Third party in-app native advertising, or what is the same, native advertising that is operated and served by a third party onto a publisher’s inventory) will be the fastest growing format and a key driver of mobile advertising. IHS research shows that it will increase an average of 70.7% a year in terms of revenues to reach $8.9Bn in 2020.
North America is the leading region in third party in-app advertising both in absolute and relative terms; however, Asia Pacific will record the largest increase in the next five years at 177 percent compound annual growth rate between 2015 and 2020.
“When analysing mobile advertising revenue by company, two patterns can be observed,” Eleni Marouli (principle analyst at IHS Technology and co-author of the study) said.
“Companies which focus on mobile in-app advertising command the majority of the mobile advertising market, and companies which focus on native advertising as a primary revenue stream are the most successful at monetizing through mobile.” This does not suggest that non-native, mobile web advertising is not growing, but rather that native in-app advertising is outpacing all other mobile advertising formats.
While advertisers are quickly adopting native in app ads, the pace within publishers is not so uniform. IHS research finds that adoption of native varies by publisher type with utilities as the most advanced and games most reluctant at adopting these kind of formats.
These and many more are the outcomes of a new study released today by IHS Inc. and Facebook’s Audience Network.
As part of this research IHS conducted in-depth interviews with industry stakeholders in 25 countries. Responses were given by a broad range of companies in three categories including publishers, app and game developers; agencies and advertisers; trade associations, ad networks and technology vendors.
In app native to receive the 63.2% of total investement mobile display
The report finds that by 2020 in-app native advertising revenue (third and first party together) will generate almost two-thirds (63.2%) of mobile display advertising revenue and will amount to $53.4Bn as a whole.
While first party in-app native (like the ads you see on Facebook or Instagram) keeps on being largest mobile native revenue driver, native third party in-app will be the fastest-growing (70.7% each year as said before)compared to in-app advertising (at 26.1%), mobile display (at 25.3%) and desktop display which will decline on average -4.5% a year between 2015-2020.
Native third party in-app advertising will account for 10.6% of all mobile display ads by 2020.
Native leads to a higher engagement from mobile users
The study also finds that consumers engage with native ads 20-60% more than standard banner ads. Native is less likely to lead to user churn and ad fatigue, and drives higher retention rates (up to 3x), eCPMs (up to 2x) and click-through rates.
Advertisers driving more and more ad investment to Mobile
As more traffic moves to mobile, more and more advertisers are shifting their budgets to this kind of formats, study participants said.
This move of the investment includes not only that done by digital-first retailers, but by arger brands as well. The publishers, developers and advertisers who stand to benefit the most from native will be those who move fastest to adopt.
“Initially, we saw mobile advertising struggling to match the success of mobile app usage and consumer spending,” said Marouli.“Now, native advertising is booming and today’s most successful mobile marketers have already made the switch. The future of mobile advertising is native.”
Room for growth: over 5Bn smartphones by 2018
Since Apple launched its App Store in mid-2008, global smartphone and tablet application stores have experienced more than 500Bn app downloads.
By the end of 2015 there were 3.3Bn smartphones in use globally, and in the most advanced markets in Western Europe, North America, and mature Asian markets there were more than 85 smartphones active per 100 people.
There is still room for growth, as the global smartphone installed base will pass 5Bn mark in 2018.
“This growth presents opportunities for both app store revenues from in-app purchases and also in-app mobile advertising,” said Jack Kent, director at IHS Technology. “Many of these markets will be mobile first in consumer adoption of online services and so mobile advertising will be the dominant online advertising channel.”
Image over the headline.-Worldwide share of in-app native advertising in total mobile display advertising revenues (%) (Graphic: Business Wire)
Related external links:
The future of mobile advertising is native (the whole report)
The future of mobile advertising is native (infographic)
