Google looks for more revenue from ads in Android app store

AP News
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Posted: Feb 26, 2015 3:06 PM

MOUNTAIN VIEW, Calif. (AP) — Google will start showing ads in its online store for mobile apps and entertainment as the Internet search leader strives to bring in more revenue from smartphones and tablets.

The advertising expansion announced Thursday will provide Google with a new opportunity to profit from its Android software, the world's most widely used operating system for mobile devices.

Google Inc. gives away Android to device makers with built-in features designed to drive more traffic to its search engine and other services, such as its Google Play store for downloading apps.

Ads will begin appearing in the Google Play store the next few weeks as part of a test program. Google makes most of its money from the ads shown in its search results, Gmail and YouTube video library.

The ads shown in the Google Play store will similar to the marketing links that the Mountain View, California, company has been displaying alongside its search results for more than a decade.

Even though more than 1 billion devices worldwide run on Android software, the shift to smartphones has posed some financial challenges for Google.

One of them has been marketers' unwillingness to pay as much for mobile ads as they do on personal computers because of the smaller screens on phones. That phenomenon is the main reason that Google's average ad rates have been declining for more than three years. Google has offset the pricing downturn by attracting more clicks on ads. Those clicks are required for Google to be paid for most of its search-driven advertising, enabling the company to continue to boost its revenue even as ad prices have fallen.

Google's ad revenue totaled $59 billion last year, a 17 percent increase from 2013.

The makers of Android apps and games keep most of the revenue from the sales made in the Google Play store. Google disclosed Thursday that it distributed more than $7 billion in commissions from sales made in the Play store last year. By comparison, Apple Inc. said its app store for the iPhone and iPad generated more than $10 billion in commissions for app and game developers last year.