Analysts are predicting big things for Apple’s App Store business ahead of the company’s Q4 2018 earnings report coming on November 1.
Search ads from the App Store could generate over $500 million in revenue during all of 2018, according to Bernstein analyst Toni Sacconaghi. Even better, Sacconahi thinks the App Store ad business could be worth a whopping $2 billion by the end of 2020.
Apple has been looking to increase revenues from its services business over the last few years. Services like iCloud, the App Store and Apple Music already generate enough revenue to make them the size of a Fortune 500 company. By generating more revenue through services, Apple can become less reliant on the iPhone to make the bulk of its cash.
App Store search ads appear at the top of App Store searches and are marked with a blue ad sticker. The search ads are similar to Google’s search ads. Developers can pay for their app to show up when people search certain words.
Sacconaghi predicts that Apple could increase search ad revenue by increasing the number of ad spots. Apple currently only allows one ad spot per search, unlike Amazon and Google, which have two. More ad spots would mean more revenue but it could come at the expense of providing a great user experience.
Opening up new markets could also drive significant revenue growth. App Store search ads are currently unavailable in China. Tapping into that market could be a huge boost for revenues. Apple has set a goal to double services revenue to $49 billion by the end of 2020, so it’ll need to bust out some new sources to meet its goal.
Apple’s Q4 2018 earnings report will give investors their first glimpse of iPhone XS and iPhone XS Max sales. Cult of Mac will be here live blogging all the action.