It's not exactly breaking news that in-app advertising is more popular than ever. In the US alone, annual digital ad spending has hit $100 billion for the first time. Mobile advertising accounts for 65% of that figure.1 That's great news for publishers looking to improve their app monetization strategies. However, beyond that big-picture trend, there are a few other app monetization trends publishers should be aware of.
In-App Purchases Face Pressure in the US
In-app purchases, whether it's for new items, features, or content, have long been a popular monetization tool. However, legislative pressure from Europe and now the US means that game publishers might need to start reconsidering parts of their app monetization strategy.
One of the most popular types of in-app purchases is loot boxes, which give the player a randomized collection of in-game items. Most of these items are common, but the chances of getting a rare item incentivizes players to spend more.
Authorities in the Netherlands and Belgium declared loot boxes to be gambling and therefore illegal. Now, the US might be following suit. A proposed bill would make it illegal to sell loot boxes in games played by minors. The proposed law might never be approved, but mobile game developers should prepare for potential legislative changes in the US market.
Chrome Browser Changes Make In-App Advertising More Attractive
Google's Chrome browser now offers anti-tracking privacy tools that seriously hinder the reach of digital advertisers using the Web to spread their message. It's now easy for users to opt out of all third-party cookies, which limits the power of targeted advertising.
Apple implemented similar measures back in 2017, but their Safari browser only has around 16% of the global browser market share. Chrome is at 63%, so the impact of Google's anti-tracking privacy tools is potentially enormous.2
With web-based advertising being so limited, in-app advertising has the advantage. It's too early to say, but advertisers—especially those focused on retargeting—might now focus more on in-app advertising instead of mobile or desktop web.
Increased Demand for Video Means Rising eCPMs
Advertisers want to spend their money where they know it makes an impact. Right now, video advertising is the perfect medium to fulfill that goal. Ad spending for all formats is rising significantly, with rewarded video seeing the highest spending increase.
These numbers come from the second half of 2018 but bode well for continued growth throughout 2019. This interest in video from advertisers is a big opportunity for publishers. Apps that smartly integrate the video ad formats might see a big boost in their eCPMs and revenues.
Transitioning From Second-Price to First-Price Auctions
The way advertisers pay for ad spaces is changing. Traditionally, programmatic advertising was conducted through second-price auctions. In a second-price auction, the highest-bidding advertiser pays the price of the second-highest bid. This second-price auction theoretically incentivizes all bidders to bid what they feel is the true price of the auction, without trying to strategically under-bid the value.
The downside is that this wasn't transparent for publishers. Now, the tides are turning and second-price auctions are giving way to first-price auctions (where the highest bid is the price paid). In December 2017, just 5.8% of auctions were first-price. Less than a year later in March 2018, 43.3% of all auctions were first-price.3 The continued shift to first-price auctions means that publishers should have a clearer understanding of what their inventory is worth.
For more insights into mobile app monetization, download our Global Trends in Mobile Advertising for H2, 2018.
1IAB, May 2019 2StatCounter, April 2019 3Gentitent, April 2018