Presented by InMobi

Advertising is the most common way apps make money now, and that’s not likely to change anytime soon. In fact, one recent study found that more than three-fourths of all revenue earned by mobile apps came from ads.

However, advertisers need to become smarter in the future regarding how they make money. In a survey of app publishers and their advertising partners that InMobi conducted earlier this year, more than half of respondents said ad revenues have decreased or remained stagnant over the last 12 months.

My prediction is that mobile in-app advertising will remain as popular as ever in the coming months and years. But how publishers monetize will change as these new techniques, processes, and technologies come to the fore. Here are my top three prognostications.

Prediction #1: Unified auctions will replace waterfalls

One of the reasons why mobile in-app ad revenues are not going up despite growing interest among brands is because app publishers and their supply-side partners still rely on waterfalls. In fact, the InMobi survey found that 57 percent of respondents use this ad serving methodology.

In a waterfall, sources of advertising demand (networks, exchanges, demand-side partners, etc.) are offered up potential ad inventory in a set, sequential order, one after the other, until all inventory has been claimed or until the ad serving opportunity is gone.

There are a number of issues with this approach, but perhaps the biggest one is that it can prevent the potential highest bidder from actually winning out. For example, let’s say I open a weather app that includes ads. The first ad exchange given the opportunity to deliver an ad to me pays $5 for the honor, regardless of whether bidders behind them in the waterfall can and want to pay more than that.

Unified ad auctions solve this problem by letting all potential bidders go head to head for each and every potential ad impression. It’s similar to how auctions on eBay or at Sotheby’s occur. By increasing competition and enabling ad impression decisions to happen more quickly, unified auctions help publishers boost ad revenues by 48 percent and decrease ad serving latency by 28 percent compared to apps not using unified auctions.

These insights, which come from our network data from 2017, show just how powerful unified auctions can be. Going forward, expect a lot more app publishers to jump on the unified auction bandwagon.

Prediction #2: App publishers will further embrace premium, high-impact ad formats

In an attempt to make more money, it can be tempting to just run more ads. But, doing so could lead to user abandonment, as end users are less likely to use an app if advertising disrupts the core experience.

Going forward, app publishers will focus more on the quality of ads running on their app, as opposed to quantity. Expect to see more premium, high-impact ad formats within app environments in the future.

For example, think about your typical banner ad compared to a video ad or native advertising. Not only are native and video ads typically less obtrusive and more memorable than a banner (when done right), they also offer higher CPMs for publishers. It’s no wonder that a third of all mobile ad spending in the U.S. now goes to video.

Prediction #3: AI and machine learning will play an outsized role in mobile app monetization

Artificial intelligence is becoming more pervasive than ever before, with AI and machine learning permeating just about ever sector imaginable — including mobile app ad monetization at scale.

In particular, here are a few AI applications I expect to soon become commonplace:

  • To ensure advertisers always pay a fair price for each and every ad impression and don’t have to worry about second price auctions or bid shading, ML algorithms will, in real time, determine the ideal price for each impression. Multi-arm bandit techniques will help highlight how advertiser demand for particular users differs by time of day, location, app usage, etc.
  • The app’s user experience, including how ads are seen and served, will be further optimized and personalized thanks to AI.
  • AI can more effectively spot the hallmarks of fraud, and remove issues before they ever appear. ML algorithms can learn how fraudsters are adapting, and then proactively patch potential vulnerabilities before they can be exploited.

Why mobile ad monetization is ripe for change

Going forward, app publishers will be even smarter in how ads end up in front of their audience and how advertising fits into the bigger picture. Unified auctions, high impact ad formats, and AI/ML will help them do that.

For more information about how InMobi helps mobile app publishers and developers solve complex challenges, visit us here.

Andrew Gerhart is the VP of Publisher Platforms at InMobi.

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