Venture capitalist Bill Gurley has long, good post on the shift from desktop to mobile, and what it means for startups.
In the post, he raises an interesting point about Google’s and Apple’s app stores.
Apple and Google are both missing a big opportunity to make money by offering paid search slots in their app stores:
Customer acquisition techniques are shifting. Startups like tried and true browser-centric customer acquisition techniques like SEO and SEM, but the mobile app world is different. To make matters worse, no new systematic customer acquisition model has emerged. Embedded placement deals would seem likely on Android (they were prevalent on feature phones), but this environment still feels nascent. More surprisingly, neither Apple nor Google offer the equivalent of SEM slots alongside their app store taxonomy (although this appears quite common in China). This represents a huge missed opportunity for both platform providers, and a missing resource for companies that wish to pay to acquire users (of which we all know there are many).
Gurley is suggesting Apple and Google should offer paid search listings in their app stores. Just like Google has a few ads at the top of its web search results, developers would be able to buy ads against app store searches.
It would require a bit of work to build the ad serving technology for Apple, but it could be worth billions of dollars in profit.
Gurley says lots of companies would love to pay for ad slots against key App Store search terms.
There is a reason Apple doesn’t take money for its App Store. It wants to have a level playing field for apps. It wants to let indie developers compete with the big boys. By enabling advertising, the big players could come in and plop down enough money to push aside indie developers apps.
That’s a fair, but Apple’s a smart company with smart people, it could figure out a way to work around this problem. It could also just limit the paid listings to one or two slots against keywords, thus allowing natural app searches to still appear.
From Google’s perspective, it wouldn’t take much technical work, since it has a big search engine advertising business in place. It just has to customise it to fit in the Google Play Store. Google probably has similar concerns, but it’s already in the search advertising business, so we doubt it’s that worried about it.
For some developers, paid search advertising would not be beneficial. For many, though, it would be a boon. Apple’s App Store search is bad. It’s a constant complaint amongst developers. This would be a workaround that guarantees developers get their apps in front of users. It would be an added cost, but with 1 million apps in the App Store, it would
With Apple’s business slowing down, any extra revenue would be welcomed. Google isn’t making much, if any, direct money from Android, search ads could change that.
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