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Apple to introduce paid search ads for apps

Apple to introduce paid search ads for appsThe iPhone maker 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.

The move to introduce a single paid ad at the top of search results in the App Store, initially in the US, could prove controversial both with developers and users, who told The Telegraph that they would prefer to see better "organic" search results rather than paid ads.

Speaking exclusively to the Telegraph, Phil Schiller, Apple's senior vice president of marketing, who in December took over responsibility for the App Stores across all four platforms - iOS, Mac, Apple Watch and Apple TV – said that introducing paid search ads, which will be chosen on an auction process like 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 65pc 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." Developers' marketing budgets are presently spent on social media or online adverts, he argued, where they were less effective.

The move comes ahead of Apple's Worldwide Developer Conference (WWDC) 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.

Schiller said that with "so much" to announce next week, Apple wanted to tell developers about the App Store changes ahead of time.

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.

"If you're searching for sports cars, you shouldn't get an ad for pretty ponies," said Schiller. 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.

Bloomberg first reported in April that Apple was considering paid search for apps, noting that it would be "a new way to make money from the App Store". Google's revenues principally come from paid clicks on search-related adverts.

But some app developers are unhappy at the prospect. James Thomson, author of the iOS calculator app Pcalc and Mac OS app DragThing, said paid search "is a terrible idea for indie [independent] developers and will only benefit the big companies with deep pockets, rather than users. It will make the playing field even less level. Search should return the best and most relevant results, not the results with the biggest marketing budget."

Dave Verwer, an independent iOS developer, said: "Apple has a huge amount of data not only on the apps we buy, but on those that we use," and suggested search recommendations should be built on that.

However Schiller responded that having use-based recommendations would favour the larger, already-established apps, and wouldn't give new or small apps a chance to break through.

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 30pc slice of the payment to 15pc, 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's the first change since subscriptions were introduced in 2011.

Itamar LeSuisse, chief executive of British brain training app maker Peak, favoured the changes.

He said that including ads was "a natural evolution" for app search: "any mechanism that helps app discovery can be positive for developers." The subscription change - which will benefit Peak at once because some users have been on subscription for 18 months - showed Apple was trying to build for the long term, LeSuisse said.

Analysts reckon Apple's iOS App Store for the iPhone and iPad generates twice as much revenue as Google's Play Store, despite there being fewer iPhone and iPad users, at around 700 million, than Android users, who number about 1.8 billion worldwide.

In general, iOS users are prepared to spend money buying apps and content, while Android apps are frequently free but ad-supported. Apple's iOS App Store, set up in 2008, took $1.1bn (£750m) over the Christmas period.

Schiller said that Apple has also focussed on speeding up the app review process, which checks apps before they can be downloaded for malicious code, faults or other undesirable content. A reorganisation, along with better tools and non-stop reviewing, has cut the time for app review and updates from days to hours.

Source: The Telegraph
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