2020 Might Just Be The Year Apps Finally Start To Embrace Real-Time Auctions

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.

“So, when I heard about in-app bidding, I was bullish – it was obvious that this is where the app industry is going and that it had to happen sooner rather than later,” he said.

Benefits of bidding

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.”

Bidding barriers

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.”

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  1. In-app bidding has been a buzz word for the last couple of years but it seems that things are finally (but still slowly) picking up this year.

    For the first time, we see bigger studios going for in-app bidding and the biggest ones are even developing their own solutions (the likes of Rovio, etc.).

    What is slowing things down, in my opinion, is that things are not black and white – only a handful of traditional ad networks everyone is used to working is offering bidding option and some of them are bidding only inside their own mediation. So, the overhead of manually managing waterfalls is still not going away, some networks even claim that their traditional inventory is paying better than bidding. Adding development time needed to switch, time for testing (if you want to compare to your current setup) increases the entry barrier still.

    Anyway, it’s similar to any other innovation in the market – early adopters will go through more hassle but will also sooner minimize their opportunity cost. I would still be careful to gradually switch from waterfall to bidding, one game at a time, to minimize technical and financial risks.

  2. I agree with you Bozo, the problem is complex and as long as not all relevant demand partners are playing along to bid into a unified auction, it will remain a hybrid approach, which ultimately defeats the whole idea of a unified auction.

    To my knowledge, Google has been the one big player holding things back, despite that they probably have all the existing tech setup in place already. In fact, Google bids into 3rd party supply already with their App Campaigns product and arbitrages inventory in their black box to CPI and CPA targets (e.g. on Unity Ads supply). Hence, its even less understandable why they would not want in-app bidding to mature. They likely want to maintain some sort of “unfair competitive advantage” which they have done for so long in desktop already, by maintaining a market status that remains semitransparent only.

    I am still a believe that market forces will push all actors to go for the most efficient, transparent setup over time as long as no single player owns a monopoly like share of the market.

    The status quo of the market is what inspired us to start Kayzen and provide advertisers with an in-app buying platform that provides the ultimate level of control and transparency. But for this to ultimately come to fruition, the supply side of the market needs to mature too.