A brave new world for app publishers in 2017

• New metrics being used to gauge effectiveness of ads
• iOS predicted to remain the most lucrative OS in 2017

IF there is one constant complaint from smartphone app developers since the launch of the original iPhone, it is the constantly rising cost of app advertising and installs. The cost of buying app install ads on social media sites, particularly Facebook. But the price of app install ads is rising nearly as fast when bought through automated systems like the one run by Fiksu.

Last year, videogame publishers, King and Supercell crossed the US$1 billion revenue mark. Nicholas Lowell at Gamesbrief says they have crossed the half billion dollar marketing spend as well. While King spent more than US$455 million on marketing its titles, Supercell passed the US$400 million mark.

Is this app publishing model sustainable?

The simplest reason for the increase in marketing spend is the increasing pressure on Cost Per Install (CPI) advertising prices. To make matters worse for videogame publishers, they are swimming in the same advertising waters as other non-gaming app developers.

Over the last two years, new advertising formats have come to market. They have proven vastly more effective — and more expensive. Video advertising and native advertising are particularly strong examples, as they both deliver clear performance improvements over traditional formats such as banner ads and interstitials.

AdColony owned by Opera, recently announced the results of its latest survey. The 6th of its kind since 2013, the survey provides insights, benchmarks, and trends from the top 100 grossing app developers globally and includes topics such as most effective app install formats, top campaign trends, and forecasted trends for 2017 including what advertisers are most excited about.

With the rise of mobile and video being the fastest growing mobile ad format, it comes as no surprise that the top three most effective app install channels are all video: full-screen video, social video, and in-feed video. Playable and native ads are surging in popularity.

DNA recently interviewed Vikas Gulati, Managing Director for Asia, Opera Mediaworks about this year's trends and his predictions for 2017.

DNA: The cost of installs have been going up on iOS and Android. This means that only the rich companies can now afford major ad campaigns on mobile. Is this a problem?

The market for user acquisition or app install is increasingly sophisticated. Increased focus on mobile and willingness to spend to reach the 'right' app users is evident, and with that, costs have been rising. However, in my opinion, this does not mean that only the rich companies can now afford major ad campaigns.

Advertisers are now looking for quality users using metrics such as cost per loyal user, retention rates and return on ad spend. In addition, as acquiring installs have become expensive, an increased focus on retargeting, to retain users and convert them to loyal users, allows advertisers to obtain higher loyalty rates.

There is also some consolidation in segments like gaming, with big studios getting bigger and more sophisticated in marketing their apps and spending more with fewer partners. According to the AdColony survey with the top 100 grossing app developers, video is turning out to be one of the most popular and effective channels for app install.

DNA: Is Android fragmentation a problem for advertisers and ad companies?

I don’t think the answer is quite so cut and dried. Most developers prefer the ease and convenience of developing on the iOS platform. iOS users are high-paying users who spend a lot more on in-app purchases. However, over the years, Android user base has grown dramatically, bridging the gap between the two platforms.

From an adtech perspective, there are technologies and tools available that work across all kind of smartphones be it iOS or any version of Android.

DNA: Do you feel that the ad bidding process offered by the bidding platforms have enough transparency?

In the app install context, there are number of blind, opaque solutions such as free app networks and incentivised integrations like offer walls. But as you can see from the Q3 AdColony study, these are the least-preferred options for advertisers.

As the ad world moves towards programmatic technology, transparency is imperative. Programmatic buying and real-time bidding (RTB) platforms help advertisers target, place and price their ads better than before.

Hence, there is direct interaction between the demand and supply forces which determine the prices of the impressions directly in the free market. This benefits advertisers, who are protected from being over charged, as well as publishers, who realise the true potential for their inventory.

DNA: iOS users spend more money than their Android counterparts. Do you anticipate this to continue in 2017?

Yes. The statistic suggests that iOS users are more affluent individuals as the operating system is only available on Apple’s high-end smartphones which are usually sold at a premium. iOS Users are likely to have a sizeable disposable income, are less price sensitive, and are more able and willing to spend on in-app purchases.

In Southeast Asian markets (excluding Singapore), iOS has top 10-15% penetration - that in itself makes it premium. On the other hand, Android has a dominant market share as it is available on both high-end and cheaper smartphones, making it affordable for the masses, especially in emerging markets in Asia to purchase an Android smartphone.

DNA: Both iOS and Android app stores are flooded with products. If you are a small app developer, has it now become impossible to get into the Top 10?

There are over three million apps in total on both the iOS and Android app stores. But while the app stores have been a success for Apple and Google respectively, that success has come at a cost. With so many apps in the app stores, discovery has become a serious problem that needs to be solved.

App discovery is not Apple or Google’s problem alone. Yes, it may be harder than ever to succeed on the app stores, especially for small teams and solo app developers, but developers need to be responsible for marketing their apps.

Users can have hundreds of apps on their devices, but it is likely that they only use a handful of apps on a daily basis, making it even more challenging for developers to compete in this space. Having said that, there are some great apps that grab users’ attention, and generate enough buzz to reach the top. But a great marketing effort can really help maximise the impact.

DNA: In 2016, we heard a lot of stories about mobile phone hacking and fraudulent apps. Do you expect these security issues to snowball in 2017?

In the context of mobile ad fraud, app install fraud is rampant as it is seen as an easy way to make money. Mobile app marketers are expected to lose more than US$100 million in 2016 as a result of app install and engagement fraud, according to AppsFlyer’s report. This includes misattribution due to fraudulent click data, paid installs from fraudulent devices, simulated in-app events, and the impact fraudulent behaviours have on lookalike targeting and retargeting.

But as the market continues to evolve, our clients have started to look at post install metrics such as retention rates, in-app purchases rather than just installs. Clients are making a conscious choice to work with trusted partners with great equity. Most importantly, they are working with tracking partners that have the necessary third party ad serving and tracking technologies to detect fraud.

DNA: Do you feel that Apple and Google are doing enough to improve security on mobiles?

Security and privacy cannot be an afterthought; it needs to be considered from the start. That being said, app makers cannot take security for granted, delegating responsibility for security to those who police the app stores. Mobile developers, advertisers and security leaders, all have a part to play, to stay ahead of continuing threats and to manage risk and improve security on mobile.

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