Why it matters: The average price of an in-app purchase (IAP) on the Apple App Store has increased by a whopping 40% year-over-year in July, compared to a more modest rise of 9% on the Google Play Store. App intelligence firm Apptopia believes this is largely due to privacy changes from Apple.
While US inflation has soared, hitting a 40-year high of 9.1% in June, Apptopia explains the rise in prices could be more closely linked to Apple's App Tracking Transparency (ATT), which was a major change to their privacy policy.
Introduced in February 2021 and first enforced on iOS 14.5, ATT is an opt-in privacy framework that requires iOS apps to ask users for permission to track them and share their data. It allows users to decide whether they want to be tracked by apps and have the data shared with marketers for targeted ads.
The privacy change has made it more expensive for publishers to acquire users.
Interestingly, the rise of in-app purchase prices precedes the inflation surge of 2022, which corroborates Apptopia's theory that developers are actually reacting to an increased effective cost per install (eCPI).
The graph below further supports this notion, as there is an obvious correlation between the rise in IAP prices and eCPI.
The biggest driver of this increase is single in-app purchases, which rose by 36% in comparison to the 19% of monthly and annual IAPs. An example of a single-purchase IAP would be buying a new skin in Tennis Clash. Apptopia explains that publishers are "trying to present a value hook to customers for longer to cut down on acquisition costs."
The privacy change has also had major implications for numerous tech giants. Meta reported its first-ever quarterly revenue drop in July. When an iPhone user says no to tracking, the app can no longer access IDFA (identifier for advertisers), making it harder for Facebook to measure the effectiveness of ad campaigns.
Mark Zuckerberg admitted the changes will cost the company as much as $10 billion in 2022. He also said it would be unfavorable for smaller businesses that use the Facebook platform for advertising.
But, surprise. Apple's App Tracking Transparency feature has boosted its own ads business, enabling it to join the Facebook-Google advertising duopoly. According to Appsumer, Apple's advertisement adoption rate rose almost four points year-over-year to 94.8%, while Meta's adoption was down by three percent to 82.8%.