Home Mobile As Mobile Ad Prices Rise, Some App Developers Shift To Ad Tech

As Mobile Ad Prices Rise, Some App Developers Shift To Ad Tech

SHARE:

mobileWhat is the cost of acquiring a loyal app user? Based on the testimonial of various industry insiders, the price is rising so quickly ad revenue can’t keep up. As such, app developers are looking for new ways to profit, often by developing ad tech.

Gartner predicts mobile ad spend will reach $18 billion this year, up from $13.1 billion in 2013. But with more advertisers investing in mobile, including apps, the cost to acquire loyal users is rising. Acquiring a loyal user (defined as someone who opens an app at least three times) increased from an average of $1.30 in 2012 to $1.62 in 2013, according to mobile app analytics firm Fiksu.

“It has become a race to spend the most money on advertising to move up on the charts,” said Jim Rainey, EVP of growth at the mobile game developer and marketing platform Midverse Studios, whose app portfolio includes Bingo Run and Bingo Vegas.

For publishers, this is a boon. Mobile app install ads are a major revenue source for Facebook. And Yahoo is testing in-app ads designed to drive downloads. The company declined to get into specifics releasing only a statement: “The purpose of these native ads is to help brands drive downloads of their mobile apps. These tests will begin to appear across all of our properties where in-stream ads run on iOs and Android devices.”

Twitter is also rumored to be testing its own app install ads, which it will presumably pair with its mobile ad exchange, MoPub, to offer advertisers greater targeting capabilities.

But for app developers, the growing price to acquire users through app install ads forces them to rethink their revenue strategies. Midverse for instance built customer engagement tools in the form of a user retention platform released last week called the AppEngage Network.

“We took a step back and said mobile is a big opportunity, and gaming is a big market [and] maybe there’s an opportunity here to build a different kind of ad network,” Rainey said. The AppEngage Network lets advertisers bid on in-app inventory that they are only charged for if a user completes an action. Users are rewarded with virtual currency or other prizes.

Instead of having users complete one-time actions, Midverse’s model is designed to promote repeated uses of a game, such as completing daily tasks to earn virtual currency, explained Rainey.

About a dozen app publishers are currently participating in the platform, some of whom are also advertisers, according to Rainey. Brand advertisers are not part of the mix yet, but Midverse is looking at ways to draw them into the platform.

“The trick for getting brand dollars is to determine what kind of actions brand advertisers are looking for and figuring out how to measure that. This is something that is part of our long-term plan,” he said.

Ironically, drawing more brand advertisers into the app space could further drive up the price of mobile advertising–the very situation that drove Midverse to develop ad tech tools.

Subscribe

AdExchanger Daily

Get our editors’ roundup delivered to your inbox every weekday.

“By Q4, brand advertisers are going to get into the app space because now they have access to this inventory and are going to drive the ad prices up,” said Lisa Marino CEO of game developer RockYou. “Game developers are going to be hurt because they can’t buy users anymore.”

Like Midverse, RockYou, is hedging its bets by moving away from developing games and into advertising services. To be successful at app development, Marino noted, “You have to be able to acquire users for less than what you make from them but every game goes into negative arbitrage over time … that’s why we decided not to build new games anymore and focus on the media side of the house.”

Must Read

Advertible Makes Its Case To SSPs For Running Native Channel Extensions

Companies like TripleLift that created the programmatic native category are now in their awkward tween years. Cue Advertible, a “native-as-a-service” programmatic vendor, as put by co-founder and CEO Tom Anderson.

Mozilla acquires Anonym

Mozilla Acquires Anonym, A Privacy Tech Startup Founded By Two Top Former Meta Execs

Two years after leaving Meta to launch their own privacy-focused ad measurement startup in 2022, Graham Mudd and Brad Smallwood have sold their company to Mozilla.

Nope, We Haven’t Hit Peak Retail Media Yet

The move from in-store to digital shopper marketing continues, as United Airlines, Costco, PayPal, Chase and Expedia make new retail media plays. Plus: what the DSP Madhive saw in advertising sales software company Frequence.

Privacy! Commerce! Connected TV! Read all about it. Subscribe to AdExchanger Newsletters
Comic: Ad-ception

The New York Times And Instacart Integrate For Shoppable Recipes

The New York Times and Instacart are partnering for shoppable recipe videos.

Experian Enters The Third-Party Data Onboarding Business

Experian entered the third-party data onboarder market on Tuesday with a new product based on its Tapad acquisition.

Albertsons Takes Its First Steps Into Non-Endemic Advertising, Retail Media’s Next Frontier

Albertsons is taking that first step into non-endemic advertising next week via a partnership with Rokt to serve ads to people who have already purchased groceries.