Apple Expands Its App Store Ads

Apple (AAPL) has opened up its App Store to more advertisements as the company pursues more service-related revenue to augment hardware sales.

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The company has been selling App Store ads tied to specific terms in the search results. In the latest move, Apple is bringing ads to the store’s search tab which will show up above the suggested apps list.

“With Search tab ads, you can capture the attention of these customers before they search,” Apple wrote in a press release.

Millions of people visit Apple Store each day in search of their next app. Apple wants developers to take advantage of the extra ad space to increase their exposure to potential customers.

The difference is that while search result ads require keywords, this is not needed when placing search tab ads in the App Store. Instead, search tab ads are automatically generated using materials on the advertiser’s App Store product page. These new ads will show the app name, icon, and subtitle.

Apple is maintaining its existing App Store ads budget and pricing model in the added slot. For example, advertisers will still be able to spend as much or as little as they want since there is no minimum spend requirement. Moreover, they will be free to stop or change their campaigns at any time. (See Apple stock analysis on TipRanks)

Wedbush analyst Daniel Ives reiterated a Buy rating with a $185 price target on AAPL stock. Ives’ price target implies 44.42% upside potential.

“A negative ruling vs Apple would be a major gut punch to the App Store crown jewel monetization engine,” said Ives about Apple’s court battle with Fortnite maker, Epic Games.

Consensus among analysts is a Moderate Buy based on the stock’s 18 Buy, 5 Hold, and 1 Sell ratings. The average analyst price target of $159.96 implies 24.87% upside potential from current levels.

AAPL scores an 8 out of 10 on TipRanks’ Smart Score rating system, implying it is likely to outperform the market.