UPDATE – I had made the incorrect assumption that apps could be gifted using an account balance loaded from gift cards. This is not the case. Gifted apps require payment by credit card, as kindly pointed out in the comments by Zeno Popovici and verified by myself. I regret the error, and have modified this post accordingly. I would actually go as far as to say without this part of it, it’s no longer really a scam. I’d now call it ‘gaming the system’.
UPDATE 2 – It has now been discovered that gifting does not affect ranks. So the scam doesn’t exist now (it may never have) and I regret doing this whole post. I’ll leave it here however, as a reminder to wait until all the facts are known before ranting about what could be. Lesson learned. Now move along :)
Earlier this week, Apple opened up app ‘gifting’. Anyone can give any app to anyone else as a gift. This has been available for music for a long time, but it has only been applied to apps this week.
So that’s great right? Perhaps, but it opens up the potential for a pretty big scam.
The first thing to note, is that developers will still get 70% of the purchase price of gifted apps. So developers can gift their own apps to anyone, and in the end, only pay 30% of the purchase price to do so.
OK, but why would developers do that? Well, doing bulk giveaways was not possible before. Developers had 50 promo codes per update, and that was it. Now developers can do big giveaways of 1000 apps+.
So why do that? The obvious answer is to gain press and interest. Large scale giveaways attract attention, so for $300, a developer can give away 1000 copies of their app, and lavish in all the attention this creates.
But it gets better. To gift an app, you need the email address of the recipient. This is how Apple knows who to credit the app too. So not only does a developer get hype and press, but 1000 email addresses to stick on their mailing list, and announce new products to.
And it gets better still. At this point, no one is certain of whether gifted apps affect ranks in the top 100s. But unless Apple are displaying an uncharacteristic bout of careful App Store planning, they almost certainly will. So currently, there is a very good chance, that the day a developer gifts those 1000 copies, their app hits the top 100, and gets all the extra eye-balls such a placement receives.
The developer need only sell 300 copies due to the higher top 100 placement, and this little scam has paid for itself.
But wait, there’s more.
Developers needn’t pay full price when they gift their app. Right now in New Zealand you can buy 2x$20 iTunes gift cards for $30. I have heard of similar specials being held in the US at places like Best Buy.
So at 25% off, you’re paying only 5c per 99c app giveaway. And in New Zealand’s case, and no doubt some other locations, you’re paying GST for the card, but not on the app purchase. So apple end up actually paying me around 5c (tax free) every time I gift an app.
So, I get press, a mailing list to spam, a shot at the top 100 with the associated extra sales, and Apple pay me $50 to do it.
FTW!
Except I won’t do it. If it’s not legally wrong, it’s certainly morally wrong. I’m posting this as it is interesting, and perhaps as a warning to Apple, but I hope developers won’t do this. It would make a mockery of the store, and is unfair to Apple, and unfair to honest developers.
Unfortunately, some developers will, and some are already trying it out to some degree.
I just hope Apple close the loophole before this gets out of hand. A limit to the number of gifts you can send per account per month would probably do the trick.
David,
I agree with most of your points here. I just wonder if Apple have some way of tracking when a developer purchases one of their own apps? Since the iPhone Dev Center is linked to Apple IDs then this shouldn’t be too hard to do. As a developer myself I certainly wouldn’t do this type of scam, but it is a good way of giving reviewers an App and for the odd give-away, those 50 codes are incredibly precious. The biggest flaw in both the promo codes and the gift options are the US only aspect, I’m from the UK, two of my team are from Canada and the rest from the US, it makes it very hard to promote our Apps to other countries etc.
Stu
Comment by Stu Helm — March 26, 2010 @ 3:13 am
@Stu: Just to clarify, gifting is not US-only. The recipient of the gifted app simply has to have an iTunes account that is from the same country as the account sending the gift.
Also there’s nothing stopping a developer from creating multiple iTunes accounts (I have a US account not tied to my dev center account, so I can redeem promo codes, for example).
I think the biggest danger with the gifting of apps is that the larger companies like EA & Gameloft will drop the price of a big-name game to 99c for a day, gift it to a few thousand people, then bring the price back up the next day.
The #2 abuse of this method would be smaller devs who are JUST under the top 100 or top 50 or whatever, and just want to get up a few more spots to rank in a higher chart and get those extra eyeballs. For a 99c app, it’s cheap, and would likely pay for itself pretty quickly.
These are two reasons I think that app gifts will either:
a) not count towards app rank or
b) be limited in some way, as Stu suggests
The Top Paid lists *will* get very volatile otherwise.
Comment by Mike Berg — March 26, 2010 @ 3:36 am
Or “big” companies with “huge pockets” can also take advantage of this to keep their apps at the top. As a developer, the only advantage I get from this is exactly what Stu said, gifting apps to reviewers when my 50-promo-code limit is maxed out.
Great article btw! Thanks for sharing your insights!
Comment by Erick Garayblas — March 26, 2010 @ 3:51 am
You can’t pay for a gift with your current ballance or gift cards. You have To pay with a credit card.
Comment by Zeno Popovici — March 26, 2010 @ 7:49 am
Why is this a scam? It’s called marketing. And yes, the big developers have an advantage because they have money, but they always have. Make a great game and promote it well on forums And everywhere you can and the word will get out and you will succeed. If your app isn’t in the top 100 and you’re not sure why it’s because it’s not as good as the other apps/games or it just needs some more time.
Once again. There is no scam in giving away your product at your cost. I you create a product and it costs you 30% of what you’d sell it for and you want to give it away to get attention threw nothing wrong with that!
Comment by Josh Ernstrom — March 26, 2010 @ 1:46 pm
@Zeno
Thanks for pointing that out. I should have verified that, it was a stupid assumption. I’ve modified the post accordingly.
@Josh
Firstly, big developers have no advantage here, any serious developer should be able to spend a few hundred dollars to buy their way to the top 100. It is much much cheaper than the current marketing channels, so if anything gives the smaller developers the advantage.
Secondly, I totally agree that making a great game is the important bit, but not sure what that has to do with my post. This ’scam’ (which I’ve now downgraded to ‘gaming the system’ given Zeno’s information) will allow crap apps to buy their way to the top 100 a lot easier than ever before though, so in fact what you have said is less true than before.
And lastly, this method is marketing, but it’s also evil. If you fail to see the moral issues around this, then you should definitely join the marketing trade if you haven’t already. You’d be a perfect fit.
Comment by David Frampton — March 26, 2010 @ 7:28 pm