Apple expanding its App Store ads business, rolling out ‘suggested’ app ads

9to5Mac reported in February that Apple was testing a new ad slot in the iOS 14.5 beta. Pictured above, the ad appears on the main page of the App Store’s Search tab, before the user has entered a search query. This joins existing App Store ads that appear alongside search results, relevant to the user’s search terms.

The Financial Times says that this new ad slot has completed testing and Apple will be rolling it out publicly by the end of the month. The timing comes as third-party ad networks are set to be disrupted by iOS 14.5’s App Tracking Transparency changes, which require a permission dialog to be shown before an app can display user-targeted advertising.

App Store Search Ads were introduced in 2016 as Apple aimed to diversify revenue streams. The App Store drives the majority of Apple services revenue today through the 15-30% commission Apple takes on in-app purchases.

Search Ads supplement that income and are currently estimated to bring in up to $1 billion annually for Apple. The new “Suggested” ad types appear in a more prominent position inside the App Store app, as they are shown on the main Search tab screen and do not require the user to actually perform a search.

This will likely fuel the flames of the ongoing antitrust arguments and debates, which focus on Apple’s monopolistic control over the app economy.

iOS 14.5 will be released next week and that brings with it the new App Tracking Transparency policy. This will mean that third-party ad networks have to go through an extra user permission step to be able to collect user data and show targeted advertising.

Ad networks like Facebook have said that small businesses will suffer as they will no longer be able to target their mobile ad campaigns as precisely. It is also likely to have a negative impact on Facebook’s revenue.

Apple uses demographics data from a user’s Apple ID (including user age, their interests, what apps have been downloaded from the App Store before, and more) to enable App Store Search Ads targeting. This targeting is enabled by default, a fact that is currently facing scrutiny by regulators.

App Tracking Transparency prohibits third-party tracking without user consent; first-party tracking is allowed. App Store Search Ads are technically first-party as Apple owns the App Store. Critics argue that Apple wrote the App Tracking Transparency rules in this manner specifically to ensure its own business interests were not impacted.

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