Mobile in-app native ads to generate $8.9bn by 2020

Research from global information company, IHS Technology suggests mobile native advertising will account for $8.9bn of mobile advertising revenues by 2020, given the formats rapid rise in popularity; by then 75.9% of all display ad turnover will be mobile (estimated $84.5bn) and 63.2% of all mobile ads will be native. The majority of revenues are currently being generated by first-party in-app native ads, followed by third-party in-app native ads, driven by uptake in news, utilities and social apps, whereas gaming has been slower to embrace this new format. Results from the research also showed that consumers are more likely to interact with native ads than standard banner ads.

While first-party in-app native ads will continue to be the biggest revenue driver, third-party in-app native ads will account for 10.6% of all mobile display ads -- or $8.9 billion -- by 2020.

Going forward, third-party in-app native ads will grow at an annual average rate of 70.7%, according to a new study conducted by IHS and commissioned by Facebook Audience Network.

By 2020, 75.9% of all online display ad revenue will be mobile. If accurate, that will amount to a cool $84.5 billion.

More to the point, 63.2% of mobile display ads will be native, by 2020. That translates to $53.4 billion in advertising revenue.

Worldwide, North America is the leading region in third party in-app native advertising -- both in absolute and relative terms, IHS finds.

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Utilities, news and social apps are championing in-app native advertising, while the gaming sector is more hesitant to adopt the new ad formats.

And, there’s good reason for all this growth.

Compared to standard banner ads, consumers engage more with native ads, at a rate of 20% to 60%, according to HIS. Consumers are more willing to share native ads than standard banner ads, while standard banner ads are more likely to result in user churn, lower retention rates, lower CTRs and eCPMs, and ad fatigue.

By contrast, native ads result in up to three times higher user retention, while native ads were less likely to be subject to consumer “banner blindness.”

The key challenges to adopting native advertising by app developers and publishers include a lack of awareness of native ad formats, and restricted infrastructure and technology.

Still, developers are also struggling with limiting scale, the low sophistication of native ad formats, and a lack of universal pricing and measurement.

For the purposes of its study, IHS used the IAB/MMA definition of native advertising, which states: “Mobile native advertising is a format of advertising that takes advantage of the form and function of the surrounding user experiences, all of which are indigenous to the wide variety of mobile devices.”

As the IHS notes, native ads are distinct from content marketing, which aims to match content and format. By contrast, native ads -- particularly those found on mobile devices -- match the style of the site or app where they appear.

As part of its study HIS said it conducted more than 70 in-depth interviews with industry stakeholders -- from publishers to ad agencies to trade associations -- across 25 countries.