Developers Still in the Dark About Apple’s Policies on Incentivized Installs, Rankings

Three weeks after Apple began rejecting apps containing offer walls, developers are still in the dark about what is acceptable and what is not under the platform’s new approach.

Last month, Apple began sending rejection notices to developers if their apps contained incentivized installs or offer walls where players can get virtual currency for free in a game if they download other apps. This practice emerged over the last year as a way for developers to earn extra revenue and to predictably get visibility for their games. By paying for enough downloads on these walls, developers could break into to the top of the charts. This is in turn raised criticism that these networks were effectively allowing developers to buy rank or “game the charts.” (We published an explanation of the model back in January here.)

Although Apple tolerated incentivized installs for months, it reversed course in April, arguing that they violate the iOS developer agreement by manipulating chart rankings

The company’s change in stance was a setback for many developers who have made their apps free in recent months and turned to in-app purchases and offer walls for revenue. Of an estimated 99.9 million downloads of iPhone apps in the U.S. in March, 39.9 percent of them were free games with in-app purchases, according to mobile app research firm Xyologic.

What’s Happening Now?

We haven’t covered the issue in the last two weeks largely because Apple hasn’t provided any clarity and developers have been reluctant to speak on the record. Apple hasn’t said what its final policy will be or fully explained the reasons behind its turnabout last month, according to multiple developers and install networks.

We’ve heard of anecdotal cases from the install networks where developers have been able to pull strings with connections at Apple and get their apps in the door that include offer walls. But then in other cases, they’re still getting rejected: text-messaging app Pinger said it had an update with an offer wall rejected this week. Many developers, like Sequoia-backed Pocket Gems, responded by taking offer walls out of their newest titles.

Developers that haven’t sent updates to the store since Apple’s changes say their offer walls are working just fine and many Tapjoy campaigns are actually operating normally as we speak. The rankings algorithm, which Apple tinkered with last month, looks like it largely went back to what it used to be and new apps are surfacing with regularity.

All of the uncertainty in the developer community was vividly underscored in game developer Glu Mobile’s earnings call this week, where the company had to speak publicly to its investors about the financial fallout and Apple’s positioning on the matter.

“The situation is still unfolding,” said chief executive Niccolo de Masi. “There is not perfect clarity on where a line is or isn’t in regards to offer-based monetization mechanisms.”

Glu, which went public before Apple launched the iPhone in 2007, is in the middle of making a transition away from a carrier-dependent strategy of making games for feature phones. Using freemium games that make money with virtual currency, Glu nearly doubled smartphone revenues quarter-over-quarter to $5.9 million (under generally accepted accounting principles), it said in its earnings call this week.

But it had to take an extremely conservative stance with earnings guidance for the second quarter. The company’s assuming that it will earn $2.8 million in offer revenue this quarter, much less than it probably would have expected a month ago. Half of that figure has also already been transacted.

Glu is now saying that smartphone revenue (using non-generally accepted accounting principles) will grow by between $550,000 and $1.55 million to between $7.25 and $8.25 million. That would be a marked slowdown from the $3.3 million in quarter-over-quarter smartphone revenue growth it posted in the the first quarter. (Glu’s beaten guidance for the last five quarters, so the company is also probably just playing it safe.)

What’s the financial fallout?