Until now, Apple has taken a hands-off approach to tax advertising within iOS apps. On Monday, Apple updated its App Store rules to require that developers use in-app purchases for "sales of 'boosts' for posts in a social media app." This means that Apple will now take a 30% cut of all boosted posts on iOS apps. While this change primarily affects Facebook and Instagram, which allow users to pay to boost the reach of their posts, it could have significant implications for the future of social media. This update represents a significant shift in policy for the tech giant, and it could have far-reaching consequences for advertisers and app developers.
For one thing, the 30% cut that Apple will now take on all boosted posts could make it more expensive for businesses to advertise on social media. This, in turn, could lead to less ad spending on social media overall. Alternatively, app developers may pass on the cost of the tax to users in the form of higher prices for boosted posts. Facebook and Instagram have already said that they're evaluating their options in light of the new App Store rules. They may choose to absorb the cost of the tax themselves rather than passing it on to advertisers or users. However, given the large margins these platforms already enjoy, it's unlikely they'll be able to do so without affecting their bottom line.
Apple has been projecting itself as "privacy-focused". The company has made several moves to protect users' privacy. While these moves have been well-received by users, they have also made it difficult for Apple to make money. The company has struggled to find new revenue means without advertising or significant service offerings. So the company took the obvious step of taxing (fees) for services rendered through the platform. Apple taxes all in-app purchases at 30%, whether or not the purchases are digital goods, premium app features or e-books, or physical goods and services purchased through apps, like ride-hailing or food delivery. Apple also gets a 30% cut of all subscriptions made through apps on its App Store. And it now seems the company plans to extend that tax to ads sold on the platform by other social media companies.
In any case, there is no doubt that Apple is playing the role of big brother here through the app store monopoly, and it remains to be seen whether advertisers continue to stay with the platform - or look for alternatives, which unfortunately do not exist at this moment.