Attention Facebook and Google: Apple is selling mobile app ads now, too

For a long time, app creators have helped prop up big internet companies like Facebook and Google by paying to promote apps that would otherwise stay buried in Apple's App Store.

Now Apple wants in on the action.

Ahead of its WWDC developer conference, Apple confirmed reports it will introduce search ads inside its App Store. The program, coming this summer, will likely resemble the keyword-based bidding system Google uses to show you ads related to your search query.

But while these ads are technically based on search, they're essentially paid slots to drive app installs, which is an actual ad format that has given both Google and especially Facebook huge injections of cash in recent years.

It's not clear how much Google makes from app install ads — it doesn't break out those numbers. For Facebook, app install ads account for 10 percent to 20 percent of all ad revenue, one source told Recode. That means the social network's $17 billion in yearly ad revenue includes at least $1.7 billion from app install ads.

These ads are certainly growing as a segment of the larger mobile ad pool. Data firm eMarketer estimates that advertisers spent more than $3 billion on app install ads in 2015, roughly four times the $770 million spent in 2013.

As for Google, it's unlikely Apple's new ads will put an immediate or significant dent in Google's core business of web search. But here's a lingering concern for Google: Apple ties its App Store search to Spotlight, its iPhone search feature, and improves its app linking features — that might hit Google where it hurts.

Last month, Google announced that its mobile ads have driven two billion app downloads, a figure on par with Facebook. And the search giant has released a flurry of new ways for developers to promote their apps, like its own app store search ads and mobile search results. While most of those features are only designed for Android, Google is pushing app marketers to use its channels, like YouTube, on Apple devices.

Apple would rather they didn't. With its App Store, Apple has a captive audience. The company told The Verge that two-thirds of iPhone app downloads came through App Store searches. Even users who come in through other means (say, a Facebook ad) linger in the store — last year, roughly 55 percent of iOS users who were exposed to an app ad also used search in the App Store, according to research from mobile marketing firm Tune.

That could mean Apple poses a bigger threat to Facebook since the social giant doesn't control the phone operating system or an app store. Instead, it sells app install ads on both Facebook and Instagram, giving the company several reasons to pray Apple's new plan doesn't encroach on its existing business.

Our colleague Peter Kafka reported this week that people aren't downloading new apps, which is why install ads are that much more important now. You can expect developers and advertisers to spend even more money trying to capture whatever potential downloads still exist. If people aren’t downloading your app organically, app install ads suddenly look even more appealing.

Reps for both Google and Facebook declined to comment.

This article originally appeared on Recode.net.

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