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In-App Advertising: Defining the Market and
Its Unique Dynamics
December 2015
I Introduction
The public is consuming media like never before and their media habits, activities, and preferences
change rapidly. Today’s consumer is increasingly mobile-first, spending more time in-app, watching a
significant amount of digital video, and more open to viewing contextually relevant advertising,
especially in exchange for content and access.
Given an abundance of media seeking to capitalize on these changing dynamics and attract consumer
attention, marketers and publishers must adapt and evolve their media strategies to elevate their
advertising message and engage consumers. This is particularly true for mobile. As consumers spend
more time on mobile devices, marketers and advertisers seek to reach their ideal customers where
they reside. In doing so advertisers and publishers face a number of new challenges:



Desktop methods and formats for delivering content do not translate directly to mobile
Few marketers, publishers, agencies, and providers have cracked the code on how to deliver datadriven targeted solutions on mobile
While not exclusive to mobile, marketers and publishers are hurt by corruption and ad fraud
As solution providers recognize these challenges, pain points are increasingly being mitigated through
the development of ad formats that capitalize on changes in consumer media consumption as well as
advertiser and publisher demand. One format is in-app advertising. As app developers seek to
monetize their apps and consumers increasingly embrace an advertising-for-access value exchange,
marketers and publishers are turning to in-app advertising. The highly effective forms of in-app
advertising, such as reward based or opt-in video, go beyond traditional banners and desktop display
formats; they are highly engaging, aligned to the changing consumption habits of today’s consumer,
and uniquely positioned to combat ad fraud.
The leading in-app advertising formats can empower advertisers, publishers, and app developers to
meet their most significant objectives:



Advertisers can deliver content, capture audience data, generate insights, and target consumers
with new content that provokes engagement and supports branding, awareness, acquisition, and
loyalty
Publishers can drive traffic, acquire consumers, and get them actively engaged with digital content
App developers can monetize their applications with high value CPMs and quality brands that are
aligned to the app and user
The increasing use of in-app formats and solutions to distribute content sits at the intersection of
critical trends related to consumer content consumption and how developers create experiences that
engage app users. It is the synergy of interests between these stakeholder groups and a focus on
content distribution, engagement, and performance that has created a marketplace for delivery of
content in-app. This makes the leading formats a highly attractive medium for advertisers, publishers,
and app developers.
This paper seeks to define the in-app advertising market, identify the leading formats, use cases and
marketer objectives, provide insight into the macro-level trends impacting the rise of in-app advertising
and finally, offer predictions on the in-app advertising market’s growth and evolution.
II
Macro
Trends are
Making
In-App
Advertising
Increasingly
Important
84%
of smartphone
users say
viewing an ad in
exchange for
rewards is
acceptable.
A number of trends impacting the marketing landscape make mobile in-app advertising an important
format for advertisers and publishers to consider. These trends can be divided into three categories:
consumer consumption, format, and the marketing ecosystem at large.
Consumer Consumption Trend: Increasing Use of Mobile and Apps
Mobile devices now account for 51% of consumers’ total time spent with digital media, up from 24
minutes in 2010.1 With the growth in mobile usage has come increased time spent engaging with
apps: smartphone users spend approximately 88% of their phone time in-app as opposed to just
12% in browser.2 Increasingly, consumers are looking for a non-monetary value exchange to keep
apps free and are becoming okay with in-app advertising to subsidize the content they are seeing.
While 80MM US mobile users will pay to download an app this year, that is predicted to decline
over the next four years.3 Alternatively 84% of smartphone users say viewing an ad in exchange for
rewards is acceptable.4
Format Trend: Increasing Use of Short and Long-Form Content, Especially
Video
Content is an increasingly large priority for marketers—77% of marketers are developing content to
fuel their marketing efforts, 70% are creating more than they did last year, and 73% plan to
increase content creation budget. Best-in-class content is continuously refreshed, able to go crossdevice, and increasingly video-focused.5 Total digital video spending is expected to reach $12.8BB
by 2018, of which almost 50% is mobile.6 Video is a top tactic to monetize publishers’ sites, with
nearly 50% of publishers using video on their properties as a monetization method.7
Ecosystem Trend: Increasing Corruption from Bad Actors
Ad fraud is a top concern for both advertisers and publishers—advertisers do not want to be
charged for fraudulent activity, and publishers do not want bot traffic. An estimated $6.3BB is lost
worldwide due to ad fraud.8 While ad fraud impacts exchange based buys due to disconnects
between buyers and sellers, high CPM ad formats (such as video) tend to see high levels of fraud as
well (~23% of video ads).9 Mitigating exposure to fraud risk is a high priority for marketers seeking
to engage audiences and publishers looking to increase traffic.
Ecosystem Trend: Rise of Data-Driven Insights and Programmatic Buying
and Media Placement
Given intense competition for consumer attention across verticals in a crowded media landscape
(and fragmentation of what was once a “mass” consumer base into smaller audience segments as
defined by their demographics and personal interests), marketers are aiming to implement
consumer-focused marketing. Rapidly growing availability of data on consumer activities and
preferences is driving a secular shift in marketer emphasis away from generic “mass” marketing and
toward programs that are grounded in deeper audience segmentation with targeted offers,
messages, and content.
