Apple to start selling adverts at top of App Store search

SAN FRANCISCO — Apple is revamping its App Store, with a surprise move to introduce paid search ads for apps, as well as a new subscription model and faster reviews before approval. But the new features may not ease concerns of developers and analysts who say that the App Store model — and the very idea of the single-purpose app — has seen its best days.

The goal is to sustain the virtuous cycle at the heart of the hugely lucrative iPhone business. Software developers make apps for the iPhone because its customers are willing to pay, and those customers, in turn, pay a premium for the device because it has the best apps.

The store is now more strategically important than ever for Apple as sales of the iPhone begin to level off and the company looks to software and services to fill the gap.

Apple CEO Tim Cook said during a recent conference call that App Store revenues were up 35 per cent over last year.

But the store is also a victim of its own success. Eight years after its launch, it is packed with more than 1.9 million apps, according to analytics firm App Annie, making it almost impossible for developers to find an audience — and increasingly difficult for customers to find what they need, as some 14,000 new apps arrive in the store each week.

The move to introduce a single paid ad at the top of search results, initially in the United States, could prove controversial both with developers and users, who said they would prefer to see better “organic” search results rather than paid ads.

Marketing head Phil Schiller, who was put in charge of the App Store in December, told The Daily Telegraph that introducing paid search ads, which will be chosen through an auction process such as Google’s AdWords, would allow developers to focus their marketing budgets on the place where people actually search for and download apps.

“There are hundreds of millions of searches on the App Store every week, and 65 per cent of app downloads are driven by search,” he said. “It’s a very valuable tool for users and developers. For developers, this will be very efficient marketing.”

The move comes ahead of Apple’s Worldwide Developer Conference in San Francisco next week, where it is expected to preview new software for the iPhone and Apple Watch, and possibly announce a new home device and updates to its MacBook Pro laptops.

The single ad appearing above the “organic” results will be marked as an advert and appear on a blue background to set it apart. The chosen ad will be determined by a price auction, along with a “relevance” metric which will be determined by Apple.

Ads can only be for other apps inside the store, not for external Web pages or content. In the same model as Google’s AdWords, developers will only have to pay if the ad is clicked on.

The other key change, being introduced on Monday, will see app developers able to offer apps through subscriptions which will earn them more if they keep customers signed up for more than a year.

After the first year of a subscription, Apple will halve its 30 per cent slice of the payment to 15 per cent, where it will stay.

Developers will also be able to raise, reduce or change the subscription fee, which the subscriber will have to approve; if they do not, the subscription will automatically lapse. It is the first change since subscriptions were introduced in 2011. Agencies