Internet Economics Homework #4

Advertising in Mobile Apps

And the Future of Mobile Advertising

Michael Kruk 9104120120 2012/11

Table of Contents
1. Introduction........................................................................................................................ 3 2. Mobile Advertising Solutions .......................................................................................... 4 2.1 2.2 2.3 Google AdMob ................................................................................................................ 4 AirPush ............................................................................................................................ 5 Individualized Solutions .................................................................................................. 7

3. Future of Mobile Ads - 2020 ........................................................................................... 8 4. Conclusion ......................................................................................................................... 9

Michael Kruk

1. Introduction
Since Smartphones and Tablets became a mainstream product used by millions of people for their daily life, marketers became aware of the potential marketing benefits and the fact that the mobile advertising sector will become a major part of the multichannel marketing strategies. As of December 2010, 302.9 million Americans reported that they own a mobile device, making the U.S. wireless penetration 96 percent, according to CTIA. Of these mobile subscribers, approximately 63.2 million own a smartphone. About 35 percent of smartphone users access the mobile Internet from their device, illustrating the reach that marketers can achieve with a targeted mobile advertising campaign. As the figures are from 2010, today the number of smartphone users will be significantly higher. Googles Android and Apples iPhone have the highest smartphone market share in the United States and the users of these devices not only browse the mobile Web, but they also use apps. With more than 700,000 mobile apps in the Apple App Store and 550,000 in Android Market, the apps market is still exploding. The market for mobile apps will continue to grow as the number of downloads is expected to increase from 10.9 billion worldwide in 2010 to 76.9 billion in 2014, according to an International Data Corporation forecast. Furthermore, new studies show that in-app advertising will hit $2.4 billion by the end of the year 2012. And by 2015 that figure will rise up to $7.1 billion. But the biggest markets are outside the United States, especially in Asia. Many Asian countries have big mobile advertising markets because there are more smartphone and mobile device users than in the US. For example, Asia has 763 million mobile Internet users, compared to 159 million in the U.S. and 117 million in Europe. Those figures demonstrate the big importance and potential of mobile advertising.

Michael Kruk

2. Mobile Advertising Solutions

"Mobile advertising gives marketers the chance to reach consumers on a more personal level than any other type of advertising" Due to the ongoing boom of smartphones, tablets and mobile apps, more and more companies realize the potentials for mobile advertising. Also there is a rising number of companies providing advertising solutions and trying to develop new ways of reaching customers on their mobile devices. In this paper the focus is set on the comparison of three different ways of advertising for mobile devices: Google AdMob AirPush Individualized Solutions

2.1

Google AdMob

Admob is a mobile advertising platform founded in 2006, offering advertising solution to Android, iOS, webOS, Flash Lite, Windows Phone 7 and all standard mobile web browser. Google has acquired Admob on November 2009 and today Admob is the worlds largest mobile advertising platform serving more than 700 billion worth of impression since its launch. AdMob mainly focuses on banner ads that can be added to any mobile app or mobile website. Once clicked upon, the banner ad will lead the user to a website where the advertised product or service can be ordered or purchased. App developers can earn money by placing those banners into their apps. The more users click on the banner, the more money the developer can earn. There are basically two different models of how the developer can earn money via ads: CPM: Cost Per Thousand impressions: advertiser pays when a user sees an ad. CPA: Cost Per Action: advertiser pays when a user completes a specific action.
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The following picture illustrates the look of those banner ads:

Google purchased AdMob for a very obvious reason: After the purchase its possible for Google to expand into different areas of mobile advertising and strengthen its position as a leading global online advertiser. The following illustration shows the advertising focuses of Google and AdMob.

2.2

AirPush

Airpush is the second largest ad network for Android mobile devices and it provides many different solutions for mobile ads. Those solutions will be explained in the following part.
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Push Ads A Push Ad is an ad sent to the notification tray of Android devices, rather than inside of an app. Publishers can control how often ads are sent and to which users. This solution generates a very high click-through-rate, but more and more users dont appreciate having advertising in their notification tray. Too intensive advertising in the notification bar might make the users angry and lead them to delete the app that causes those ads. Smart Wall The SmartWall dynamically optimizes between multiple sub-formats including AppWall, OfferWall, Dialog Ads, Video Ads or Rich Media. Publishers decide when this ad unit is triggered, such as upon app launch, app exit, and in natural breaks of the app session (for example in between game levels). This way of advertising very common for mobile games and most users dont mind this kind of non-aggressive advertising method. Icons Ad This format places a shortcut on the home screen of Android devices which links users to third party content such as free apps and deals. This advertising is relatively rare as most users dont want apps to put shortcut icons on their devices.

