Nov 30, 2017 by AirpushMobile advertising can be a bit of a minefield. Getting your ads out there is one thing, but making sure they’re where y...
In 2008, Steve Jobs forever disrupted the way people find and download mobile apps. He leveraged the same music distribution mechanism made famous by the iTunes Store to create the iTunes App Store, forever changing how we consume mobile content. Prior to the iTunes App Store, carriers held all the power of what apps would be installed on consumers’ phones by demanding that manufacturers deliver devices with the apps they wanted installed. If an app developer wanted to distribute an app, they previously had to go to great lengths to get a carrier to specify to the mobile handset manufacturer to include their app on the mobile device. Working with Apple and Google (who quickly followed Apple’s lead with the launch of their Android Market–now Google Play) was a noticeable improvement for app developers in the ease of gaining distribution of their apps than working with carriers, but nothing like the gains made by Apple and Google in controlling how apps were distributed.
In early 2009 I started hearing the first rumblings of “overnight app success stories” or “app millionaires”, savvy programmers who’d quit their day jobs, published an app on the iTunes app store, and started to rake it in as iPhone users hungry for apps to show off or play on their new iPhones, downloaded the few available apps en masse. There were tens of thousands of apps available in the iTunes App Store at that time and these early success stories caused tens of thousands of additional developers to start making and publishing apps of their own in search of similar instant fortune. Of course only the few, absolute best apps ever earned six figures in revenue, let alone millions, and app consumers quickly shied away from paying to download apps in favor of free ad-supported apps or the so-called freemium model, where an app is free to try, but additional features must be unlocked through in app payment.
By modeling the first App Store after the iTunes Music store, apps quickly became a hits driven business where apps like songs needed to climb to the “top of the charts” to generate more downloads. But unlike music that has so many methods of promotion including the radio, satellite radio, movie soundtracks, music videos, Rolling Stone magazine, etc., the category charts of top apps were both the means of distribution as well as the top promotional method for apps. What’s more other than the few developers who were successful in achieving top spots on the charts and Apple and Google, very few people understood the value of a hit app in every category of the app stores. Here was a booming very imperfect market with little information flow and those with the best information, Apple and Google, guarding that information very tightly.
Furthermore, the tools that Google and Apple offered to developers to make sense of the developers’ app installs and revenue were greatly lacking for anyone running an app business where small movements up and down the various charts in the matrix of multiple international app stores and categories within each app store, meant real changes to the amount of revenue a developer could expect to receive. Enter App Annie and Distimo who offered better dashboards to developers to track their business and in exchange got an inside view of enough companies’ data to start to unlock the secrets of the dollars and cents behind the app stores that Apple and Google held so close to the chest. While they might not know how much every productivity app was making, like Google and Apple did, if Distimo or App Annie had enough points on the curve of #1 to #50 app they could start to plot the whole curve and the more points they had the more accurately they could understand the value of each position on each category chart. App Annie built a business around selling this market intelligence to the serious larger development shops as well as VCs and mobile ad networks.
With AppAnnie acquiring Distimo, the combined entity now has many more points to plot more accurate curves of the value of the chart positions within each category in every app store. Their data still pales in comparison to what Apple and Google (and Microsoft) know about their respective app stores, but it is the best data available to anyone willing to pay for an inside look into the market in order to make important decisions about what app to build or fund next or whether they should reposition an existing app in a different category. These were really the only two players of any scale within this space and while their combination yields better data and should yield better products, I would imagine it would also lead to higher pricing since there is no longer any competition.
I’m also left somewhat perplexed as to why Nielsen or Comscore, or one of the other larger audience measurement companies, didn’t step up and buy Distimo, instead of allowing the company to sell to their leading competitor AppAnnie. With consumers spending more time on mobile, the app store data that AppAnnie controls is only going to go up over time and by the time one of the consumer audience measurement companies buys them they may wish they bought Distimo at a fraction of the future price when they had the chance.
