"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Tom Kershaw, chief product and engineering officer at Rubicon Project.
In the next three years, nearly 700 million new consumers will access the internet for the very first time, according to eMarketer. That’s more than twice the population of the United States emerging from a previously disconnected state into a global community with access to every aspect of communication and information on the planet.
This growth in new online users will be fueled by the continuous adoption of mobile devices globally, with smartphone usage estimated to increase 37% in the same period. With the growth of mobile-first users, the mix of “digital eyeshare” will increasingly favor in-app over traditional browsers as well, driving the mobile app economy to surpass $100 billion annually by 2020 [PDF].
With mobile app traffic booming, the question for developers, not surprisingly, becomes one of effective monetization. To date, the mobile app advertising market has focused almost exclusively on getting new installations, which currently accounts for the vast majority of all in-app revenue.
While some developers attempt to monetize their apps through advertisements, very few have seen marketable success. A recent study from Gartner found that almost two-thirds of consumers indicated that they never click on ads within mobile apps. But why?
In-app advertising is still heavily concentrated mostly in gaming apps and utility apps (such as navigators, battery savers and organizers). Both categories require an extremely high rate of engagement from consumers and, as such, are riddled with disruptive advertising. But no one wants to be disrupted to watch a 30-second video in the middle of game or read a pop-up banner ad while using their phone to navigate through traffic.
This reality has kept many brands and their billions of advertising dollars on the sidelines waiting for the in-app advertising experience to improve.
As we look to unlock potentially billions of new brand dollars for in-app advertising, the industry must take several key steps collectively to bridge the divide and realize the massive potential the future can hold for in-app consumer engagement.
The app community is still a bit of the Wild West, with new apps, a large universe of long-tail developers and broad international distribution. This creates choice for consumers but also creates navigation challenges for brands. Fraud, spam and false clicks are still real problems for in-app advertisers and, more importantly, concepts of brand-safe apps and formats still have a long way to go.
App developers need tools to protect brand safety and to measure it, and they need to develop best practices to make it easier for brands to invest in their users.
Find New Ways To Communicate
Mobile apps are a new frontier in advertising, but so far many of the formats the industry relies on seem to be from another era. Interstitials, unskippable video ads and crudely resized banners leftover from desktop are far too common, while interactive and short-form formats are still rarely seen. Even worse, many of the most common mobile formats are those that consumers like the least.
We have an exciting opportunity to innovate the space, but we as an industry have become stagnant in our approach, relying on outdated strategies to drive consumer engagement. From my experience, ads that complement the experience, such as rewarded video, have no impact on gameplay and can improve developer CPMs. This is the kind of win-win we need to strive for, and to achieve it we need to invest in home-grown mobile ad formats that maximize the benefits of the mobile app itself.
When I open Waze, the app knows my office address and preferred driving routes. When I play “Candy Crush,” the game remembers my high score.
Mobile apps have the unique ability to form a personal connection to their user. From geolocation service to saved preferences, consumers have come to expect a deeply personal service from their apps, so it makes sense that they should expect the same from their in-app advertisements.
This is where the importance of microtargeting comes into play. Traditional targeting would have brand X throwing ad dollars at all men between the ages of 18 and 25, but it’s no longer enough to generalize audiences by demographic. To deliver fewer ads more effectively, we need to define audiences at a granular level. This means serving the ad to an audience of 22-year-old men living in Detroit who drive to work every morning and have shopped for Nike sneakers in the past six weeks.
Unlocking the potential of microtargeting will allow us to serve the right ad, to the right consumer, at the right time. Ultimately this will reduce ad load, increasing efficiency and improving the overall user experience.
The final key element in any monetization strategy should be built on the concept of evaluation. When we pay attention to engagement data, the numbers can direct or course-correct our approach. CPMs and impressions are no longer effective measurement standards in an industry that focuses on people first.
As brands shift from advertising models that generalize audiences by demographic in favor of microtargeting, they will increasingly serve ads that are relevant to individuals. When audience engagement becomes personal, the true measure of effectiveness will no longer be based on impressions, but actions.
In an industry fueled by constant change, brand dollars will follow the consumer when the industry stops focusing on app inventory and attempts to force legacy ways of consumer engagement into the app environment. We need to instead focus on the consumer experience.