Mobile advertising is one of the fastest growing sectors in ad tech. Ever so often, we read articles declaring how mobile ad spends will explode into billions overtaking all other media channels. We also read press-releases of product launches or fundraising rounds from ad companies each professing to be the best, the most innovative, the most advanced mobile ad tech ‘platform’, and each hoping to bite into the imminent massive influx of dollars. The authors of such articles are not to blame - demographic data, device usage trends, and user engagement all purport that mobile is here to stay and is changing our lives in remarkable ways. However, mobile advertising is still in its infancy and has a long way to go to catch up to its desktop (web) counterpart. Cutting through the noise, advertisers reach end users on mobile devices through two main channels - mobile websites and mobile applications. Mobile websites are essentially mobile optimized websites or sites designed for mobile devices. The majority of traditional web advertisers are primarily spending their ad dollars on mobile websites. One of the reasons for this is that cookies work on mobile web as seamlessly as they do on desktop, and ad tech companies whose technology was built for desktop ads can easily expand into mobile web with their existing technology. Advertisers can track users across devices, measure engagement at different interaction points, retarget them, and build user profiles all based off the cookie. This gives buyers comfort to allocate large spends as they don’t have to change anything. Mobile web attracts big ad dollars from search, retargeting, online shopping ads and other large brand advertisers. Mobile apps are native applications developed for the iOS and Android platforms. Mobile apps are the other mobile channel through which advertisers reach users. Mobile app ad spend has been dominated by app install ads, with majority of app install spend coming from Games (50%) followed by lifestyle, entertainment, social network and travel categories (each under 10%). Facebook’s billion dollar mobile business was largely built on the back of app install ads. Though app install ads have dominated ad spend growth rates, those rates are likely to taper as advertisers shift focus from user acquisition to user engagement. The ad tech companies operating in the mobile apps space typically have a mobile only focus with their technologies being built around mobile app ads. Between the two channels, mobile apps have superior engagement metrics than mobile websites. Mobile analytics firms have published several studies on this topic backing this claim with data. A quick Google search will yield several hits on app vs web engagement metrics. The fact is that most users primarily consume content (Music, Games, Weather, Email, Entertainment, News and so on) on mobile apps. Further, the ad formats, ad delivery, and ad engagement (read click through rate) on mobile apps is superior to mobile web. This does not mean that mobile web inventory is irrelevant. It does have its place in the ad ecosystem. It is preferred for search, online shopping, entertainment, and retargeting. However, where mobile web falls short, mobile app inventory excels, i.e. in user engagement, ad formats, ad engagement and ultimately conversions. Despite better performance, large brands still haven’t truly adopted mobile apps as a channel in a big way yet. To assess some of the ways in which existing ad tech players / platforms can drive more brand dollars into in-app ads we need to look at the media buying process. Large media buys are primarily done through ad agencies that represent large corporations. More recently DSPs (demand side platforms) have burst onto the scene and savvy CMOs are  agencies to directly work with these DSPs. Here’s what matters most to these large buyers when they consider buying mobile app inventory:
  1. Scale: Large media buyers - the ones with the tens/hundreds of million dollars ad buys have specific campaign mandates (spend, reach, metrics). The revenue model of these intermediaries, more often than not, is directly linked to the total campaign spend wherein they receive a certain % of the total ad spend. Since their revenue is linked to spending the campaign budget within certain pre-defined performance metrics, these buyers want sellers that have the scale and quality inventory to absorb their spend. Currently, buying mobile in-app inventory at scale is challenging because a) it is sold across a fragmented and incestuous cluster of exchanges, supply side platforms, ad-networks, and direct publishers, and b) there is no consistency in working with a set of app to gain a set audience, because of rapidly changing usage popularity of most apps on App Store and Google Play rankings. Apart from Facebook, Twitter and a few other large publishers, no single ad tech company has the scale of quality mobile in-app inventory to absorb large budgets. And scale means massive user reach, across various of ad formats, across devices, and across geographies. Buyers have to cobble together inventory from several small to mid-size sellers to be able to spend a sizeable budget on in-app media buys, which, seems to be an inherently inefficient process. Any ad tech player that is able to consolidate direct inventory of premium app publishers at scale will undoubtedly attract big brand dollars.
  2. Audience Segments: One of the first steps in the media buying process is to define the target audience i.e. the most relevant end-users for the ad campaign. Agencies will typically have mandates to reach a certain audience segment, say for example,car enthusiasts, parents or teens, when they make their briefs. Mobile in-app inventory filtered to relevant demographic and interest attributes, packaged and sold in audience segments, is likely to attract large budgets. Additionally, some mobile app publishers sit on a treasure trove of first party user data such as age, gender, interests, app engagement and so on. Selling platforms that help publishers organize and share this data with buyers in a privacy-safe manner could complement the complex targeting algorithms implemented by Demand side platforms (DSPs), thereby channelizing more spend. In short, any selling platform that enhances targeting and builds segments by aggregating anonymized user data can prove to be valuable for large media buyers who want to reach audiences.
  3. Connecting Web and App users: One of the major limitations of advertising on mobile apps is the cookie. All the targeting and browsing information advertisers painstakingly collect on desktop users is completely useless in the in-app world. Anyone that is able to target users across desktops, mobile web and mobile apps will most definitely unlock spending on mobile apps. One of the reasons why Facebook has been successful at attracting large advertising budgets is because it can target users across devices using account login information. The folks at Google still haven’t solved the problem, but are working on bridging the gap. A Google spokesman confirmed the effort, "As an alternative to less transparent methods, we're doing some tests to help businesses run consistent ad campaigns across a device's mobile browser and mobile apps, using existing anonymous identifiers, while enabling people to use the established privacy controls on Android and iOS."
These are some of the challenges curtailing the mobile app ad spend, and no matter what happens, one thing is certain - the ad tech industry will evolve to address these challenges. Mobile advertising as a channel will be taken more seriously by CMOs, advertisers will get more mobile savvy., and fragmentation will decrease (see 2014 acquisitions). Eventually, only those companies that provide great value and a differentiated offering backed by robust technology will survive to scale or get acquired.