Apple enters search advertising as first App Store ads roll out

Arvind Hickman
By Arvind Hickman | 7 October 2016

Apple has rolled out the first search ads on its US App Store overnight, the tech giant's first move into the multi-billion dollar search advertising sector dominated by rival Google.

The tech innovator, which unveiled plans to enter search advertising earlier this year, launched search advertising in the US and will roll it out to App Stores in more than 100 countries, including Australia.

Search and directory advertising still attracts the most online advertising revenue in Australia with ad spend growing by 24% to $3.1 billion in FY2016, according to the latest PwC/IAB Advertising Expenditure Report.

Google has long dominated search advertising on the back of a superior product that has become synonymous with internet search. This has allowed it to build a closed revenue ecosystem around search that attracts the majority of advertising spend with the exception of a few markets such as China.

Apple's entry into search will be restricted to its own controlled app ecosystem. Some commentators believe Apple will see how the market responds to see if there is scope for a bigger move in the search space.

Regardless, in the short term it will allow developers another tool to improve the visibility of apps in an increasingly cluttered marketplace and Apple is offering $100 credit to early adopter developers to build momentum.

Apple says 65% of all app downloads come directly from App Store searches and an algorithm will automatically match search terms to relevant apps by considering app metadata, listing information, similar apps and other search data.

Search ad listings will be automatically generated and placed in a blue box above the search results using imagery from App Store listings and metadata. Developers will not be able to upload a bespoke design.

Apple’s search ads are priced using a cost-per-tap model, which means advertisers only pay when a user taps on the ad. The cost of a tap is determined by a second price auction that considers what rivals are willing to pay up to your maximum bid.

It’s unclear how much taps could yield, but brands will be tempted to test out the performance and ROI of search ads, particularly apps that struggle to make the first page through SEO alone.

Earlier this week, Google placed a stake in an industry sector Apple dominates by launching its first Google-built smartphone.

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