Ad networks are on the outs in the desktop world, but they still have a stranglehold on the mobile app ecosystem.
That’s beginning to change, though. Mobile app publishers are transacting more of their impressions through programmatic auctions in a setup that mimics header bidding on desktop.
The momentum has been growing over the past year thanks to exchanges and platforms developing in-app bidding solutions designed to woo publishers away from the comfort of their waterfalls. As a result, in-app bidding spend grew 20% quarter on quarter in Q3 of 2019, according to PubMatic.
But why now?
The main carrot for publishers is the potential to earn more revenue.
In a survey of 108 mobile publishers conducted late last year, mobile monetization company Chartboost found that just shy of 75% cite revenue lift as a “very important” benefit of implementing in-app bidding.
Other side benefits, such as greater transparency, more demand choices and reduced latency, only have a moderate influence in getting apps to flirt with unified auctions.
MAX, the monetization provider acquired by AppLovin last year to develop its in-app bidding tech, claims that its publishers are seeing anywhere between a 10% and 45% increase in their average revenue per daily active user (ARPDAU). A game studio called FUN-GI Games saw a 25% lift in ARPDAU after including Facebook ads through Audience Network via the MAX SDK.
PCH/Media, the digital advertising arm of Publishers Clearing House, saw a 15% uptick in its ARPDAU after testing an advanced bidding product from Twitter-owned mobile ad exchange MoPub.
With that in mind, why has it taken so long for app publishers to jump in? The holdup until now is mostly down to passivity.
Over the years, app publishers got comfortable working with their ad networks in waterfalls. The revenue was steady and predictable, even if they were probably missing out on ARPDAU.
Availing that inventory in a programmatic auction was mainly a technical challenge. Unlike mobile and desktop sites, apps don’t have a header, which means every partner looking to compete in an auction would need to have its SDK integrated, or the app would have to shift to a server-side integration.
The motivation to test a parallel bidding SDK or to migrate to a server-to-server setup wasn’t there because … why rock the revenue boat?
“Publishers using mediation owned by ad networks didn’t want to risk the money they were already making,” said Offer Yehudai, president of mobile supply-side platform Fyber, which launched its own in-app bidding solution early last year.
Many ad networks felt the same way about their cozy arrangement in the waterfall. Publishers were reticent to disrupt their monetization, and so ad networks largely didn’t invest in the infrastructure to support unified auctions.
“I came from the desktop world, and when I entered the app world it was like … desktop circa 2014,” said Doug Cuesta, a programmatic sales specialist at PCH/Media. He was “shocked” that advertisers couldn’t easily bid on app inventory at the impression level.
App publishers are almost literally leaving money on the table when they rely on historical eCPMs, said Idil Canal, director of platform product at AppLovin and GM of MAX.
“The user base is the same and we’re talking about the same amount of ads – so what’s the difference for publishers? Competition,” Canal said. “Competition between demand partners is what drives the higher revenue.”
But ARPDAU isn’t the only way to measure the return, said Casie Jordan, senior director of professional services at MoPub, which started testing its unified auction solution early last year.
Monetization managers spend countless hours setting up and maintaining their waterfalls, time which could be better spent on strategy and optimization.
“Time is expensive – it’s got an actual cost associated that needs to be factored into ROI calculations for all of the demand sources that a publisher works with,” Jordan said. “A waterfall makes monetization more complex and scaling back on it is an opportunity to reduce operational overhead.”
Still, some publishers are holding onto their waterfall setups – but that’s only natural, said Omer Kaplan, CRO and co-founder of app monetization platform ironSource, whose in-app bidding solution came out of beta in late October.
Although publishers are increasingly testing out their inventory within a bidding environment, and the stage is set for wider implementation of the tech in 2020, “onboarding to a transformative new technology always takes time,” Kaplan said.
And there’s nothing wrong with taking a hybrid approach, even in the long term.
“The waterfall probably isn’t ever going to go away completely,” MoPub’s Jordan said.
Some publishers will always want to preference certain demand sources over others.
“When you have a preferred mediation partner that doesn’t support OpenRTB, it’s hard to change,” said Jan Pollack, senior ad monetization manager at Wooga, a Berlin-based mobile game studio that’s starting to experiment with a hybrid model approach that allows for both waterfall-based and programmatic auctions.
“But that is part of a transition period that is hopefully coming to an end by next year,” Pollack said.
Despite the promise and the progress, though, certain app publishers are still in a holding pattern. Although 38% started using some form of in-app bidding tech this year – up from 31% in 2018 – many say they’re not yet using an in-app bidding solution, according to a recent InMobi survey of 83 app monetization and in-app advertising professionals.
Why the hesitation? App publishers (45%, as per InMobi) aren't tapping into in-app bidding solutions because they say they don't fully understand the technology. But that could actually be an opportunity in disguise. Adoption doesn't just happen, someone's got to drive it.
The larger hope for 2020 is that the big exchanges and ad networks, particularly MoPub and Google’s AdMob, will help drive adoption of in-app bidding with their unified auction solutions, said Mark Ellis, CEO and founder of mobile DSP Liftoff.
“They have what you’d call a privileged relationship with publishers,” Ellis said. “MoPub and Google can drive adoption at scale more efficiently than anyone – and once that happens we’ll start to see the percentage of bid requests sent from an advanced bidding environment become really material.”