Even as its iPhone sales are slowing down, Apple is exploring new options to increase its revenues. One of the areas the company is going to extensively focus is its App Store, which has continued to be a significant contributor to its revenues. Apple has now announced some big changes for its App Store that focus on encouraging developers with a new revenue sharing model and introduction of search ads. Apple’s announcements comes a week ahead of its annual WWDC conference, which begins on June 13.
Apple earlier this year had revealed that its developers have earned about $40 billion dollar from its App Store since its launch in 2008. According to research firm App Annie, the ‘Games ’category is the biggest revenue generator, contributing about 75 percent of its global revenues. As expected, free games with in-app purchases are among the top grossing apps. Even as Apple’s App Store is growing, developers, particularly the indie ones, have long demanded for more prominence for their apps.
In a bid to resolve this issue, Apple is going to bring search ads. In line with an earlier report, the concept is similar to the Google Play store wherein Apple will be showing ‘promoted apps’ ads into the search results. The ads will appear with a light blue background and be clearly mentioned as “Ad”. The company will not be showing the ads for apps that users have already on their iPhone. One of the key things to note here is that ads will be shown on the top of the search results and not mixed with the organic search results.
Since Apple is allowing developers to target certain demographic, users can avoid it by switching ‘Limit Ad Tracking’ within Privacy in Settings. Similarly, you can disable the ‘Local-based iAds’ to avoid location based ads.
“Designed to give users a safe search experience, Search Ads sets a new standard for delivering relevant ads while respecting user privacy,” Apple said in a blog post. The company has already launched a Search Ads beta program.
Another important thing Apple is doing to incentivize the developers is alter the revenue sharing model. Right now, Apple has 70-30 revenue share model, which is going to stay. But Apple is now encouraging developers to move to subscription-based model under which Apple will cut its share to 15 percent after a year. Also, Apple is opening subscription based model to all kind of apps including games, which is already a big category, instead of just certain apps.
Apple is going to bring new pricing options for subscriptions that would be based on currencies and regions. This is going to help subscriptions based apps and the new ones to streamline their payment model for different markets and increase user base worldwide.
The new app subscription model, as Apple calls it Subscription 2.0, will be rolled out to developers this fall. If the app makers already have customers onboard with annual subscriptions, the new model will come into effect starting June 13, on the same day Apple holds its annual WWDC conference.
In a nutshell
Apple is going to launch Search ads on its App Store.
Apple will open auto-renewable subscriptions will be open for all apps across App Store categories.
Developers will get a bigger cut for their subscription based apps after one year, along with more choices for region based pricing.