Earlier this year, Google announced it was going to start testing out search ads in the Google Play store.
As investors and analysts panic about how Google’s search advertising revenue growth is slowing because it can’t charge as much for mobile ad clicks as desktop ad clicks, this move gives Google another huge avenue for mobile monetisation.
“We view this move as akin to when the company first introduced
sponsored links in the search engine results page,” analysts from Credit Suisse wrote in a note Friday morning.
Credit Suisse included two charts in its note that perfectly underscore exactly why investors and analysts love this move and why it could have negative effects for Android developers.
Here’s the old value chain versus the new one one:
Google will make more money, developers will make less. But Android devs already make less money, on average, than iOS developers, so the prospect of a further slice taken from their piece of the pie objectively isn’t great news.
Of course, not all developers will have to opt into that estimated 20% cut by buying search ads. And, for some, the revenue cut will be worth the additional downloads its app gets.
Ryan Matzner, new projects director at app design and development company Fuelled, told Business Insider that his company sees the introduction of ads as a huge boon to business.
“Fuelled is releasing new apps all the time and usually there’s some other app in the store with a similar name or the same name. Even though it’s a completely unrelated app or crappy app that no one’s using and has four reviews that are at two stars, it’s hard for us to rank ahead of them early on,” Matzner says. “We would almost always want to buy paid placement, so that we could be visible right away.”
The choice between additional revenue loss or less visibility would affect smaller developers much more, though.
“For people like us, it’s not very good,” Cameron Banga, co-founder of app development company 9Magnets, told Business Insider. “We’re small. Most of our clients aren’t going to have the budget to compete with the people who are at the top. They’re already facing an uphill battle, and this is just going to be just one more step that’s going to be really hard to overcome without tons of capital.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.