Because of its innovative advertising method Airpush grew to the second biggest advertising network and it provides the highest earning-opportunity for developers of all mobile ad networks, as the click-through-rates are much higher as in Googles simple AdMob banners. In July 2012 Airpush paid the developers using its ads over $2 million of ad revenue. The relatively young company is still growing dramatically and will surely be a threat to Googles AdMob.

Michael Kruk

2.3

Individualized Solutions

To be more effective with its mobile marketing campaign, more and more companies are developing their own mobile ads instead of paying ad networks to do so. Experts believe that rich media ads within apps perform much better than standard display ads. Banner ads are often not even noticed and seem to be even annoying to many users. Therefore mobile ads should offer more utility than the typical banner ad and behave like small app themselves. A good example of this kind of entertaining and interactive ad is a mobile advertisement of the Westing Hotels & Resorts, as shown in the following picture:

The rich media ad for Westin for example invites users to tap here to warm up. After that, virtual frost covers the iPhone screen and can be wiped away to reveal pictures of eight Westin Hotels & Resorts in warm climates. The creation of app-like mobile apps may be more expensive than simple banner ads, but the chance is higher that customers will be more attracted to this kind of entertaining and interesting ads and that users will remember those ads for a longer time.

Michael Kruk

3. Future of Mobile Ads - 2020

This chapter will focus on a study that analyzed the development of mobile advertising and made conclusions on how it will develop within the next 10 years until 2020. New technologies, more interconnected devices and faster wireless data connections will provide many new opportunities for advertisers and change the way of how companies will try to reach their customers. According to studies, mobile advertising in 2020 will be mobile directed advertising which is selected and chosen by the individuals themselves. Individuals and not consumers; consumers remain a group or type of person which conforms to a predefined segment by the brands. Individuals, on the other hand, are fully independent, they may let you know them or part of them but they will never let a brand own them. It will no longer be the advertisers and media agencies deciding which consumer segment to target via which channels based on their demographic and usage profiles. Instead we will see individuals identifying brands which match their own needs or interests and granting them permission to reach them. One of many possible examples is a digital billboard advertisement. Instead of the billboard changing as an individual walks past, a personalized, relevant advertisement will be sent directly to their mobile device, as shown on the following picture.

The car illustrated on the billboard will have different meanings depending on the individuals preferences. For one it could mean purchase, another it could be rental
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or finally it may mean accessorize. This fully depends on the user and his or her own preferences and interests. According to studies, successful brands in future will be those which collaborate with individuals, include them in communities and ratings of their products or services. Converting advertisements into purchases will be driven more the ratings and recommendations within those communities than the power of an advertising campaign. Furthermore, the connections between different devices can also lead to new and more effective marketing techniques, as for example shown in the following picture:

While watching a movie on the TV advertising for items appearing in the movie can be send to the smartphone of the person watching. This marketing technique could increase the purchase conversion rate.

4. Conclusion
The market potential for mobile apps grows every year as more and more people use smartphones and tablets daily. Especially Asia is one of the biggest current and future markets for mobile ads, as most smartphones are being used there. Google was one of the first big companies in the mobile ad business, as the bought AdMob, but their concept of simple banner ads might lose its efficiency as other
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companies like Airpush come up with new and innovative ideas of bringing advertising to their users. As we are currently still at the beginning of the development of mobile ads, the following implications can be found for marketers, concerning the future development of mobile ads:
Implications for Marketers:

Mobile is going to be a significant media channel. Early adopters will benefit from low cost experimentation and first mover advantage. Mobile advertising is not simply an extension of other media plans - it requires a different mindset, a distinct process and new metrics. New forms or collaboration intra-company and across company are both possible and necessary in the emerging mobile space. The cost of entry is currently low.

It is hard to predict how mobile advertising will develop in future, but it can be said seen as certain that mobile ads will become much more individualized and a bigger part of our daily lives.

Michael Kruk

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