Tapjoy, a startup that lets companies pay for app installations, is capping the number of installs each user can make, MocoNews reports. This is almost certainly in response to Apple, which doesn’t like pay-per-installs.What does Tapjoy do? Here’s how it works: let’s say you’re playing a game with virtual goods; the game might offer you in-game currency if you install another app instead of paying cash. You install the app and get your in-game currency. The app gets a new install and pays for that. Tapjoy is the middleman, splits the revenue and keeps some of it. It’s big business: Tapjoy said they’re on a $100 million revenue run rate, and its biggest competitor Flurry is thought to be doing very well too.
Why is this a big deal? It’s a big deal because a lot of people download apps based on the top-selling lists. Many startups figure that they can buy their way to the top 10 and, once they’re there, recoup their investment through “organic” downloads. The whole thing has probably become inflated, with bidding for the top 10 spots becoming self-sustaining, and VCs pouring cash into mobile startups and demanding exponential growth.
Isn’t this a bit scammy? No. Paid distribution has always been a part of the internet, and of business in general. Zynga buys Facebook advertising to get new users, Groupon buys display ads to get new subscribers, and even Amazon pays Google around $200 million per year on search advertising. In the case of Tapjoy, as far as we can tell, no one is being lied to. Users get rewarded for downloading apps, advertisers and publishers get what they want.
So why does Apple care? Our Steve-Jobs-mind-reading machine is still in the shop, but we’d have to say there are two reasons. First of all, it shows discovery is broken on the app store, and Apple doesn’t like its weaknesses exposed. Searching the app store is ineffective unless you know what you’re looking for, and “top 10” lists just invite gaming. Second of all, control. It’s Apple’s ecosystem and Apple wants to control it. It doesn’t like people going out of Apple-approved routes to gain users. And, presumably, if there’s money to be made for app distributions (and Tapjoy has shown there is), it wants a piece of the action.
At the end of the day mobile apps is a complex ecosystem and it’s very hard for one company to keep control of it. Tapjoy seems to be providing a valuable service. Apple might want to tax it in some ways, and set down guidelines so there’s no scammy stuff in the future, which is fine, but crippling it is just going to make that stuff go underground and hurt everyone.