This week’s post is brought to you by Tapdaq. Fellow friends in the app growth business.

The mobile advertising industry grew to be an estimated $18 billion business in 2014, a number which won’t surprise many within the industry. As the number of devices and applications available has skyrocketed in recent years, this has led to a huge amount of inventory being created which advertisers have bought up in the billions.

But as fast as the industry is growing, mobile ad tech is advancing. As demand from both publishers and advertisers increases, ad networks are evolving in their bid to deliver the most engaging ads possible to the most targeted users.

In this post I am going to look at 3 ways in which ad tech is evolving in order to meet the demands and challenges that exist within the mobile ecosystem, and what his will mean for the indie developer community.

 

RTB vs Direct Deals vs Cross Promotion

Nearly all mobile ad networks operate via either a real time bidding (RTB) exchange, a direct deals marketplace, or a cross promotion model, with each of these having positives and negatives for developers.

Let’s take a look at each of these in a little more detail…

 

Real Time Bidding Exchanges

Real time bidding exchanges are where most inventory is traded, and they provide publishers with an easy, automated way to start monetizing their application. eCPMs are typically very healthy, as adverts constantly try to outbid one another in their attempt to buy up as much premium inventory available.

Whilst this is a positive for developers looking to monetize their app, it is a challenging situation for some advertisers, tilting the scales in favor of larger developers who can afford higher cost per installs.

 

Direct Deals

Direct deals are not as widely used as RTBs, and fewer networks support this. The principle with direct deals is that publishers and advertisers can work directly with one another, arranging and agreeing on fixed targeting and prices, and often have exclusive access to inventory.

The negative side to direct deals are that they take time to set up, and, depending on the network, you have to trust your partner to deliver on your agreed terms. The positives are that because inventory is not being sold via an auction, advertisers have much greater control on the price they pay. For publishers, they also have a clearer understanding of how much revenue their inventory will generate, whilst they also have more transparency over what ads will actually be appearing within your app.

 

Cross Promotion

Cross promotion involves exchanging installs between your own network of apps, and can often be done for little or no cost. In fact, developers with enough resource often build their own tool in house to enable them to cross promote their apps effectively.

The down side to cross promotion is that the amount of installs you generate is limited by the number of impressions that your apps are able to generate.

 

The Advertising Mix

Mobile advertising is currently at a very interesting stage. The minority of developers which can still afford to user real time bidding exchanges are shifting their attention to Facebook, as their targeting is superior to most other ad networks. This is leading to established ad networks such as Chartboost having to focus more on their direct deals and cross promotion in order to attract advertisers.

Over the next 12 months, it will be fascinating to see how other ad networks respond to Facebook’s growing dominance. With more and more top tier spend moving to Facebook, I think we are going to see a fair amount of consolidation from other networks as they try to support themselves via other models away from their traditional RTB exchange.

 

Ad Units

When mobile advertising first set out, banner ads were pretty much the default ad unit. However, as developers demanded higher click through rates, and ultimately, higher eCPMs, larger and more obtrusive ad units began to appear such as interstitials and video.
Ad Unit
This image, which is from an excellent post on ad innovation on the AppLift blog, highlights the challenge that developers have when choosing the ad unit to use within their app.

Now, the focus is on getting the right hybrid between user experience and ad efficiency. This means generating as many clicks and installs per 1,000 impressions as possible, without damaging the user journey within your application.

The answer to this problem is native ad advertising, which enables developers build their own custom ad units which can grab a user’s attention whilst fitting seamlessly into their app’s user experience. These units can come in the form of news feed style ads, customised interstitials, and list view units.

One of the most innovative ad units around is offered by App.io, who actually enable users to demo the app right within the ad. This is one the most interactive and engaging forms of advertising I have seen on mobile, and I think we will start to see more examples of ad units similar to this in the future.

 

Targeting

Perhaps one of the biggest threats to many ad networks today, particularly those that rely on an RTB exchange, is Facebook. Advertisers want to buy the best targeted traffic possible, as this translates into better conversion and monetisation rates within their app. And when it comes to in depth user targeting, nobody can top Facebook.

A number of large advertisers I know (over $1 million in spend per annum on ads) have been refocusing away from their traditional channels, and moving to Facebook, and this is causing other ad networks to have to adjust their strategy. Nobody can compete with Facebook in terms of user data, so in order to succeed networks have to innovate on their business model and provide more engaging ad units in order to differentiate themselves.

I think one of the best examples of this recently was when just this week, Chartboost showed a clear shift in focus with their new site design, where the focus is no longer on monetisation via their RTB exchange, but on app growth through direct deals and cross promotion.

 

The Future

The ad tech industry is growing and innovating at a rapid rate. Here at Tapdaq, we very much believe that due to the cost implications on RTB exchanges, you will see many more developers moving towards direct advertising deals which offer greater control. Also, we are likely to see some consolidation when it comes to the number of RTB operated ad networks, as Facebook (and potentially Twitter) use their vast amount of social data to increase their own share of the market.

When it comes to the adverts themselves, we have already come a long way in just a few years. Users can now watch, share and interact with adverts which are shown to them in app, and this is huge jump forward from the banner ad that we started with not so long ago.

This innovation will continue over the coming years, as networks bid to provide users with an ad experience which they actually enjoy and benefit from, as ultimately this is in the best interest of the publisher and advertiser as well.