Facebook’s mobile app advertising has been a game-changer, delivering undeniable success for both Facebook and the apps using its mobile app install ads. But as of the last few weeks, Facebook is no longer the only game in town. Google, Twitter, AOL, and Yahoo have disclosed plans for dedicated advertising products for app marketers. But, as we saw with the early days of mobile ad networks, even a rapidly growing market will have some winners and some losers.
First, let’s take a look at this sudden rush of activity and explore why app-specific advertising products are the future of mobile app advertising:
A complete reversal
In mid 2012, Facebook was getting dinged for not doing enough on mobile. They had an underwhelming app experience and hardly any revenue from mobile – then they introduced their mobile app ads.
In slightly more than a year since the management APIs were introduced, the app install ads grew from minimal revenue to 30% to 40% of Facebook’s entire revenue stream, according to some estimates. Not bad for a company that, back in May 2012, admitted it didn’t know how mobile worked.
Today, it’s clear just how well Facebook’s app ads perform. These stats are specific to game apps, but hold true across many app categories.
That kind of out-of-nowhere performance is industry-changing – and that’s why we’re seeing in this spurt of strategic moves by Google et al.
But what does it take to succeed?
In our view, there are three essential components to achieve large-scale success with mobile app install ads:
• Targeting capabilities
• Programmatic access through APIs
All three are intimately related: all the data in the world is useless without flexible targeting capabilities to slice and dice it; the more precise your targeting options, the more you need advanced programmatic tools to manage and optimize them.
There are certainly other components – the usability of the ad unit itself, the willingness of the audience to engage with the ads, the pricing model – but we believe those are the three major drivers. There are also plenty of opportunities for ad units with unique hooks to succeed: video networks like AdColony and Vungle are currently very strong performers for driving app installs and engagement.
Who are positioned to be the biggest winners?
All four companies that have made announcements about new app install ads are well-positioned to take advantage of this new market.
o Facebook: has already proven its ability to successfully execute these ads. Incredible amounts of data, precision targeting, and powerful APIs.
o Google: should be a slam dunk. Has built a unique position in the industry, with search, an OS, a browser, shopping, video, home automation, navigation, and more under one umbrella. They certainly have the data and the tech capabilities – it should just be a matter of execution to deliver an effective app advertising product.
o Twitter: remains to be seen, but is promising. Twitter has plenty of data for targeting, significant API capabilities and mobile runs deeper in their blood. Twitter started as an SMS service, and currently see more than 75% of usage on mobile.
o Yahoo: also promising with good data for targeting and strong API capabilities. Yahoo has been in the advertising business longer, saw 430M unique mobile users in Q1 this year – more than half of total usage – and boasts mobile-friendly services like Tumblr and Flickr, in addition to top-ranked news and weather apps.
o AOL: owning an impressive bunch of properties including TechCrunch, The Huffington Post, DailyFinance, Engadget, AOL Mail, and Autoblog, AOL reaches about 86 million unique mobile viewers a month. They also claim a coming “premium environment” in which users can download apps. We shall see.
The potential is there for all of these properties to create app install ad products that dramatically outperform banner ad networks. In addition, app install ads on mobile have the ability to double as re-engagement ads, so users who already have the app installed get targeted messages with deep links to specific parts of the app – new content or features, for example. This helps solve an additional app marketing challenge: user decay over time.
We expect these types of products to make up the vast majority of mobile app marketing spend in the near future – with RTB exchanges positioned to efficiently provide access to huge amounts of inventory not covered by the big four.
Craig Palli, the author of this post, is Chief Strategy Officer of Fiksu