App Store Brings in Ads and Changes to Revenue Splitting

apple app store updateApples annual WWDC developer conference doesnt start until next week, but the company has already started rolling out changes to the iOS App Store that could have a major impact on developers and brands.

Perhaps the biggest change is the addition of ad placement within the App Store search results page, enabling developers and companies to promote their apps to users who are searching for associated terms, boosting their placement in app search rankings and potentially disrupting the process of app store optimisation that many developers have sunk time into over the years.

“Weve though about how to carefully do it in a way that, first and foremost, customers will be happy with,” said Phil Schiller, senior vice president of worldwide marketing, in an interview with The Verge, adding that the ad auction system for the App Store will be “fair to developers, and fair for indie developers too.”

Another change for developers is an update to Apples revenue sharing model for subscription-based apps and services. Currently, 70 per cent of such revenues go to the developers, with Apple taking 30 per cent. Now, once a customer has a subscription active for at least a year, that ratio will change to 85:15

A few more minor changes were also announced. Featured apps that users already have installed will no longer be promoted by the App Store, and iPhones with 3D Touch (currently the iPhone 6S and 6S Plus), will have  new options for sharing App Store apps with others from the Home Screen.

Overall, the changes, and Apples long-term strategy for the App Store, is to maintain the virtuous cycle of attracting top developers to the iPhone, who in turn attract customers willing to pay out for apps.

As iPhone sales level out, software and services become more important, but with almost 2m apps available via the iOS App Store, and 14,000 added each week, it is increasingly difficult for developers to distinguish themselves and for customers to find new apps that might suit their purposes.

According to app analytics firm Sensor Tower, the top one per cent of app publishers brought in around 94 per cent of the App Stores revenue in Q1 2016, a gap which has consistently widened since the App Stores earliest days. If Apple is to keep attracting talented developers, it may have to do more to keep them happy.