In this article:

http://www.businessinsider.com/4-reasons-why-the-iphone-app-store-is-bad-news-for-google-2009-6

Time spent in apps is competing with (and replacing) time spent on the mobile Web.
There are some Google display ads in iPhone apps, but no direct line to

Google Search or search ads, where Google stands to make the most
money. (The good news is that Google doesn’t make much money yet from
the mobile Web, so this isn’t immediately disruptive.)

Time spent in apps is competing with (and replacing) time spent on the REAL Web.
This is probably the scariest scenario for Google. If I am sitting on
my couch playing iPhone games or reading an article in Instapaper Pro
— instead of goofing around on the Web on my laptop — that is
potentially real lost revenue for Google. (Similarly, even if I’m using
my iPhone’s Web browser, using the mobile Web and Google search, Google
is probably not monetizing those searches nearly as well as they do on
the computer.)

Users are learning to go to an app to find the information they need as opposed to going to Google or the Web.
For example, if I want a restaurant review, I don’t go to Google to
type in the name of the restaurant. I go to the Yelp app. Or
Urbanspoon. Or whatever. Either way, no Google there.

The App Store search engine built into every iPhone is becoming a very important search engine.
One billion apps downloaded means hundreds of millions (or billions) of
searches conducted. Google doesn’t power it or sell ads there.

Think client applications are back, baby.