Why in-app ads may be the future of mobile advertising

angry birds

Brands and agencies can no longer only focus on mobile Web, because apps are growing rapidly and in-app advertising offers marketers a better opportunity to target the right audience at the right time. 

It’s universally acknowledged that there’s a disparity between the amount of time people spend on mobile and the actual ad dollars allocated to this medium. However, this gap will narrow as advertisers are becoming more adept at using mobile to reach their audience.

Compared to mobile Web, in-app advertising can provide a better solution to capture targeted consumers’ attention and encourage them to interact without interruption.

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Many big companies have sensed the opportunity offered by in-app advertising. For example, in September of 2015, AOL acquired mobile ad network Millennial Media for $238 million, which brought the company more than 65,000 apps, according to Chad Gallagher, director of mobile at AOL.

“In-app mobile ad spend is really the future of the mobile advertising category. Considering that people with access to a smartphone or tablet now spend an average of three hours on them per day and 84 percent of all smartphone time is spent in-app, in-app engagement is increasingly critical for brands, advertisers, marketers, and agencies,” says Gallagher. “They can’t just focus on mobile Web. That’s not where the growth will be next year or five years from now,” he adds.

Important industry stats

BI Intelligence predicts that U.S. mobile ad spend will  reach around $42 billion in 2018, up by a five-year compound annual growth rate of 43 percent from 2013.

WPP’s mobile ad platform Medialets found that during the first half of 2015, in-app click-through rates averaged 0.56 percent globally, compared to 0.23 percent for mobile Web ads.

Jupiter Research estimates that in-app mobile ad spend will reach $16.9 billion by 2018, compared to $3.5 billion in 2013. While app downloads will increase exponentially by then, the majority of in-app advertising expenditure will be allocated to social mobile giants like Facebook and Twitter, according to the company.

Why in-app ads work

In-app advertising works well because it is enhanced by location data, which is the first step in understanding context and increasing engagement, according to Ran Ben-Yair, co-founder and chief executive (CEO) of mobile in-app ad platform Ubimo.

“Location unlocks the many rich layers of data which marketers can analyze, such as weather, local events, demographics, to get a full picture of what is going on at a certain location in real-time,” he explains. “Mixing and matching these several ‘real world’ data layers allows marketers to create dynamic, on-the-go audiences. Combining all these data layers to find the right audience for your message is what makes in-app advertising truly effective,” he adds.

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But location data is not the only answer to why in-app advertising is effective. While geo-targeting is a possibility, having access to the data and being able to use it on all points across the ecosystem is what is driving marketers’ ability to become highly targeted.

Google and Apple provide single identifiers to make tracking, attribution, and targeting better. Mobile analytics companies like Appsflyer and Tune have become more adept at tracking ad campaigns. Likewise, technology companies like Fiksu have abundant data on use behavior, what apps people have downloaded, and what people are likely to do.

“When all those things are combined together, it becomes really powerful for advertisers,” says Tom Cummings, director of account management at Fiksu.

“Three years ago, for example, I built a persona and identified my users as high-net-worth individuals. My best option was to find a publisher that claimed it worked well with high-net-worth individuals, such as Forbes, Fortune, or CNN Money. But now, I’m able to know who exactly clicked on my ads based on my tracking and attribution. I can go to a technology company that knows more about my target audience based on device identifiers aggregated into a persona. Then I can take that information and bring it to big publishers or ad networks like Google or Facebook and customize audiences,” he explains.

Which in-app ads work?

In-app ads are displayed within a mobile app, such as banners at the top or bottom of Angry Birds, as well as more advanced Facebook auto-play videos and Twitter sponsored posts.  

It’s hard to say which ad format works best, as it all depends on your goals and testing results. For example, video is helpful when you don’t have any brand recognition. If you see a display ad for Dunkin’ Donuts that says “Download now for free coffee,” one may click on the ad immediately to redeem this offer.

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But if the same ad comes from a new app, you may not understand why you should care about it. In this case, video could be more effective than display advertising in the new app, because it can visually illustrate what the brand is doing.

“My recommendation is target the best way you can and experiment with all kinds of ad formats. You can start with one banner, one video, and one interstitial and A/B test them,” says Cummings.

Compared to different ad formats, making sure that an ad is relevant to the user while simultaneously presenting it in an non-invasive manner is more important. It is the relevancy of the ad that makes it compelling as opposed to simply the ad type, according to Ubimo’s Ben-Yair.

While declining to disclose the brand’s name, Ben-Yair describes how a leading multinational fast food company created its in-app campaign, which successfully generated huge amounts of engagement.

“It promoted a custom game, which was played directly through the ad banner. By targeting sports fans at a prolific local sporting event, the brand saw a 60 percent increase in engagement over average. In this case, the brand created a compelling ad campaign that was served in real-time to relevant audiences, and it saw great results because of that,” he explains.

A few thoughts

Although ad formats are less important than relevancy, online research shows that in-app banner ads don’t generate the best revenue compared to other ad formats, as evidenced in the study below from the programmatic mobile ad platform, AppFlood.

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HootSuite also reports that 54 percent of users don’t click banner ads because they don’t trust them.

On the other hand, in-feed ad offerings provided by big social networks, like Facebook and Twitter, are highly targeted, immersive, and less intrusive, however they are also expensive. So, what should app marketers that can’t afford to pay the high rates on Facebook do?

“If you are an app startup and you want to become a profitable company, you absolutely need to figure out the best ways to drive users that are also cost-efficient. If you cannot get a return on paid advertising, one of your alternatives is to engage with your community, find out who their influencers are, and build strong relationships with them,” says Fiksu’s Cummings.

“But if you plan to experiment with paid premium advertising, the best advice I can give is make sure you know what your goal is for that return and how you are going to get it,” he adds.

 

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