US in-app mobile ad spend set to reach $20.79bn this year
In-app mobile programmatic ad spending is expected to account for more than 70% of total mobile ad spending this year, reaching over $20bn, as the average CPMs for in-app ads rise every year. While Facebook currently receives the majority of mobile programmatic ad revenue, this will drop over the next year, with 53% of the ads set to be spent outside of Facebook.

by Tobi Elkin @tobielkin, April 14, 2016

While programmatic buying for the mobile Web is more popular among buyers than buying in-app inventory programmatically, in-app buying is poised to grow.

In fact, eMarketer estimates that the U.S. in-app mobile ad spending market—which includes both search and display advertising—will reach $20.79 billion this year, accounting for 72.4% of total mobile ad spending. A large portion of that in-app ad spending transacts traditionally, not programmatically. But this dynamic is about to change.

Speaking during the Mobile Marketing Association (MMA) Mobile Automation & Programmatic Leadership Forum on Thursday, eMarketer Senior Analyst Catherine Boyle said that the digital researcher forecast that U.S. advertisers are projected to spend $15.45 billion programmatically to serve mobile ads. That number is expected to hit $21.22 billion in 2017, or 37% year-over-year growth, according to eMarketer estimates.

In-app advertising, Boyle said, will be a key driver of this growth. To contextualize that $15 billion figure: it’s 10x the $1.5 billion Powerball jackpot, which was the largest in U.S. history. And it’s more than the industry will spend on radio, newspaper and magazine advertising combined in 2016.

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In addition, eMarketer projects U.S. advertisers will spend $22.39 billion on mobile display ad spending in 2016. “The mobile display advertising business is not a small business,” Boyle emphasized. And, $15.45 billion of that will be spent programmatically.

But, the elephant in the room? It’s Facebook and the role it plays in mobile programmatic. In fact, currently the bulk of mobile programmatic dollars will flow to Facebook—51% of the ad dollars in 2016, according to eMarketer. But in 2017, that trend will shift just a bit as the majority (53%) of mobile programmatic ad dollars will be spent outside of Facebook.

Boyle pointed out a few key data points on mobile:

Mobile users spend the majority of their time using apps; Web visits are frequent but fleeting.

79.3% of consumers’ time is spent with apps, with roughly 20% using the mobile Web.

In mobile, the ad dollars are following consumer behavior, so 73.2% of ad spending (that’s display plus search) is going to apps.

While the majority of consumers’ time spent with mobile apps, the mobile Web is playing a dominant role in programmatic. But why? Boyle pointed to three factors:

1. A larger volume of mobile Web impressions are bought and sold compared with in-app impressions. Of the mobile inventory bought programmatically in 2016, estimates range from 70% to 85% of it being mobile Web inventory. (That’s volume of buys, not total dollars spent).

2. Inventory is skewed to the mobile Web, but that’s changing. While there’s a 50/50 split in in-app and mobile Web in 2016, there’s a 70/30 skew to in-app impressions.

3. The total spent on the mobile Web exceeded in-app spending totals, but that’s changing too. For example, in Q1 2016, estimates show a near-equal split between the total amount spent on in-app and mobile web impressions bought programmatically.

Notably, Boyle cited research that media sellers in 2015 reported 49% of their revenue came from mobile-optimized Web sites and 18% from in-app.

Boyle cited factors that work in favor of programmatic growth for the mobile Web:

1. Many advertisers still have Web-centric campaign buying habits.

2. Retargeting--a common practice in programmatic buying--has been easier via the mobile Web.

3. Publishers’ premium content is still more widely available on the mobile Web. In addition, testing different monetization solutions is easier on the mobile web vs. an in-app environment which requires a Software Development Kit (SDK).

4. A lot of in-app inventory is in gaming apps and utilities, which many advertisers don’t perceive as environments for premium content.

On the buy side, marketers are demonstrating a growing interest in buying mobile programmatically, including in-app inventory, and this interest is driving up CPMs, according to Boyle’s research. She said average CPMs for in-app inventory bought programmatically are rising year-over-year. For example, in Q3 2015 for the iOS platform, CPMs grew 109% and 40% in Q4, she said, citing PubMatic research.

Advertisers are also reacting positively to the availability of location-based first-party data, which is drawing dollars to in-app buying. Also helping in-app programmatic grow is that methods of targeting across devices are improving, i.e., matching device IDs to the cookie IDs on desktop. This makes cross-channel programmatic buying easier.