Apple's New App Store Search Ads Have Some Brands Cashing In

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An example of an Apple search ad. Brands like Jet and Amazon are among those who have already started advertising in the App Store.
An example of an Apple search ad. Brands like Jet and Amazon are among those who have already started advertising in the App Store. Credit: App Annie
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Brands searching for more app downloads might want to turn their attention to Apple's latest ad offering.

Apple about three weeks ago debuted its search advertising product, which displays ads related to users' searches in its App Store. Although it's early days, app developers appear to be getting a bargain when it comes to cost-per-user acquisition, a crucial measure as the holiday season approaches and brands pitch shopping apps and, later, apps for smartphones received as gifts.

Apple is also providing insight to marketers not seen through Google and its Play Store, said Peter Hamilton, CEO at mobile marketing firm, Tune.

"People were excited because of Apple's intention to show marketers which keywords are providing downloads and how many downloads are coming from those keywords," Mr. Hamilton said. "That's something that hasn't been done before in app stores, where there is that level of transparency."

"This starts to provide more transparency in general about the activity of the app store," he added. "If I'm able to buy advertising on a specific search term, and I can see the volume of new installs I get from that new search term, then I can also guess how much volume I'm getting from organic search, as well."

That would allow marketers to see the relationship of search terms in the App Store on which keywords really provide the most volume and which ones are the most valuable to go after, Mr. Hamilton said.

Generally speaking, advertising through paid search is achieved when advertisers bid on keywords. Something like "Black Friday shopping" might prove popular as the holiday season approaches. Whether in an app store or a desktop search engine, the most popular search terms typically get the most bids and wind up costing the most to obtain.

Marketers who win on the search terms will appear at the top of search results, with labeling to let readers know that the placement is paid. The ads can be critical in acquiring new app users: More apps are downloaded through an app search (21%) than any other method, ComScore said, and 14% of those downloaded are at the top of those results.

Apple is also using relevance as a factor when users perform a search. This is especially important for brands, as most dedicate a portion of their search budget toward making sure a competitor's ad doesn't show up when a user specifically searches for them. According to a 2016 report by AppsFlyer, iOS users spend 2.5 times more than Android users.

"We don't know exactly how it works, but this would be the secret sauce of Apple's search advertising," Mr. Hamilton said. "Apple is using relevance to specific search terms and determining what is relevant, so you can't be the highest bidder and win. You also have to have relevance."

Early adopters also appear to be getting good value. According to Mr. Hamilton, most cost-per-install figures are coming in under $1, where $3 to $5 is more common. "There's a caveat to that," he added. "It is early days, so there are fewer bidders and less competition."

Fabien-Pierre Nicolas, VP-marketing communications at App Annie, said marketers will look to spend more in acquiring new app users as the holiday season approaches. "If you go after shopping moms in a period like right now, you will have a significant cost," he said. "Typically, you are going to be in the $5 to $10 range."

Mr. Nicolas said he was "surprised" at the level of targeting that Apple is providing to marketers, given its usual protectiveness over consumer data. Advertisers can aim ads by location, gender, age, among other criteria, he said. It should be noted that Google does provide even more targeting options to advertisers.

"Some of the big brands haven't moved in yet, and because it is Apple and because people have become familiar with app search advertising [with Google Play], I can see something like this will scale very, very quickly," he said.