apple to drive china revenues with search ad launch

Apple Search Ads Expands to Mainland China

Five years after its initial release in the United States, Apple’s Apple Search Ads service has now become available in mainland China this week.

How Apple Search Ads Works

This feature enables developers to participate in an auction for advertising placements. Bids are based on keywords users enter when searching within the App Store. The system functions similarly to Google Search Ads in its core mechanics.

Analysts at JPMorgan have projected that Apple’s total annual advertising revenue could exceed $11 billion by 2025. However, this forecast does not provide a specific breakdown for revenue generated by search advertising.

Challenges and Restrictions in the Chinese Market

The delayed launch of Apple Search Ads in China was likely due to regulatory restrictions imposed by the Chinese government on advertising operations. Apple appears to have navigated these challenges.

However, this was achieved with certain concessions, including accepting payments in foreign currencies and a limitation on offering Search Tab ads, according to Rich Bishop, founder and CEO of AppInChina.

Apple's Stance on Personalized Advertising

Concurrently, Apple is increasing its focus on user privacy. The company has implemented features allowing users to disable data tracking by applications.

This shift will likely impact the business models of companies like Facebook, which rely heavily on third-party data for targeted advertising.

China's Importance to Apple

China has historically been a significant market for Apple products. However, the iPhone is facing increasing competition from domestic brands like Huawei, diminishing its status symbol appeal.

Despite this, Apple’s smartphone shipments in China experienced a resurgence in the first quarter. This was driven by declining Huawei sales and the introduction of the iPhone 12 series.

The Chinese App Store remains a crucial revenue stream for Apple.

Developer Requirements for Advertising in China

Apple has published a five-page document outlining the qualifications for developers wishing to target ads to users in mainland China.

Advertisers are required to possess a comprehensive set of industry-specific licenses. This effectively prevents most foreign companies from directly advertising within mainland China, as highlighted by AppInChina.

The Need for Local Partnerships

To participate in bidding for search ads in China, applications must collaborate with local partners who hold all the necessary government approvals.

Apps importing goods into China, for instance, require not only a general license for internet value-added services but also registrations with relevant trade and customs authorities.

AppInChina suggests Apple may soon request these permits even from apps simply seeking to publish within China. This reflects Apple’s increasing adherence to regulations set by the Chinese government, as demonstrated by its recent actions regarding gaming applications.

This article has been updated to include insights from industry experts.