Before delving into mobile RTB itself, let’s take a step back and define some of the alphabet soup of specialized acronyms and terms associated with this space and briefly discuss what’s led mobile RTB to become the white hot growth area within digital advertising.
Take the example of a sports brand looking to advertise to male sports enthusiasts who like to be on the cutting edge with their sports footwear purchases. In the past advertisers and their agencies would define an audience they were looking to reach, for instance, Male, 24-36, sports enthusiasts living in urban areas, with college educations, and a household income of $50,000 or more. Next a media budget would be allocated and a media planner would develop a media plan by talking to a large number of media outlets: television stations, radio stations, magazine publishers, billboard companies, online web sites, and more recently mobile app publishers or mobile ad networks, etc. The media planner would need to understand which media outlets were targeted to their desired audience as well as the cost, usually in Cost per Mille (CPM- cost per thousand impressions), of taking out advertising space in these media outlets. The media planner would divide up the budget for the media plan among the media outlets they thought would be most successful in reaching the desired audience and sign insertion orders (IOs) to buy media from the media outlets. Hopefully from the brief outline of this process in the paragraph above, it’s become clear that this is an incredibly inefficient process.
Over the past 8 years media buyers have looked to become more efficient, at least with their purchases of online media through RTB. Web site publishers now “broadcast” the availability of eyeballs (impressions) looking at their web site in real time and conduct auctions on exchanges (not dissimilar from stock exchanges such as the NYSE) for media buyers to buy this media in real time via cloud-based software that is programmed to “listen” for these impressions (Demand Side Platforms or “DSPs”). In some cases the publisher will identify the name of the web site associated with the impression, such as Sports Illustrated or ESPN (in our example above), but in other cases they will not identify the name of the web site and instead append information about the audience looking at their web site in the bid request that is sent to auction on the exchange. Trading desks within advertising agencies program their DSPs to “listen” for desired impressions and make decisions in real time based on their media budgets at any given time and metrics about how many conversion events such as clicks on a web site banner ad or online purchases are taking place as a result of the auctions they are winning.
With the huge growth in adoption of smartphones and tablets over the past few years, there’s been an enormous shift in how digital content is viewed. Consumers who previously performed searches and browsed the web on their PCs are now doing 20-50% of this activity on their mobile phones or tablets, even when their PCs are close by! Tablets are now outselling PCs. Because of this shift, web site publishers are seeing declines in their online advertising and scrambling to sell more mobile and tablet advertising to make up for their losses from desktop web advertising revenue. Even giant Google, announced as part of their earnings announcement earlier this month, that they are susceptible to this trend. Meanwhile advertisers who’ve observed the same trend are eager to reach their target audience on their smartphone or tablet screens. This creates the perfect storm for Mobile RTB.
Some of the companies who accurately predicted this shift in content viewing and put themselves in a great place to be at the eye of the storm with their mobile exchanges include AppNexus, Inneractive, Mobclix, MoPub, Nexage, Pubmatic, Rubicon Project, Samsung, and Smaato. They did so by aggregating a large number of mobile app and mobile web site publishers and making their ad impressions available for RTB on their mobile exchanges. Recently Millennial Media and Flurry, and most recently Mojiva, have announced that they will soon be launching mobile exchanges of their own. Here at Airpush we’re also working in partnership with OpenX to make our mobile ad inventory available programmatically via our own private exchange we expect to launch in the Fall.
On July 1st at Airpush we launched AirDSP which allows media buyers to use the user interface on our web site to target very specific audiences on their mobile devices both through the Airpush network as well as the leading mobile exchanges. This past February Millennial Media purchased mobile DSP, Meta Resolver, and two weeks ago, online DSP X+1 purchased the mobile specialist agency/DSP, WDA, in order to accelerate their ability to execute programmatic buys on mobile. Additional consolidation by online DSPs buying up successful mobile DSPs is likely. Mobile RTB is sure to remain a rapidly growing area in the next few years and we look forward to discussing future industry trends as well as our own experiences and new products on this blog in the near future.
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