Over the past few decades, industry groups like the ARF (the Advertising Research Foundation) have led active discussions around the effectiveness and impact of TV advertising, print and radio advertising. More recently, those discussions have expanded to include social, search, and web advertising. But one area has been left without adequate coverage: mobile advertising.
Today, we are developing a new framework and methodology to advance the sophistication and maturity of mobile advertising. In fact, Verto Analytics has developed the Verto Retention Report, a new approach to measuring the value of a mobile app user. A full explanation is included in our recent webinar, presented in cooperation with the ARF (you can watch the webinar replay here: The True Value of a Loyal Mobile App User). Below, we highlight some of our major predictions for mobile advertisers to keep in mind as we move into 2017.
Prediction #1: Mobile advertising will triple in value
Through our work with leading brands, advertisers, and publishers in the U.S., Asia, and Europe, we’ve found that most traditional brands and advertisers are not fully satisfied or confident with existing mobile advertising options—and that’s reflected in their limited spending in this category. Instead, they continue to spend their ad dollars on mature advertising mediums, such as television, print, social media, and display. Those who actively use mobile as an advertising medium tend to be mobile app publishers. These companies not only understand mobile, but also their business models directly benefits from the infrastructure of mobile advertising. For example, mobile app companies can directly track which ad-backed downloads lead to new users. This is an advantage that’s not readily available to most other brands.
However, as discussed in our webinar, the advertising ecosystem as we know it is about to change. The market expects that mobile in-app advertising will surpass search advertising on desktop PC as the biggest revenue driver of online advertising. Advertising revenue streams for PC search advertising are expected to remain flat over the next two years, while all key domains of mobile advertising will triple in value. And out of those mobile advertising domains, native mobile in-app advertising is expected to be the largest.
Prediction #2: Expect seamless mobile usage experiences to emerge in the mobile apps market
While there is room for advertising to grow in mobile, there are clear differences between mobile and other platforms. After all, mobile is a very personal channel and is often the “hub” or focal point of a consumer’s decision making. Mobile is contextual, location-based, pervasive; and already integrated within powerful payment channels. Today’s advertising solutions incorporate some of these dimensions, but there is room for more innovation that could offer significant benefits to brands.
For example, instead of simply targeting high-income females in New York City, a brand could specifically target females who have purchased premium facial products and only recently moved to New York. Or rather than serving an ad to a user located in Times Square about a steakhouse because he ate at a steakhouse last week, an advertiser could use historical data to see that this consumer ate a late lunch and is more interested in seeing a musical. Instead of serving up an ad for the closest Starbucks, an ad could prompt a user to order their favorite drink via Starbucks’ own ordering and payment app. Thea user would have to do is walk down the block to find their hot drink awaiting them, already paid for. Clearly, there are vast implications for seamless user experiences and increased revenues for advertisers.
Prediction #3: When it comes to metrics for mobile apps, engagement and usage will become more valuable than number of downloads
Verto’s premise is simple: connect investment to the return on that investment. Having better visibility into your costs and how that spend links to any revenue that partially or fully results from the investment will enable you to better assess what will be profitable in the long-term.
Our webinar includes insights from the new Verto Retention Report framework. For example, while consumers in the U.S. have an average of 71 apps installed on their mobile devices, only 20-30 of them are used monthly, 15-20 of them weekly, and only 5-10 are used on a daily basis. Mobile app publishers shouldn’t measure success based on the number of app downloads; instead, it is engagement and usage that matters. We also revealed research that shows that up to one-third of app downloads in the U.S. result from referral or advertising traffic, which is a remarkably high number. Organic growth increasingly is linked, or is even dominated by, paid downloads.
Throughout the webinar, we also addressed the importance of understanding retention. Apps retain anywhere from 2%-25% of their user base 30 days after download. At Verto, we link retention numbers, the average share of paid downloads versus all downloads, and the attribution model between downloads and long-term valuable loyal users, to show how to assesses one’s profitability in the mobile app install advertising business, as per the example below.
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