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Mobile Ads Had a Strong Q4

Pubmatic released its quarterly mobile index and it was filled with good news for the mobile advertising industry. That good news was mostly for large, premium publishers but it’s good news nonetheless.

The retail and technology sectors had very strong performance within Q4, with the latter clocking a 285% increase in private marketplace (PMP) volume between the start of the quarter and Black Friday. Many of the increases did come in the form of PMP buying, which heavily favors very large sites and apps; you need a critical mass of inventory in order to create a private marketplace.

Large publishers and large exchanges have made a concerted effort over the past year to eliminate low quality inventory and Pubmatic cites that effort as one of the big factors driving PMP growth. Pubmatic still sees mobile CPMs that are higher than desktop CPMs, though both are growing at a strong 36% clip year over year.

One of the biggest takeaways was the strong performance they are seeing from Android apps. Android ads have traditionally under-performed other ad types, particularly iOS ads. Pubmatic found that Android ads had larger increases in both CPM price and inventory volume than any other ad type. Android ads are finally catching up.

In general, events with a large impact on the general population drive higher ad sales, particularly on exchanges. That being the case, we should all be in for a very good 2016. The industry is already gearing up for normal first quarter events like the Super Bowl, March Madness and holidays like Valentine’s Day.

In addition to annual events, this year will have the summer Olympics and a presidential election that will likely contain more ad spending than any other in history. That’s debatably bad news for the average American but great news for those in the ad industry. For app developers specifically, the rise of Android ads and the strong mobile CPMs are fantastic news and 2016 will be filled with opportunities for developers monetizing with ads.

Header Bidding for Apps

Our kids are young and rough on their clothes, so my wife often visits what are called “tag sales.” It’s one of those things that I didn’t realize existed prior to becoming a parent. A mother’s club usually organizes a tag sale and it’s basically a large yard sale where everything is tagged with a color-coded price tag.

Because the inventory is sort of random and inherently limited, you’re far better off arriving early. So tag sales often end up looking like a Walmart on Black Friday, with people lined up early in the morning waiting to get in. If you volunteer to help with the sale you can get in earlier and there are even hierarchies within the volunteers that allow access earlier yet. All this to get the most desirable used clothes.

If you’ve been running ads for any length of time, you might have noticed that the competition for your inventory is a lot like that tag sale. There are many entities that want to take the first look at what you have to offer and buy it for themselves before anyone else takes a look. The players are always jockeying for position, in this case creating new technologies that allow them to see the ad requests a few milliseconds before everyone else.

In the web environment, this has been going on for a long time. When Google bought DoubleClick, they took over one of the dominant ad servers and got access to a lot of publisher inventory at the very first step. They then created their ad exchange and gave it first look at all that inventory.

That worked very well for Google for quite some time. In the past couple years, a technology called header bidding has been gaining steam. Header bidding was created specifically to deprive Google of that unfair advantage in looking at all the inventory first. Bids from competing ad companies can be run in an auction that is stuffed into the header of a web page and then lodged as campaigns within the ad server.

This allows companies other than Google to participate at the earliest stage, increasing the bid density and producing more revenue due to the increased competition. Header bidding has been a win for publishers and competitors of Google, but the increased latency required to run that additional auction is yet another reason why users hate ads.

This situation also exists in the mobile app environment. There are ad servers and SSPs with dominant market positions like MoPub who use their optimization layer to give their own exchange the first look at an app’s ad inventory. And there are a bunch of other ad companies that chafe about that to no end.

One of the first header bidding technologies for apps was just released this week when AppNexus introduced their PriceCheck (http://www.prnewswire.com/news-releases/appnexus-announces-launch-of-pricecheck-header-bidding-for-mobile-apps-300209082.html) product. The mobile app world has an additional challenge for ad companies that want you to use their products, which is that they usually require you to install an SDK. It used to be easy to get app developers to throw in another SDK, but those days are long gone. Every SDK comes with potential problems so developers have become extremely selective about which ones to use.

