It may not be the end, but the prognosis doesn’t look good. Social micro-payments platform Flattr is taking an unkind hit in terms of its future growth opportunities on mobile, the company details on its blog this morning. After being integrated into popular third-party podcast manager Instacast back in February, Apple decided at the beginning of May to reject the app from the iTunes App Store due to its Flattr integration. The result? The only way Instacast could get back into the app store was to change the user flow in the app to direct the actual “flattr” (as the micro-payment process is called) to take place in the Safari web browser instead. Not an ideal user experience, Apple admits, but it’s as required by the App Store Review Guidelines.

Flattr, for those unfamiliar, lets users click to donate funds directly to a content creator. It’s a “like button with cash,” TechCrunch’s Mike Butcher once said of the service. To use Flattr, a user decides how much they want to spend per month, then, whenever they see a Flattr button on the web or mobile, they click to donate. At the end of the month, Flattr counts up all your clicks and distributes the funds evenly. The company scored a high-profile partnership with web video giant Dailymotion at the beginning of this month, which targeted Dailymotion’s top content creators in its “Motionmakers” category. (Butcher, however, still questioned Flattr’s business model at the time).

With the Instacast integration, the Flattr feature allowed listeners to “flattr” (donate to) podcast creators after having finished listening to a show. There was also an “auto-flattr” option, which allowed users to automatically flattr podcasts after the episode began playing.

According to Flattr’s community builder Siim Teller, Apple rejected Instacast on May 6th, citing the App Store Guideline 21.2, reading: “The collection of donations must be done via a web site in Safari or an SMS.” Flattr, of course, was permitting in-app donations. Apple itself says: “We understand that directing your user outside your app may not be the user experience you prefer to offer your users. However it is a common experience in a variety of iOS apps.”

Apple’s final ruling on May 24th was not in Flattr’s favor. Vemedio, Instacast’s maker, was forced to remove the in-app Flattr integration in order to push their critical bug fixes for their app into the App Store.

Although the Flattr blog post is in-party titled “it’s not the end,” the goings look rough – at least in terms of iOS. The guidelines are clear. Despite Teller’s reporting that Vemedio will “continue a dialog with Apple regarding their Flattr integration,” and his promises that Flattr will continue testing different ways of integration, it’s probable that Apple will not change its mind here.

As pointed out on the post burning up Hacker News today, Apple, after dealing with fallout from angry parents whose kids racked up huge iTunes bills through in-app purchases, may just be protecting its back here. Although Flattr users themselves set the monthly donation amount, and would have to manually enable the integration, there’s a chance that confusing dialogs or UX flow could lead to unintended donations.

More importantly, however, is the idea that Flattr could become an alternative to Apple’s own in-app purchasing system, allowing users to “flattr” in exchange for virtual goods, perhaps. That would be a huge no-no, considering Apple’s 30% cut of in-app purchases are a key revenue generator for its app business. Rather than police all future apps with Flattr integration, Apple has decided to break the user experience instead. Developers, users, and content creators may not be happy with the decision, but the end result is worse news for the Flattr ecosystem than it is for Apple’s.