In-app advertising — or “appvertising” — has quickly matured from a novel new marketing platform into a bona fide strategy for delivering pitches directly to consumers on their mobile devices. Advertisements distributed through these applications are expected to play a key role as mobile apps drive an industry that is expected to rise from less than $10 billion last year to $32 billion by 2015.
It’s no surprise that the growth of in-app advertising has followed closely on the heels of the growth of mobile apps themselves. Apple has led the way, of course, with its iPhone and a supporting App Store that now teems with more than 200,000 titles. Google has followed with its Android Market (roughly 40,000 apps), and a small army of other players — Nokia, Research In Motion and Palm, to name just a few — are also feeding the mobile-app frenzy. All these apps have created an enormous amount of opportunity for advertisers to deliver their messages in applications while simultaneously keeping prices low and forcing developers to tinker with business models other than simply selling apps for the highest possible price.
The in-app advertising ecosystem is a dynamic one; the ground is constantly shifting and will continue to do so for some time. A disconnect, between publishers with ad inventory to sell and advertisers, has led to the rise of ad networks that serve as middlemen between the two camps. And a lack of visibility into the effectiveness of in- app ads gave rise to mobile analytics firms that provide information on user behavior and help determine ROI for advertisers. The landscape has continued to change as larger players build out their businesses to create end-to-end services for both publishers and advertisers (via both acquisition and organic growth), and as smaller startups team up to fend off the competition.
All these factors, meanwhile, have given birth to a number of different business models, including sponsored apps, content extensions and ad-supported apps. Strategies include simple brand ads and call-to-action messages designed to entice a user to click a link to watch a video, say, or request a free trial of a service. And, like Internet advertising, those strategies require different business models, including cost per impression (CPM) and pay-per-action, in which the publisher charges the advertiser based on how many users interact with the ad.
In-app ads are still in their infancy though, and the space remains a difficult one to navigate, for both publishers and advertisers. While Apple continues to hold the dominant presence with its iPhone and iPad, Google has gained impressive momentum with Android, and a host of other operating systems and app distributors are vying for space. The proliferation of operating systems gives developers plenty of options when it comes to deciding which platforms to build upon. It also forces analytics companies and other players to choose whom to support — and whom not to.
The emergence of new devices, such as the iPad, is already spurring the development of immersive apps that leverage larger screens and more sophisticated devices than were previously available. And as new information, such as location, becomes easier to access and leverage, advertisers will be able to target ads based on more than simply information like demographics and mobile behavior patterns. That will lead to ads that are highly targeted and highly effective — and thus, highly lucrative. But those trends will also further complicate a market that is already highly fragmented and difficult to grasp.