Sources: 1) eMarketer (2015), 2) ComScore (2014), 3) Forrester (2014), 4) eMarketer (2015), 5) ion
interactive/CMO Council (2014), 6) eMarketer (2014), 7) Brightroll (2015), 8) Whiteops (2014),
9) eMarketer (2015)
III
Aligning
on Mobile
In-App
Advertising
Format
Definitions
and Use Case
Activation
Given the rise of consumer app consumption, the flexibility of apps to display various forms of content,
the ability to limit fraud with potential placement through an SDK and offer highly engaged audience
through consumer self-selection (i.e. download), advertisers, publishers, and app developers have begun
looking to distribute advertising in-app as it is a more effective way to engage consumers. It responds to
macro-level trends and begins to tackle the imperatives faced by core stakeholders: advertisers and
their agencies, publishers, and app developers.
Defining Mobile In-App Advertising
Mobile display (static or video) advertising which appears within an app environment and is
built in through the app’s SDK, can be transacted on a CPM, CPE, CPV, or CPCV basis
In-app banner: Ads that appear on the top or bottom of the app screen and
prompt users to install other apps, visit websites, or view products. Ads
dynamically resize to fit the screen and rotate with the device.
Native: Digital content that blends seamlessly within an app environment and is
coherent with other media in-app; ads are popular within social or news streams.
Identifying the
Formats
Interstitials (auto-play video, static display): Full screen ads that appear in an app at
break points or transitions (e.g., in between game levels, at the conclusion of a
video, etc.) Similar to in-app banner, ads prompt users to install other apps, visit
websites or view products. Format often requires users to close the ad; videos can
be skipped after a certain amount of time.
Opt-in, reward based video content: Users are incentivized within the app
environment to view video advertising (e.g., earn more coins, extra lives, more
minutes, etc.). If users opt in they must view the entire video to receive the reward.
Opt-in video is often loaded through app SDK to reduce loading time. In some
cases, prior to watching a rewards based video, users are asked a targeting
question to tailor their video experience.
Understanding
the Use Cases
IVIdentifying,
Defining, and
Analyzing
Demand
Trends from
Industry
Stakeholders
Advertisers and Their Agencies
Advertisers and their agencies are directly impacted by the macro trends detailed above
but also have a unique set of secular trends that directly impact their advertising efforts.
Content marketing
Developing short and long form content, both text and video, is becoming high
priority for marketers as they seek to engage audiences; additionally,
advertisers are focusing on creating quality content due to its importance in
driving SEO; search engine algorithms, notably Google, are punishing “content
mills” that focus on quantity over quality.
Getting around the ad block
With the rise of mobile ad blockers, advertisers are turning to opt-in, reward
based methods to effectively distribute marketing content that reaches
consumers.
Multichannel performance
As marketers and their agencies are asked to do more with less, the ability to
efficiently and effectively meet campaign KPIs becomes critical in selecting
partners and solutions; mobile remains a pain point so those providers and
formats that can effectively activate the mobile channel are even more
valuable.
Data-driven and becoming customer-centric
The growing availability of data on consumers and their behaviors has armed
marketers with a deeper understanding of who the consumer is and how
consumer relationships evolve across their respective lifecycles. While
marketers have a mandate to activate their data, many struggle to effectively
do so.
“Video is highly attractive to my client as it extends their reach beyond what they do on
TV…it engages people with messages and gives more control over actual views.” -Agency for
national telecom advertiser
“We’re trying to get all of our providers and clients to focus on multi-channel—it has to be a
conscious effort to get people thinking that way as far as budgeting and planning. With top
providers, it’s the experience they’re creating more seamlessly across screens that will help us
break that barrier.” -Digital strategist for pharmaceutical brands
“We have increased spend on native from test last year to being an expectation in the media
plan, so it gets a significant portion of budget.” -Agency for global oil and gas consumer brand
Publishers
Similar to advertisers and agencies, publishers are impacted by a number of trends that
represent both challenges and opportunities.
Quality traffic and viewability
Publishers aim to drive the majority of their traffic organically. However, when
they need to purchase additional traffic, publishers want to ensure the audience
is real and actually viewing content; bad actors have made it more difficult to
consistently ensure high quality traffic.
Striving for high levels of engagement
Organic traffic drives high engagement; however, purchased audiences do not
always drive the same results; publishers are not only looking to deliver
audience at scale but also high levels of engagement, not just page views.
Assistance with activating mobile
Publishers realize the value of mobile for their audience acquisition efforts,
though many struggle with execution.
Data-driven
Similar to marketers/advertisers, publishers are looking to activate the
immense amount of audience data to drive additional, highly qualified traffic
that will actively engage with site content.
“A big focus from advertisers and publishers is quality traffic and ad viewability. As long as
providers are able to deliver quality traffic, that’s what we’re looking for and need help with at
least over the next 4-6 months on desktop and mobile.” -Audience marketing manager for online
lifestyle publications
“Customer acquisition is a huge portion of my job…99% of the time we manage our own traffic
well, but for that 1% we look to providers for a targeted, reliable audience for content.”
