Apple, Advertising, and Elon’s Agenda

Elon Musk, Twitter’s new owner, yesterday posted a series of tweets about Apple’s App Store practices. In this series of tweets, Musk:

  • Questions the legitimacy and prudence of Apple’s 30% platform fee on in-app purchases and year-one subscriptions;
  • Suggests that Apple has indicated that it may soon remove Twitter from the App Store;
  • Addresses the fact that Apple has recently scaled its ad spend on Twitter back significantly.

In a since-deleted Tweet, Musk hinted that he might “go to war” with Apple over its 30% platform fee (image below courtesy of Axios).

There are obviously a number of issues to unpack across these narrative threads. The first is advertising revenue: advertisers have fled Twitter, citing “brand safety” concerns. According to one analysis, Apple was, until recently, Twitter’s largest advertiser and represented 4% of ad spend on the platform. And according to Media Radar, Twitter was the largest single destination for Apple’s social media ad spend at 84% of that budget. As I note in Elon’s Dilemma, Twitter must very quickly find a means of replacing the brand advertising spend on its platform with direct response advertising spend, which is more durable and is less sensitive to bad press and brand safety concerns (to a point, and not at the extremes).

Notable, it seems that Twitter is attempting to achieve exactly that transition: the company has recently announced two sets of improvements to its direct response advertising tools ahead of the holidays, with one of those announcements published on the day before Thanksgiving. It’s clear that these tools must have been in development for far longer than Musk has owned the company, but it doesn’t seem like a coincidence that the pace of product releases and feature updates related to direct response advertising has accelerated markedly since Musk took Twitter’s helm. Apple is emblematic of broad brand advertiser withdrawal on the platform, but it’s just one of the advertisers reducing its spend there, and it does appear that Twitter is attempting to rapidly scale its direct response advertising business to offset that loss.

The second issue that is germane to Musk’s recent protestations is Apple’s 30% platform fee, which Musk characterized in a tweet as “secret.” While this 30% fee is a well-known phenomenon to app developers, and one that I have covered volubly, it’s likely not popularly known by iPhone owners (it should be noted that Google Play applies exactly the same fee, and Apple and Google mostly work in lockstep related to their platform fees). It’s entirely possible that a very small proportion of iPhone owners understand that each purchase they make through the App Store’s (and Google Play’s) in-app purchases interface results in the platform retaining some percentage of the transaction price.

And the third issue is Apple’s control over App Store distribution. Musk proclaimed that Apple is considering removing Twitter from its App Store over content moderation concerns. Apple has total agency over the App Store and has flexed that agency in very high-profile cases in the past:

  • With Parler and Gab on the point of content moderation;
  • With HEY over content being gated by an external login and the app’s lack of an in-app purchase that could be used to unlock that content;
  • With Fortnite over its attempted use of off-platform, in-app payments;
  • and with Facebook’s internal employee apps over Project Atlas, a program in which Facebook paid users $20 for installing an app called Facebook Research that could observe various activities on those users’ phones.

Twitter’s removal from either the App Store or Google Play would likely be very painful, if not devastating, for the company. And the other threads at which Musk is tugging likely relate to that. I’d imagine that Musk is aware of the fact that he can sidestep App Store and Google Play platform fees by collecting payments for the Twitter subscription via the web, which Twitter seems almost ideally positioned to do. Musk also likely knows that both the App Store and Google Play reduce the fee paid on subscriptions to 15% after one year, meaning the average effective platform fee that Twitter pays over a user’s subscription lifetime is less than 30%. And finally, Musk might perceive that the walls are generally closing in on 30% platform fees, and that Apple may have a “too big to fail” problem that prevents it from pursuing total enforcement for certain services.

My sense is that Musk is using a general lack of understanding of the mechanics of mobile platforms to galvanize public opinion against Apple. This could create awkward optics for Apple if it does remove Twitter from the App Store for legitimate concerns over content moderation: Twitter’s removal could be seen as retaliation for drawing attention to the economics of the App Store.

It’s unclear if this type of public awareness pressure campaign would influence Apple into reversing course. To be fair, it’s also unclear whether Apple has even genuinely threatened to remove Twitter in the first place.