Pretend for one moment that you’re an Apple developer. Your apps have to compete against the hundreds of thousands of other apps in the App Store, so it’s in your best interest to get your app ranked as high in Apple’s charts as possible.

You know that Apple ranks apps solely on how often they’re downloaded, and so, with thousands of dollars in venture capital financing at stake, you begin to look for ways to get your apps downloaded en masse. It doesn’t matter if a user only opens the app once and never uses it again – Apple doesn’t track that – it only matters that your apps get downloaded, and downloaded often.

So you look for ways to increase the number of downloads for your app. One tempting, if somewhat devious option: incentivizing users to install apps they might only use once, if at all. The fact that it’s an empty installation and the user has no lifetime value doesn’t really matter, since Apple doesn’t track whether the app is being used on a daily basis.

Well, Apple seems to be tracking those metrics now, prompting a major shakeup in how apps are ranked.

Last month, reports began to emerge that Apple was no longer using download rates as the sole metric for its app rankings and had even begun to reject apps whose sole purpose was to generate new downloads. Apple, in classic walled-garden style, hasn’t confirmed any of this, but unexpected shifts in its top app charts indicate that some change is afoot in the company’s ranking algorithms.

OfferMobi, which runs a pay-for-performance mobile marketing platform, recently spoke with Wireless Week about the apparent changes in Apple’s ranking algorithms, and why those changes will incentivize developers to create higher-quality apps. Below is an edited transcript of Wireless Week’s discussion with OfferMobi CEO Howie Schwartz.

Wireless Week: You mentioned that Apple has made some changes to how it ranks developers. Can you explain what happened?

Howie Schwartz: Apple made a change in the way they were ranking the App Store top 25 charts in the Apple iOS operating system. The traditional developers that were ranking in the top 10 to top 25 over the past year got wiped out to the bottom 50, and those that got higher daily usage, like Facebook, went to the top. This is the first time Apple had changed its ranking algorithm from simple installs to something more like Google’s algorithm for Android.

Apple in the past was ranking apps for just installations. The issue with that is it was being manipulated very heavily: Developers were buying their way up the charts. Apple’s ranking algorithms are no longer just pure downloads and installs, they’re more of a mix of rankings that includes how people use the apps, like what Google did for Android.

Google wound up making their ranking algorithms closer to a black box so developers wouldn’t know how their apps were being ranked. If developers know how their apps are being ranked, they’ll try to manipulate the rankings. 

WW: How were developers manipulating the rankings?

Schwartz: They were manipulating the rankings with something called incentivized installs. It’s a way to bribe a user to install an app. Say you’re playing a game about cooking, and it tells you that you have to install another app to get a recipe for that game. You didn’t really want the app, you just wanted the recipe in that app. So you download the app but don’t really ever use it. These apps are either never used or used very seldom –  you only create them to boost your rankings by incentivizing people into downloading them.

WW: What do you think would make a better metric to value a developer?

Schwartz: Apple changed the metrics to include more usage, not just installs, and started banning apps that only did the incentivized installs. We feel the best way is a black box approach so it’s not easy for developers to rank and manipulate it. We believe the proper model for ranking apps is based on usage and engagement, such as daily active users. That way the rank of an app is based on its quality.

It can’t be based purely on the level of installs, because what was happening is developers were buying their way up the Apple charts. What we see Apple doing as they go forward is changing the way incentivized installs work, so that they can’t be the main focus of the app. Apple’s rankings will probably look at some installs as a popularity measure, but include user engagement as well.

We also don’t believe the current rankings will look the same in the next three months. The ranking algorithms will be a moving target, and we think that’s good for the ecosystem, since developers were clearly manipulating the top charts by buying empty installations.

WW: How did you see developers react to the change in Apple’s ranking algorithms?

Schwartz: It was mixed. Developers that focused their business model on incentivized installations were very upset. Smaller developers with quality apps who didn’t have the budget to buy their way up the charts felt this was a more fair way to get discovery.  

However, this is a really big change for developers beyond how their apps are ranked. This goes to how they value themselves as companies when they go out to raise capital. The way they were valuing their businesses was on these incentivized installs – they got money to buy their way up the charts from angel investors and venture capital.

Our position is that developers up until now, the way they were valuating their company when working with angel investors and venture capital was on the number of installs, not on the profitability or daily active usage and lifetime value of the customer. They were just going out and blindly buying these incentivized installs because that was the metric they were being rewarded on.

Now that Apple has changed their ranking algorithms on the top 25 charts, developers need to change the way they’re valuing their business when they work with investors, and move toward a more blended valuation that’s based not only on installs but also daily active users and profitability.

That’s what everyone should be working toward: the value of their daily active users. When you have an empty installation, users didn’t really want the app. They’re not using it, and if they’re not using the app they’re not interested in in-app purchases and they’re not participating in mobile advertising.

WW: Do you think this change in ranking algorithms will lead to the creation of more quality apps, since developers are essentially incentivized to do that now?

Schwartz: Definitely. It will force developers to spend more time on creating a higher quality app with higher usage. They’re going to actually have to spend more time on the quality of the app, because if it’s not used consistently, they’re not going to do well in the rankings. Installations will be valued more appropriately, because it’s not just about installs, it’s about how well you’re monetizing your users.