-Audience acquisition manager for top-tier publisher
App Developers
An overlooked, but critically important, stakeholder group in the activation of mobile
marketing is the app developers. While the advertisers create the content, the design,
look, feel, and ability to drive engagement is the developer’s responsibility. The
developer’s ultimate goal is to monetize their app, and they seek out formats, solutions
,and providers that can help them achieve a number of goals. These include:
•
•
•
•
•
Easy integration of formats
High value CPMs
Well-known brands that align with app audience
Legitimate audience and deep supply—decreasing fraudulent audience
Transparency into audience
V Evaluating
Mobile
In-App
Advertising as
a Means for
Content
Distribution
In-app advertising sits at the intersection of major trends impacting the digital marketing
landscape and provides a solution that can effectively target and distribute content on mobile.
The format best suited to activate the broadest range of use cases on behalf of stakeholders
and engage consumers is opt-in, reward based video. While more exclusively priced than in-app
banner or other native formats, it is significantly more effective at putting content directly in
front of consumers while eliminating concerns around fraud. Content is optimally embedded
through the SDK and wholly immersive with limited interference or ability to exit, decreasing
load times and increasing engagement and view through.
Utilizing a range of available data points such as device ID, in-app behavior, and responses to
opt-in questions, reward based video can be highly targeted. Consumers are actively viewing
video and content that is highly relevant to them, whether in support of audience acquisition,
retention, or branding efforts. As more data becomes available on users, the targeting becomes
more effective, allowing for deeper user engagement.
As advertisers seek to utilize data to dynamically target and engage consumers,
publishers look for unique ways to drive traffic to their digital properties, and
developers seek to monetize mobile apps, many have turned to (and will continue
to turn to) mobile in-app formats to distribute content and achieve strategic
objectives.
“Targeting is very important to us and we were happily surprised to find that providers have firstparty targeting; we didn’t think with such good inventory they could layer on targeting.” –Agency
for national telecom advertiser
“We had outlined a test budget for the in-app video offering. We tested it, got good results, so we
kept using them and now have incrementally put more funds to video.” –Agency for prescription
pharmaceutical brand
“Some partners are video only, other partners offer other native content alongside video content—
that provides differentiation—but there’s not a lot of platforms that asks users a targeted
question before the video plays. Opt-in video is something that’s special.” –Agency for global oil
and gas consumer brand
“The opt-in video model is special…consumers are becoming more savvy, and they want
something they can opt-in into, something that ads value for them.” –Agency for global oil and gas
consumer brand
“Targeting performance is consistent and in the content areas we push, we do see people actually go
to the next level. That tells me they are engaged in the content beyond just generating a page
view.” -Audience acquisition manager for top-tier publisher
“A lot has changed quickly over the past couple of years as demand is shifting quickly to mobile and
especially mobile apps. We need to adjust how we work with partners on mobile because that is
where demand is and the scale.” -VP of ad sales for mobile social network
“Consumers notice a difference but don’t know why with opt-in video. It feels friendlier to them.
We only buy opt-in and don’t plan to buy on a straight CPM.” -Developer of multi-platform games
VI Predicting
the Growth
and
Evolution of
In-App
Advertising
Given the macro-level trends that impact individual stakeholder groups, the in-app advertising
format is primed for growth. We believe the next phase of growth for the format—and
subsequently the providers that support it—will be marked by a number of key elements:
 In-app solutions will become increasingly reward focused—84% of consumers believe that
rewards based, opt-in ads are very acceptable or somewhat acceptable in a mobile app.
Moreover, users are more likely to download content and have increased respect for brands
through opt-in ads. Meanwhile, 50% of surveyed respondents find full-screen video ads very
unacceptable and disruptive.10
 In-app solutions will develop more advanced targeting based on providers’ ability to collect
first party insights; this is especially true for those with opt-in reward based solutions as the
provider is using download data to help initial targeting, and then constantly refining
targeting with first-party data gathered through survey questions.
66%
of surveyed
smartphone
owners who said
their preference
for viewing inapp advertising
is reward based
as rewards and
the ads
themselves are
more relevant to
their interests
VII Conclusion
 As the market scales, there is potential for increased brand budget to flow into mobile
specific formats, alongside performance based budget.
 There will be a shift away from programmatic buying of pre-roll video content due to limited
engagement and fraud.
 Video based pricing models will evolve—CPE, CPCV—as agencies train their clients beyond
the CPM.
 Marketers will look to solution providers that have robust analytics and reporting and can
accurately determine in-app ROI.
A confluence of trends in the advertising and marketing ecosystem—including native, content,
video, mobile, and fraud mitigation—combined with the unique needs of advertisers, publishers
and app developers has led to the creation of a distinctly mobile marketing format that can
effectively target and engage consumers. As marketers, advertisers, and publishers continue to
search for methods of effectively reaching and engaging consumers, the development of mobile
in-app solutions devoted to content distribution (notably video) and the use of the providers that
power its placement will continue to rise.
Source: 10) IPG Media Lab (2015)
About
Winterberry
Group
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