Apple has disrupted the industry with innovation, but now it is facing challenges in the innovation ecosystem due to the App Store’s bidding ranking mechanism. Bidding rankings allow developers to clearly price their exposure opportunities, and users are easily misled by ads when downloading apps. Large factories rely on spending money to occupy the front row of searches, and small and medium-sized innovators are difficult to be exposed due to high promotion costs, resulting in traffic concentrated in the head, disproportionate flow of innovation returns to the platform, and the foundation of innovation is shaken.
In 1976, when Jobs and his friends founded Apple in a garage for $1,300, he boldly said: “There is no limit to innovation!” As long as you dare to think, nothing is impossible. “At that time, Apple was a disruptor and a dreamer, constantly redefining the boundaries of the industry with amazing technology.
The company, which once disrupted the industry with innovation, is now facing the challenge of balancing platform rules with the innovation ecosystem. The App Store’s bidding ranking mechanism is the epitome of this contradiction.
If you want to make an app that ranks high on the App Store, you need to pay for it, and the higher the price, the better. In July 2021, Apple launched search ads in the App Store in Chinese mainland, and the first thing that appeared after many users searched for the app was not the app they wanted, but the app recommended by the advertisement, and they may accidentally click the download button and click the wrong app. For small and medium-sized innovative companies and independent developers, because the promotion budget is not enough, they can only rank low, and it is becoming more and more difficult to be seen by users. This is undoubtedly a big hurt.
Developers’ exposure opportunities are clearly priced, and users’ experiences are threatened by commercial interests.
The more far-reaching impact lies in the deterioration of ecology. By controlling traffic ingress, the App Store continues to eat into developers’ revenue, forcing innovators to either succumb to high promotion costs or exit in disgrace. Innovation is no longer exciting, but has become a tiring job with high thresholds and low returns. When more and more innovators feel suffocated, Apple’s innovation ecosystem built over the years will also suffer irreversible damage.
1. Bid ranking – a survival game in the name of innovation
At first, the App Store was just an app distribution platform that allowed users to discover, download, and purchase a variety of apps. However, the evolution and iteration of business models often exceed people’s expectations. The continuous maturity of the mobile ecosystem has gradually evolved the App Store from a simple app store to a huge digital business ecosystem.
The large number of users and developers precipitated by the App Store itself is a scarce resource, developers are creative, users have traffic and payment ability, and accurately matching the two can completely derive a good business. Apple cannot ignore this. In fact, the App Store has the nature of both a “tool platform” and a “attention economy platform”, which not only connects applications and users, but also can operate the distribution of traffic.
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Apple has finally started bidding rankings to monetize App Store traffic. The essence of bidding ranking is a mechanism to convert traffic allocation rights into commercial bidding. Just like you have a first-class ticket or because you are a Gold member, you have priority boarding before regular passengers, you have privileges and privileges.
However, when the Apple App Store sells privileges and superiority, it needs to balance commercial interests and social responsibility with a fair mechanism. We cannot sacrifice the exposure opportunities of small and medium-sized innovative companies just because large companies have more advertising budgets. Nor can it always present some information distorted by bidding advertisements to mislead users. However, in recent years, the Apple Search Ads (ASA) system implemented by the App Store has increasingly shown resistance to the development of small and medium-sized innovative enterprises.
Earlier third-party studies estimated that about 50%-60% of app downloads in the App Store came from search. For developers, the benefits of promoting their apps prominently with search ads are self-evident. ASA provides an opportunity for more obscure apps to make the list, but this business model has also made the search “keyword bidding” gradually become a “survival game” that developers have to participate in.
Large factories rely on spending money to occupy the front row of App Store searches, and small and medium-sized innovators are difficult to gain exposure because they cannot bear the high promotion costs. This makes the traffic more and more concentrated in the head, and the small and medium-sized innovation teams either grit their teeth or leave the scene helplessly. Our own AI application inspiration island is also experiencing this unfair competitive environment on the App Store, which is also one of the difficult survival situations of the majority of small and medium-sized innovators.
2. The App Store wall is so strong that it suffocates innovation
Bidding Rank on the Apple App Store is a type of search ad. In the past, Google and Meta easily ate half of digital advertising in the United States by accurately matching user needs. But now, the new gameplay of AI directly throwing answers is difficult to insert (bidding) advertisements. Previously, I read an industry report about a significant drop in user retention due to ad insertion in an Al product test.
