The rise of in-app advertising: Why ad whales matter to your spending strategy

Mobile Marketing - Sponsored by: Adjust

Kia Saedi, director of sales, west at Adjust, discusses the shortcomings of in-app advertising and what can be done to address these issues

Kia Saedi AdjustToday’s apps have cracked the code on effective performance marketing. Nowhere is this more obvious than with video, which now captures and keeps user attention long enough that it can be monetized through advertising. And with companies everywhere taking a mobile-first approach, ad revenue has gained momentum as a viable monetization and diversification model for many app publishers.

This is where publishers will sell ad space in their app to other brands. When publishers allocate inventory within their app for advertisements to be placed, the money they make from these advertisements is known as ad revenue.

Estimates predict a 60 per cent increase in apps monetizing through in-app advertising in 2019 – but despite so much money being spent on it, there’s one big issue – read on as we explain. 

The shortcomings of in-app advertising
Today’s industry standard is based on reporting aggregated and averaged ad revenue data. Yet this stops app publishers from tying back ad revenue data to user acquisition sources or breaking it down to any segmentation level. The data they receive is aggregated across an entire network, so in-app ad revenue is shown as equally distributed among a user base. But the majority is actually generated by a small group of users – known as ‘ad whales’. These ad whales often make up 80 per cent of the advertising revenue for mobile apps.

What’s more, this aggregated reporting means that marketers are equally as blind to the opposite of ad whales: those users who are quick to dismiss ads and are likely to churn if they’re being served too many.

This has a big knock-on effect on Average Revenue Per User (ARPU) and Lifetime Value (LTV). These blind spots in your analysis can lead to poor decisions, like chasing the wrong users, or overemphasizing campaigns that don’t generate the right returns. Moreover, audiences or user segments based on profitability could more likely suffer from accuracy issues.

So even though in-app advertising spend is on the rise, the results are stuck in a rut. If marketers can’t find the valuable users who have a huge appetite for ads, they could be chasing minnows, now whales.

How can marketers work out who these ad whales are – and serve them the ads they’re likely to find useful?

The solution: User-level ad revenue 
User-level ad revenue tracking is the ability to tie back monetization revenue to the source of the user and compare it with the cost of acquiring that same person. For app publishers, it gives them an easy and privacy-compliant way to calculate ARPU and LTV. This data can then be used to calibrate their ad spend more efficiently, and to retarget more effectively.

Up until now, it’s been difficult for brands to distill user-level ad revenue into actionable insights on their own— they need the support of their ad mediation platform partners to work it out. Fortunately, several have built the capabilities to do exactly this. Mobile monetization and distribution solutions provider ironSource, for example, has created an API that allows mobile measurement partners (MMPs), including Adjust, to funnel ad revenue data into their systems.

This move gets high marks from marketers. But Jonathan Winters, head of user acquisition at Miniclip, points out that for user-level ad revenue to really gain momentum— and for brands to truly succeed with their in-app advertising— all mediation platforms and partners need to scale this solution. Only then will the ecosystem gain more transparency.

In fact, Winters leads the charge for networks to do more. In his view, brands should initiate an open and frank discussion about the issue. “The core problem is a lack of transparency when it comes to understanding advertising revenue across multiple networks,” he explains. “The question is not whether advertisers should raise this to the individual networks and monetization partners, but how we can encourage more openness and sharing with mobile measurement partners so that we can track ad revenue in a similar way to how we track in-app revenue.”

Some marketers may see ad revenue tracking as just another KPI to monitor and optimize. But its potential to finetune user experience and rocket revenues means it’s well worth investing the time and resources into getting it right. 

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