I might be missing something here but why is everybody hating on Google for this?
I don't like this form of paid promotion within Google Play because it means that users will see fewer quality apps in their searches and more expensive apps. It will be harder for users to find enjoyable games and easier for them to find addictive, extortionate games that constantly demand the purchase of gems and coins and other upgrades. When there exist two applications that perform the same function, paid promotions will ensure that the Google Play user will first see the one that will end up costing him the most, rather than the one that would best serve his purpose.
How is this different from having sponsored results in the search results on Google?
Google earns money through sales and in-app purchasing of the apps found on Google Play. This is not true of the web search results found at google.com. Because of this, it serves Google's interests to direct Google Play users to apps that extract more money, whereas with Google Search, Google is motivated to return the most relevant possible links.
1. This allows apps which are new to not just rely on something unreliable as App store optimization to get downloads.
This will make it harder for new apps and new developers to be discovered, not easier. Everyone can compete in the app store optimization arena equally by researching and changing keywords and descriptions in their app copy. However only apps that have an average per-user revenue that exceeds the promotional placement price will be able to justify competing with these paid promotional placements.
2. This will force app developers to think about monetization more seriously and possibly even get rid of free apps culture.
Yes, this will encourage developers to work harder to monetize their users. I would prefer if developers were motivated to work harder to please their users instead.
3. You can get users at the point of their query. Facebook gets you passive users. For example on FB you might need to reach 100 people to find one person who has a problem solved by your app, but using this you can find the exact people looking for apps which solve the problem your app is about.
Yes, this makes it more efficient for developers to purchase users. Being bought and sold more easily is bad for the users. From the user's perspective, it would be better to have an honest response from a Google Play search. One that finds them the app that best suits their purpose as effectively as Google Search finds them useful web pages.
4. The argument about Zynga and King owning the sponsored are false. It is like saying Microsoft, Twitter and Facebook are going to own the search results on Google.
Zynga and King.com buy an incredible amount of advertising space. They will certainly take advantage of this promotional opportunity, but it isn't these two companies that will dominate all search results. In every niche in both games and applications there will be some app whose developer has figured out the best way to prey on human psychology by withholding features, ransoming data or peddling in-game content to maximize revenue from each download. With paid promotional placements, those apps will be each dominate over apps that are designed to be the most useful or entertaining.
5. Improvement in organic search doesn't need to happen without starting sponsored results.
No, but with promotional placements Google will be motivated to make the organic search results less relevant. Google profits more when their ads are clicks and when the more expensive apps are installed.
With promotional placement in the Google Play search results, Google is double-dipping from the app economy by charging 30% from app sales plus charging developers to even make those sales in the first place. Since Google gets to chose the outcome of searches in their app store, they will be doubly motivated to disregard app quality and rank the long-term priciest apps most highly.