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This article was published on December 9, 2015

Mobile advertising as a force multiplier

Mobile advertising as a force multiplier
Mackensie Graham

Mobile advertising sounds simple enough. It’s just taking the classic elements of advertising and putting it in on a mobile platform, right? So you open the ad space and begin requesting ads from ad networks or mediation technology with high hopes only to see less than stellar eCPMs, charges for mediation commissions and fill rates under 100 percent.

We’re at the dawn of the mobile ad market, and everyone – industry colleagues, conference experts and prospective ad network partners – seem to think they have the tips and tricks that will make you the most money.

So how do you cut through the noise to what actually works? Is a “Multiplying Profitability of Mobile Advertising for Dummies” too hard to ask for?

Thankfully there are some top tier platforms and successful publishers who have mastered how to make the most profit possible off of mobile advertising without risking the customer experience.

Hack the second price auction problem

Auction problems in mobile advertising have nothing to do with mistakenly raised paddles at Sotheby’s. The real-time bidding (RTB) process for ad space happens in the blink of an eye and a tap of the finger.

From the time the ad exchange receives the bid request triggered by a user taking an action (clicking to spot within the app or a web URL), in approximately 100 milliseconds the request and demographic data will be subjected to automatic bidding from multiple advertisers.

But nobody is sitting behind a screen 24/7 making comparative bids. DSPs ensures a cheaper, increasingly efficient process by removing humans from the majority of the process. RTB is automatic and set with maximum bids within budgets. Yet, RTB lacks universal standards that allow best practices.

The RTB process lends itself to a second price auction conundrum. The highest bidder always wins the bid by $0.01 cents over the second highest bid, even if the impression is worth less to the winner than the second highest bidder. This puts increasing downward pressure on publisher CPM rates and pricing floors tend to be inefficient, ending up pricing the publisher out of their own mobile ad revenue game.

The second price auction set-up is a conundrum for many publishers. Advertisers rarely pay the price they bid and often secure advertisement space with a single penny over the second highest bid. As Golubev pointed out, in this scenario, it’s necessary to bring in a decoy or shill to achieve a fair price.

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To mitigate this systemic problem Appodeal’s CEO & Founder, Pavel Golubev, recommends introducing a third party bidder to bring a balance back to the auction. Ultimately networks purchase impressions at the price they bid, not anything less. It’s a solution for all involved as the publisher receives a fair price for the spot, the advertiser stays within budget and get their ad spot.

Premiere pacing

When opening mobile real estate to the RTB process it seems that bidding by all advertisers just run at full speed around the clock. But, that would run through an advertiser’s budget far too fast, which is why pacing has a place.

The budget is then extended evenly over a certain time period (usually daily). If a mobile app’s users don’t match up exactly with higher paced advertisers daily budget than the ad space sells to second-tier advertisers. However, instead of settling for less than stellar bids, skip it in lieu of running an many auctions as possible.

By increasing the number of auctions, as the seller has about a minute of flex time to work with, the probability of getting a good offer from advertisers. This can be done safely in the background with multiple auctions until the right advertiser is achieved.

Make the switch from CPI to CPM

At first glance it may not seem the metric doesn’t make a dent in profitability. But knowledge is power, so switch to using CPM (cost-per-mille) instead of CPI (costs-per-impression) as the traditional networks like to operate. CPI takes power away from the publisher — no oversight on ad quality, advertiser landing page, and the like.

Instead of advertisers just working for the conversion in exchange for the transaction within the CPI model, the CPM model means the advertiser pays the publisher every 1,000 ad impressions. This gives advertisers an incentive to influence the product conversion and maximizes the ROI for both parties involved. This also gives publishers even a greater incentive to attract users to the platform.

When switching to CPM, place an increased influence on collecting user data in order to attract advertising partners.

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Where in the world

Where your app users are around the world matters, not just for language, but also interests, culture, and social norms. So, look before you publish for optimized ad performance, and thus multiplied profitability.

Analyze the pool of users in your most common locations beyond the confined set of data points previously relied upon in the history of mobile advertising such as content behavior, cookies, and search history. Once you have that data you can pick-and-choose the best networks for the varying locality.

Of course determining user location accurately is a whole other issue. Accurate data defines the user’s actual location proximal to the user’s stated location—which could be the difference of hundred of miles.

Accurate location data can come by way of user enabled WiFi access and GPS, and then secondly, by IP address, device identification, and user registration on social network updates.

One of the easiest ways to obtain user info is bake it in naturally. Offer a login to the app with a Facebook profile, and then request access to profile information, all the while, ensure the app won’t post for the user (because that’s just annoying, invasive, and will cause consumers to go scurrying).

Invest in a mediation tech partner that can ease the process up for you and your team. Look for one that places an emphasis on data including country, application type, and advertiser in relation to every ad requested, taking into account the expected eCPM.

Who are you?

Speaking of pinpointing customers, user behavior is a huge indicator in what sort of campaigns should be shown.

While CPM may be the preferential metric for publishers the majority of the time, users that instal advertised apps often may be best targeted with a CPI campaign. Accordingly, users who click on ads at a high rate but never follow the CTA to install, will be best served by CPC display campaigns.

Collecting data on your users gives your the upper hand when it comes to reaching them where their behavior is already at and still maximizing revenue. A platform or tool that progressively tracks consumer behavior and then can serves campaigns accordingly will be a wise investment.

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Native ads

It’s time to breakup with the banner ad. Particularly when ad blocking grew by 41 percent globally in the last year, cost publishers nearly $22 billion during 2015.

Unlike a few years ago, native ads are nothing new and are no longer the hot item on the conference agenda. But that doesn’t mean they should be forgotten. Native ads are so baked into our daily app usage (think promoted tweets and sponsored Instagram photos), that they are almost a given. By definition these ads chameleon in with regular, non-sponsored content.

Another great native ad example is rewarded video ads. These types of ads are a great incentive for users to stay engaged in your app, while earning more ad revenue as users are rewarded – in in-game currency – for watching a video ad, and is only distributed to the user after completely viewing an ad.

Native ads of all kinds are unobtrusive and maximize the limited real estate on the mobile platform in comparison to a desktop. In some studies native ads are viewed 53 percent more times than banner ads and 32 percent of consumers said they would share a native ad with their network. In an Interactive Advertising Bureau study, (involving more than 5,000 people) native advertising was reported “more appealing and less intrusive than any other major paid media format.”

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Unobtrusive native ads thrive on and the consumer sentiment is largely positive: 71 percent of publishers received no major complaints for featuring native ads, while 29 percent  received only minor complaints.

Maximizing profit from mobile advertising is complex, but through investing in the right tools of the trade and pursuing a baseline knowledge of the industry, optimized strategy and results are yours to achieve!

What best practices for multiplying profitability in mobile advertising would you add to the conversation? Share with the TNW community in the comments below.

Read next: Evolution of the phone: Why the phone lies at the heart of business

Image credit: Giphy