So, is the Apple App Store also facing this challenge? Unfortunately, not yet.
It’s not that no one has tried to build an App Store in the AI era to challenge Apple. OpenAI’s GPT App Store was once seen as an alternative to the App Store, and people imagined that people who couldn’t code could make their own apps. However, due to the ambiguous ecological positioning and insufficient developer incentive mechanisms, the platform has not been able to effectively challenge the App Store, and many developers have completely given up after trying for a while.
To date, the App Store’s bidding rankings have not been threatened by the reality of AI technology, that is, the lack of external pressure for change.
Undoubtedly, the App Store is still a strong platform. According to Apple’s official disclosure, Chinese apps have appeared on the AppStore store page in 175 countries and regions with the help of Apple devices, reaching more than 2.2 billion active devices worldwide, and 35% of its revenue comes from users outside China. Therefore, even in the face of unfair platform rules, developers still need to use the App Store to reach a wide range of user groups.
The Apple App Store has made countless innovators, and countless innovators have developed these easy-to-use mobile apps that have made the iPhone more valuable. This was supposed to be a virtuous ecosystem where (innovative developers, platforms) achieved each other, but unfortunately, the App Store’s bidding ranking mechanism broke this virtuous circle.
In the past, life applications such as weather queries could be at the top of the App Store list by relying on user word-of-mouth + organic traffic without a large-scale promotion budget, which also fed back to the improvement of App Store user experience. However, after the App Store implemented bidding rankings, many very good niche apps quickly faced a sharp decline in organic traffic, and some even disappeared. When the return of innovation flows disproportionately to a strong platform, innovation, as an economic force, will eventually decrease.
On today’s App Store, excellent apps are no longer seen because of quality, but because of advertising budgets, which not only damages the interests of developers, but also shakes the innovation foundation of the entire mobile ecosystem. This is why Zuckerberg pointed out in a public interview that the arbitrariness of Apple’s platform rules is gradually deviating from its innovative spirit. “The iPhone is great because almost everyone in the world now has a phone, which makes a lot of amazing things possible…… But on the other hand, they use this platform to make a lot of rules, which are arbitrary. ”
3. Reconstruct the ecology: let innovation return to the source of value
The bidding ranking staged by the Apple App Store is that even if the user explicitly enters the product name to search, the result obtained may still be an unfair “advertisement”. At the same time, when all developers on the App Store are investing more resources for traffic and rankings, the motivation to innovate is reduced, and users are mostly faced with similar products. Developers and users alike need to pay for the deterioration of the ecosystem, and the only winner is the App Store. Is this reasonable?
The history of Internet business has repeatedly confirmed an iron law: when platforms (as technology gatekeepers) take more value than innovators, the system is not far from collapsing.
If you think about it carefully, the innovative achievements of small and medium-sized developers must first be refracted through the prism of platform interests, so is it possible for today’s “garage entrepreneurs (small companies)” to replicate Jobs’ counterattack?
Of course, the essence of Apple’s predicament is a common proposition faced by all tech giants: when the platform economy enters deep waters, how to balance commercial interests and social responsibility?
According to the 2022 report of the National Science Foundation, in the field of information technology, small and medium-sized enterprises account for 65% of R&D investment, and it can be said that small and medium-sized enterprises are increasingly becoming the main force of innovation.
It is undeniable that the App Store has been an incubator of innovation, with countless small and medium-sized developers breaking through through organic traffic.
Based on the long-term development logic of platform enterprises, we expect the Apple App Store to make good changes and reconstruct the rules: make traffic distribution more fair, reserve “non-bidding” exposure for original applications, and dynamically display non-commercial indicators and algorithms based on user ratings and update frequency; At the same time, open the bidding logic to avoid small and medium-sized enterprises blindly burning money due to poor information. More importantly, listen to the voices of small and medium-sized innovators, and the industry will discuss the symbiotic model of platforms and innovators together.
Standing in the long history of science and technology, looking back, truly great enterprises are never the harvesters of traffic, but the ferrymen of innovation. When Jobs typed the first line of code in his garage, he might not have thought that half a century later, humanity would need to relearn how to guard the fire of innovation. We look forward to Apple once again “Think Different” and redefine the platform’s mission with innovation.
Because the next app that changes the world may be lying in a developer’s draft box, waiting for an opportunity not to be buried by the bidding rankings.
