Mobile Advertising Before And After 2018
This is the latest Forbes article from Chartboost co-founder Maria Alegre originally published here.
This year, the App Store turned 10 years old. I’m fortunate to have witnessed the challenges and opportunities of this vibrant ecosystem throughout all these years, first as part of a mobile game studio (Tapulous, acquired by Disney) and then as a co-founder of an in-app advertising platform (Chartboost). Here is a summary of how I believe the future of mobile in-app ad tech will evolve in the next three to five years. This will hopefully save you research time, provide clarity and make you a bit more informed about where to place your bets on partnerships, investments, a road map and more.
Before we get started, a basic clarification: Mobile in-app advertising is not the same as mobile web advertising. There are two key differences: 1) cookie tracking vs. device IDs, and 2) real-time ads vs. delayed or cashed ad delivery. These differences have proven to be extremely hard to reconcile, resulting in several long, painful, time-consuming failed partnerships between desktop and in-app key players. Partnerships that often start among company leaders full of hope and get abandoned nine months later by frustrated integration teams.
A big part of what’s happening in the mobile in-app advertising industry is similar to what happened on the desktop. But the intrinsic differences between the two platforms are fostering faster changes and more opportunities for newcomers to lead the transformation.
Appnexus (recently bought by AT&T), Rubicon, Index, Criteo and Amazon are the current dominant players (outside of the Google and Facebook duopoly) that started on the web, built billions of dollars in value and have declined now in the times of mobile. These companies do have mobile web, but the data shows that engagement happens in-app. This is like telling a sea lion that the future is above water. They can breathe but they can’t run.
Mobile in-app advertising is about to endure a profound transformation that will change the dynamics of the current ecosystem and turn it upside down. I believe the innovation dilemma will cause many to fade away, and new transparency-first programmatic solutions will rise. It’s a shakeup that will be painful at first, but overall, it will deliver a healthier, cleaner and better set of partners for app developers to monetize their content. But before we get to that, let me go through a little bit of history.
In-app advertising used to be sold through ad networks. Ad networks use humans the vast majority of the time to buy and sell ads through a mostly self-contained ecosystem. Most of them have succeeded on the shoulders of expert deal negotiators instead of having great tech. They tend to be black boxes. They tend to give you good performance when they are onboarding a publisher and slowly degrade as their partner loses attention. Ad networks are, in general, a win-lose game.
That is why mediation layers were born. As a protection to publishers, their pitch was to enable publishers to put an ad network against another and switch them up when/if performance was degraded. But there was a big problem with that vision: No one was willing to pay for that service. Therefore, mediations had no means of thriving as a business and had to hack one together. They built their own exchanges: a pipe to aggregate demand, either directly or from third parties and compete in their own waterfall with the ad networks they were theoretically providing a neutral optimization for.
As you might have guessed, there is an inherent conflict of interest in that model, which forced mediations to become extremely opaque with their optimization algorithms and lose all credibility from the in-app publishers. That is how, today, over 70% of publishers have decided to build their own in-house mediation technology based on our own data after analyzing over 200,000 publishing apps. Some in-house mediations are good, but they are hard to maintain, and it’s hard to prioritize engineering resources for them inside of a content creator whose mission and passion is to build amazing, engaging content for their audiences.
Which brings us to today.
Advertising today is no longer bought and sold by humans. Computers have proven to be a much more effective way of buying the right audience at the right price to deliver value for the advertisers. Since its inception in 2010, OpenRTB has become the standard to buy and sell inventory programmatically, first on the web and now on mobile, too. In essence, real-time bidding (RTB) allows an individual ad impression to be put up for bid in real time. This is done through an auction per impression, similarly to how financial markets operate. The main benefit of RTB is that it allows advertisers to make pricing decisions per user based on their demographic, contextual or behavioral characteristics.
Some ad networks have built programmatic exchanges to complement their direct demand with third-party demand and compete with the opaque mediations that are often rigging the selling process. But the future is not exchanges inside ad networks or exchanges embedded in mediations. The future is a unified auction where the players can transparently see the logic behind the bidding process so the auction, this time, can’t be rigged.
The vision of the transparent unified auction is extremely powerful and the value proposition is simple: The trust is based on the transparency, and the profitability on the player who is smarter, faster and most efficient. Publishers will make more money and will regain visibility and control, and they’ll replace middlemen with transparent technology. The company who is able to execute on that vision will own the future if mobile in-app. And every day this is delayed the publisher loses.