Apple Expands Ad Business: New App Store Ad Slot

Apple Introduces New App Store Advertising Opportunities

Concurrently with increased scrutiny of advertising practices employed by competitors, Apple is unveiling a novel advertising method for developers within the App Store. Previously, app promotion occurred following user-initiated searches, utilizing targeted keywords. For instance, a search for “taxi” could yield an Uber advertisement prominently displayed above the organic search results.

However, this new advertising placement will reach users prior to their conducting a search. This expanded reach has the potential to expose applications to a significantly larger user base.

New Placement on the Search Tab

This more visible ad position is located on the App Store’s Search tab, a section receiving substantial traffic from Apple device users monthly. Currently, the Search tab features two distinct areas beneath the search bar: a “Discover” section showcasing current App Store trends, and a “Suggested” section offering app and game recommendations.

The advertisement will appear at the top of the “Suggested” apps list within this section.

Search Tab Campaigns and Search Ads Advanced

These new ad placements, designated as “Search tab campaigns,” are available through Apple’s Search Ads Advanced service. They leverage existing assets already uploaded by developers to their App Store product pages, such as the app’s name, icon, and subtitle.

As developers are purchasing a direct placement within the App Store, the need for keyword submissions, as required for other App Store advertisements, is eliminated, along with any additional creative asset requirements.

Similar to existing Search results campaigns, no minimum expenditure is mandated for a Search tab campaign. Developers retain the flexibility to allocate funds as desired, initiating, pausing, or modifying campaigns at any time, according to Apple.

Ad pricing operates on a cost-per-thousand-impressions (CPM) basis. The actual cost is determined through a second-price auction, calculating the developer’s payment based on the willingness of the next highest bidder.

An impression is registered when at least 50% of the advertisement remains visible for a duration of one second, Apple clarifies.

Timing and App Tracking Transparency

Apple’s expansion of its advertising business appears strategically aligned with the release of iOS 14.5, the latest iteration of the iPhone operating system. The introduction of App Tracking Transparency (ATT) within iOS 14.5 represents a tightening of restrictions on applications that track user data without explicit consent.

Following an update, users will encounter a new prompt within each application, requesting permission for the developer to collect and share their information with data brokers and third parties, particularly if such collection occurred previously without user consent.

Users also have the ability to manage app tracking preferences for individual applications through their iOS Settings.

Impact on the Digital Advertising Landscape

This change is significantly impacting the $350+ billion digital advertising sector, dominated by Facebook and Google. Facebook has voiced concerns that the changes will disproportionately affect small businesses, which rely on targeted advertising to reach potential customers efficiently.

Advertisers have also suggested that Apple’s modifications may primarily benefit its own financial performance at their expense.

Apple’s Stance on Privacy

Apple’s response has consistently emphasized the necessity of these changes to safeguard consumer privacy. The company asserts that individuals possess the right to be informed “when their data is being collected and shared across applications and websites,” and to exercise control over such data sharing.

Early Data and User Opt-In Rates

Initial data from Flurry Analytics indicates that approximately 11% of users are opting into tracking following the iOS 14.5 launch. This low opt-in rate could enhance the appeal of this new ad slot for app publishers seeking new user acquisition strategies.

Control and Valuation

Reports from the Financial Times in April highlighted that Apple’s motivations extend beyond revenue generation, potentially encompassing a desire for greater control. Historically, featuring on the App Store could substantially increase a company’s valuation due to the influx of new users.

Apple may aim to reclaim this influence, shifting power away from external entities and consolidating it within the App Store, both in terms of app discovery and the identification of promising new applications.