Report: Apple building AdWords-like ad product for the App Store

Taking a page from Google, Apple is reportedly building a paid-search-style ad product for its App Store. According to Bloomberg, Apple “has constructed a secret team to explore changes to the App Store, including a new strategy for charging developers to have their apps more prominently displayed.”

Bloomberg says that there are roughly 100 employees working on it. Some of the engineers on the project are from Apple’s iAd unit, which has substantially scaled down over the past year or so.

Given app discovery challenges, I would expect an auction for prominent placement to be both popular and lucrative for Apple (provided Apple does a good job with it). When the App Store launched in July 2008, there were only 552 apps. Today, there are more than 1.5 million, creating a significant visibility/discovery problem for publishers and developers.

A substantial chunk of mobile ad revenue is still tied to app promotion. Facebook has been particularly successful with app-download ads.

Assuming the story is accurate, it’s not clear whether Apple is driven by a desire to improve the overall App Store experience or to generate revenue, though probably both. App and services-related revenue amounted to roughly $20 billion (with a “b”) for Apple last year.