So AppNexus killed two birds with one stone by making PriceCheck available with just a few lines of code. It’s very light and pre-caches ads to contribute “virtually zero latency” to your app’s user experience. That’s a claim that can’t be made about header bidding in the web world.

Other companies will no doubt follow AppNexus’ lead with very similar solutions in the near future. And as long as the latency remains very low and the additions don’t bloat your apps, I don’t see any reason not to participate. My philosophy is that it’s beneficial to be plugged into as many unique demand sources as possible. AppNexus is a huge exchange and no doubt has some demand that is unduplicated by the MoPub exchange and other prominent app inventory exchanges. Header bidding for apps could be a relatively easy way to expose your app to new demand sources.

MoPub Explains Beginner’s Luck in Mobile Ads

If you’ve been considering putting ads in your app and haven’t yet pulled the trigger, MoPub gives you some good reasons to do so. MoPub is Twitter’s huge mobile ad exchange, composed mostly of in-app inventory. Their recent Mobile Programmatic Trends Report had some interesting tidbits for new publishers.

MoPub found that brand new inventory on their exchange in the third quarter got far better results than is typical for older apps. New apps received 186% higher click-through rates, which led to 67% higher eCPMs than older apps received. If you haven’t launched ads in your app yet, then you missed the holiday rush. That’s a shame because Q4 is huge for publishers just like it is for retailers.

However, there are other upcoming events that will help you cash in. Big sports events tend to drive a lot of advertiser spend on in-app advertising and one of the biggest is the Super Bowl.

If you can get your ads in place now, you’ll likely be rewarded during the big game with high fill rates and eCPMs, particularly if you have an app with ad space that is brand new to the exchange. And if you miss that, Valentine’s Day and March Madness are other Q1 events that can also drive ad spending.

You can get a similar effect in terms of increased performance with new ad units, even if the app isn’t new to the exchange. Basically, whenever ads are located in a new spot, the click-through rate is initially higher and you can cash in on that.

That’s particularly true of ads on an exchange, because the buyers on an exchange are very sensitive to click-through rate. It’s the easiest success metric to track so it carries a lot of weight (too much, IMO) on the exchange.

Mobile Advertising is Officially Soaring

Digital advertising in general continues to break records, with more and more ad dollars pouring into digital. Some are calling this the golden age of digital advertising as it is set to surpass even television ad spending by next year. For the better part of the past decade, most of that money has been spent on desktop ads, though everyone has long predicted that mobile would come into its own.

That has finally happened, and I'd say it took much longer to arrive but happened much quicker ​than anyone expected. Facebook led the charge into mobile and now it is their main business, a shift that you can expect to see for publishers across the board. 

In fact, I'd say that mobile has become so successful so quickly that "mobile" will soon be a useless distinction. It will go from being a fringe case to being so dominant it's not worth mentioning the device. ​The sometimes abusive level of advertising seen on desktop sites just isn't really possible on a screen the size of a smartphone's, and it's a more personal device as well. Those factors mean a hard transition for desktop publishers but also a lot of opportunity to show ads that are truly better. And they are. 

Pubmatic is one of the largest SSP/exchanges around and they recently published their quarterly mobile ad index. ​They found double digit--even triple digit-- year-over-year increases in mobile CPMs. CPMs for mobile-optimized inventory increased by 48% whereas non-mobile-optimized inventory fell by 26%. It shows the value of mobile, but there's really no excuse these days for a publisher not to have a mobile-optimized site so those sites are getting what they deserve. 

Some of the biggest gains in CPMs were seen on in-app inventory, including a 133% year-over-year increase for iOS app inventory. Native apps haven't had any ad blocker problems thus far and benefit substantially from the advertising IDs that can be passed to ad networks and exchanges.

The other big factor cited by Pubmatic was ​private marketplace (PMP) inventory, which had CPMs that were 5-6 times higher than non-PMP inventory. That sounds fantastic but it generally only applies to the largest, most premium of publishers and it is fraught with all kinds of frustrations that the old insertion order method didn't experience from a publisher's point of view. That's a soapbox I'll stay off for now, but I'll plan a rant for later...