How In-App Programmatic is Changing the Mobile App Advertising Marketplace
The days when mobile ad networks and mediation platforms dominated the in-app advertising market are numbered. We can expect in-app programmatic and header bidding to level the playing field for all stakeholders, says, Adam Corrado, Director of Global Strategic Partnerships at Fyber.
Life is looking pretty good for the mobile ad networks and mediation platforms that were first to enter the mobile app monetization market. They’ve had the better part of a decade to establish relationships with advertisers and mobile app publishers, and ultimately dominate the in-app advertising market. Their sell-through rates are high and their margins impressive. And if that all wasn’t envious enough, the investment community is heaping their love on them. AppLovin is gearing up for an IPO it hopes will raise $1 billion for the company in 2020. Blackstone announced a $750 million investment Vungle. And Unity Technologies has raised $150 million in Series E funding in May.
It’s hard to argue with such success, and yet I can’t help sensing dark clouds on the horizon for these incumbents. Why?
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The Challenge With In-App Inventory Purchase Models Today
It’s not the established business model, but more the approach. These companies typically purchase mobile in-app inventory in one of two ways. Either they rely on mediator’s predictive models that leverage historical data to calculate a waterfall price, or they rely on price floors, which they compress in order to pay the lowest price possible. Interestingly, the latter has become the network’s preferred method of buying. What’s more, some networks will also sell guaranteed segments of inventory for static prices, a concept that may provide the publisher with some amount of revenue predictability, but that effectively directly impacts its bottom line, yielding no room for scalability or revenue maximizing. So while the arrangement is as great for advertisers as it is for incumbents, it’s hardly ideal for publishers who seek to earn the highest possible prices for their inventory.
We all know that functioning markets require an alignment of interests. If a participant isn’t deriving equal benefit from a market, it will seek greener pastures. But it’s difficult for the mobile app publisher to get the same level of benefit. Predictive pricing can’t accurately assess how much a user is worth right now for this buyer. And more importantly, manually managing price floors is time-consuming and inefficient, which means publishers can’t update their pricing strategies in anything close to real-time. The ultimate optimization involves penny intervals in pricing.
How In-App Programmatic Will Level the Playing Field for All Stakeholders
In-app programmatic, along with header bidding, is the great equalizer. When all buyers compete simultaneously for impressions, the publisher is able to sell inventory to the parties willing to pay the most for it, and buyers have a fair shot at acquiring the users they value most.
Publishers benefit from the dynamic nature of programmatic. There are times when the value of their inventory will spike because a buyer is looking for a specific user type, and is willing to pay premium prices for it. And because programmatic generates impression-level detail, publishers can glean a lot of insight as to who purchases their users, at what price, time of day and so on. There’s just a lot of compelling reasons for publishers to seek programmatic buyers.
Also Read: Mobile Marketing: Navigating the Modern Consumer
The In-App Advertising Ecosystem Is Changing: And so Are the Outcomes for Publishers and Buyers
For a long time, publishers didn’t have a lot of options, as these incumbents were the only game in town. That’s changing, now that new buyers – proficient with both programmatic and in-app know-how – are emerging, bringing big-brand budgets with them. As a result, we can certainly expect to see a market shift towards programmatic trading becoming the norm. With more options on the table, I anticipate publishers feeling empowered to take back control of their inventory to such an extent that we may see them start demanding programmatic buys for those who wish to access their inventory.
Of course, this could lead to a heap of trouble for the incumbents who haven’t made the investments into programmatic – technology, sales training, pricing models and otherwise. Market dominance is really a fragile balance, especially in an industry where innovation is fast and furious.
While the incumbents may be currently riding high, once the inevitable shift to programmatic happens, their current business practices will be completely obsolete. Those who succeed in breaking through this ceiling will not be those that rest on their laurels.
