 2012 approval of Facebook’s acquisition of Instagram. Even though Zuck has offered the court a cool billion to settle, the case is projected to fail, in the words of Ben Thompson: “The government is making a case from the late 2010s, using evidence from the early 2010s, that Meta is a monopoly in the 2020s, and thus should have to divest acquisitions made over a decade ago.”
Amazon and Apple aren't immune to the punitive scrutiny.
That said the FTC is making some helpful rulings that are right on time: such as forcing Airbnb to display full prices (looking at you $250 cleaning fee) and dinging Uber for falsely claiming “savings of $25 a month” for subscriptions to Uber One, then telling users to contact customer service to cancel, but giving them no way to do so.
Apple's EU App Store changes...won't change a thing
You may have heard of the EU’s Digital Markets Act which require large online platforms to “behave in a fair way.” Well, to no one’s surprise, Apple’s much-anticipated response to the DMA was to materially change EU App Store policy changes-- in a press release "dripping with disdain"-- but, spoiler alert: they aren’t likely to materially impact the economic status quo for app developers.
I've summarized the changes in a post and there are certainly savings to be had versus the standard store commission rates – back of the envelope, I calculate north of $600MM savings using publicly available Spotify financials.
However, most think app developers will stick with the status quo. Beyond the sheer technical complexity; the process will add hurdles in end-user adoption; notable administrative overhead--including, getting a million dollars of credit with Apple; and, most importantly, opting into these changes requires the upfront burden of paying Apple for all app downloads and future updates. Clearly, it’s a financial risk that few businesses can tolerate.
Eric Seufert also has an excellent ongoing editorial on the changes in his three-part series "Heads I win, tails you lose."
Last week, Apple published a report done by Analysis Group, an international economics consulting firm, under the headline 'Report finds third-party apps see global success on the App Store'.
The Apple press release and the report itself are worth discussing separately: the former is full of carefully-polished PR points, but the latter is a legitimately interesting whitepaper with a lot of fascinating industry data.
Setting aside PR spin, it's probably best to take this analysis at face value for exactly what it shows: in certain markets and for certain verticals, users prefer apps not made by Apple. Nothing more, nothing less.
This week, Apple released a couple of self-serve tools to help developers promote their apps.
They're…basic. But maybe a sign of more to come? After all, a robust array of tools integrated directly with the App Store could help justify that 30% commission rate…
