The in-app advertising market has changed quickly in just the past 12-18 months. Consider: Q1 2017 was a record-breaking quarter for app stores, with 15% download growth year-to-year. All told, there were 25 billion downloads in Q1 of this year. Consumer spending on and within apps was $15 billion in Q1 2017, representing 45% year-to-year growth.
That part continues to prove what most marketers know already: experiences and customers are increasingly moving to mobile, with more to come — gross app revenue might surpass $102 billion by 2020.
As the app ecosystem has seen growth, though, the role of in-app advertising has changed. For a long time, app developers favored a “pay once and play” model, where users weren’t prompted with in-app advertising purchase options. Increasingly, as more free-to-download apps enter the market, the brand side needs new revenue generation models. That’s become more about in-app advertising and in-app goods and services. It’s now about 72% of all total mobile ad spend.
This makes sense: comScore research has shown mobile users spend 88% of time in-app, which far outpaces the amount of time spent in mobile browsers.
Some trends to consider in the in-app advertising space:
Programmatic vs. Header Bidding
Programmatic advertising — somewhat complicated overall, but essentially the process of using computers and algorithms to determine ad buys, as opposed to RFPs and human beings — is on the rise within in-app, although it has a competitor in header bidding. Here’s how it works in browsers:
This can be moderately confusing to the marketing side, but here’s one take from a Managing Director at Applift on why header bidding could be detrimental to the rise of programmatic advertising:
Header bidding allows publishers to offer inventory on multiple exchanges rather than filtering demand through a single stream. Most DSPs are connected to most of the leading exchanges. If a DSP registers the same inventory from four different exchanges, it is going to bid the same price across all four, potentially increasing its price.
Programmatic advertising is “hot” in mobile and desktop right now. Header bidding could change that while increasing prices.
Likely not a surprise that video would be a trend in any mobile area for 2017. Look at the growth of mobile video ads:
This is a good time to mention the “Vendor Carnival” problem, though. There are lots of different vendors and options around in-app advertising and in-app video advertising. Because they all offer slightly different solutions, advertisers can struggle to find the right combination to analyze a complete mobile journey for their targets. (This is, of course, why you need to vet any mobile partners significantly, especially as mobile continues to see huge growth.)
Video has been proven over time to deliver higher-value customers to businesses. Most effective marketing involves analyzing channel performance and reducing spend on channels with less performance; as a result, more companies are navigating to in-app video advertising as a potential for positive ROI. That growth in video will only continue in 2017.
A Bad Santa 2 ad in the Fandango app.
Chatbots have been on the rise for a few years, and you’ll continually see them in 2017 and beyond. The major reason is that baking a purchase process into messaging typically yields positive results for brand-customer relationship, in large part because of the ease of process.
In fact, Huffington Post recently argued that 2017 will be the beginning of “a farewell to ads,” which sounds crazy on the surface: an average marketing department dedicates 48% of its budgeting to ad spend. At the same time, though, 75% of consumers would rather reference a website than deal with a direct salesperson, and we all know adoption numbers on messaging platforms are huge. If people are (1) already on their phone, (2) already on a messaging platform, and (3) can buy directly through there as a form of in-app advertising, this “farewell to ads” does make some sense. It doesn’t mean ads will disappear completely — it means chatbots will take a much more prominent role in promoting products and services.
The Bottom Line On In-App Advertising
It’s likely to continue to grow as a driver of total app revenue, which will exceed $100 billion in three years. As mobile-first becomes normative in other parts of the world, in-app advertising will continue to expand its reach and potential for mobile marketers.
What’s more, despite misconceptions about cookies (mobile is a cookie-less channel, and cookies were a gold standard of tracking users for years on desktop), there are increasingly ways for in-app advertising to deliver user data and audience targeting back to the advertisers. As that functionality continues to evolve in 2017 and beyond, we’ll likely see even more adoption of in-app advertising.
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