What Is In-App Advertising? How Does In-App Advertising Work?

Publift
January 8, 2021
January 28, 2023
What Is In-App Advertising? How Does In-App Advertising Work?

In 2022, global mobile ad spending amounted to $395.96 billion. By the end of 2023, mobile ad spend is expected to reach $446.14 billion, reaffirming the faith that brands continue to place in the efficacy of mobile advertising.

For publishers looking to monetize this constantly rising trend, in-app advertising has become a key strategy in the mobile game.

It is more important than ever for publishers to consider leveraging mobile ads as part of the overall advertising campaign.

In this guide, we'll take a deep dive into in-app advertising, how it works, and the crucial trends you need to know about that drive in-app advertising. We discuss the benefits for publishers of mobile website display advertising versus in-app advertisements and finally the best in-app advertising networks to consider.

Let's dive in.

In-app advertising works by showing ads to users while they are in an app. While this is a great monetization strategy, publishers need to ensure that the ads don’t disrupt the user’s experience, and are relevant to the content the user is already consuming. Otherwise, app publishers could see a dip in user engagement with their apps. 

To make sure that the in-app ads shown to users are of the highest possible quality and relevant to the content the user is interested in, publishers should only partner with a trusted ad network.

Make sure you check out how Publift solves the problem of finding the right balance between monetization and user interest retention through its in-app advertisement solutions.

What Is In-App Advertising?

In-app advertising is both a marketing and revenue strategy for app developers and brands where advertisers serve ads via their apps for compensation. These in-app ads are served by ad networks once developers and advertisers agree to a deal via programmatic ad buying.

These ads come in different types and formats to suit the viewable space and developers can choose between various ad types to monetize their app. These include in-app display ads, native ads, interstitial display ads, rewarded videos, and more.

How Does In-App Advertising Work?

The mobile app advertising ecosystem can be thought of as consisting of two parts—buyer and seller. Ad networks act as brokers, facilitating smooth transactions between app developers and publishers (the ad inventory sellers) and advertisers (the buyers).

Here’s how in-app ads work:

  • The app on the user's smartphone sends a request to the mobile ad network or ad exchange to serve an ad.
  • The ad network or exchange takes a multitude of factors into account, including user data, and then uses an algorithm to identify the best and highest-paying ad from multiple advertisers.
  • The ad is then served to the mobile app in real time.

‍Mobile Websites vs. Mobile Apps

Mobile apps are shown to capture their audience’s attention, and guide them on through the brand’s marketing funnel. And while mobile websites share certain similarities with specific apps, there are some critical differences, particularly regarding digital advertising.

Whereas mobile sites track via cookies, apps (which ask users to opt-in) track via device id, offering developers valuable audience data that is not available via cookies alone. This will be critical to publishers moving forward into a post third-party cookie digital landscape. 

While cookies offer basic user data such as shopping habits and browsing history, Device IDs offer developers information such as geo location data, types of mobile devices, OS, gender, age, and wireless carrier.

Furthermore, their resistance to ad blockers and the high amount of mobile time spent in apps, makes in-app advertising work successfully for mobile publishers across the board.

While overall growth of mobile app advertising expenditure has taken a hit due to the pandemic, ad placement numbers are gaining traction still significantly high with global app sales revenue crossing the $50 billion threshold this year. The in-app purchase market is expected to grow at a CAGR of 20.8% in the 2023-2028 period and forecast to reach $284 billion by 2026.

Providing an exemplary mobile experience has become increasingly important for all brands and businesses looking to build brand awareness,third-party user engagement.

Let's take a closer look at the benefits of in-app mobile advertising.

Benefits of In-App Advertising

Now that we know what in-app advertising is, we look at some of the benefits that it brings for publishers.

1. More Monetization Opportunities

On mobile apps, advertisers and app publishers have much more freedom to monetize the app in ways they cannot monetize a mobile website.

For mobile ad publishers, in-app ads have proven to be a successful monetization strategy. These days, smartphone app developers are making money by serving ads on their mobile apps. For example, the premier online real estate business, Zillow, publishes ads for allied businesses enabling them to reach targeted users through their app.

2. Users Spend More Time on Apps

According to a Smaato study, mobile users are spending 90% of their time on apps, equivalent to more than three hours a day. This means that when it comes to mobile experiences, apps have taken the driving seat with mobile web being the distant runner-up.

3. More Engaged Audience

Unlike traditional marketing channels, the mobile app audience is by far the most captive and engaged, making them the ideal audience for display advertising, leading to higher interest, click-through rates (CTRs), and conversions and ultimately, higher ad revenue for app publishers.

4. Higher Chance of Conversion

Research demonstrates that apps are 120% more likely to convert compared to mobile websites. A Criteo report found that users coming from in-app ads view 4.2 times more products per session. Considering that, you may want to think about adding in-app advertising to your arsenal.

5. Accurate In-App Ad Targeting

When a mobile user is browsing websites, advertisers and publishers can only accumulate data about them using cookies which is quite limited. However, when using an application, ad publishers can collect more targeted information through device ID including age, internet provider, gender, operating system, device type, location, and more.

6. More Personalization

In-app-based mobile advertising enables ad publishers to create highly personalized and customized ads that have higher odds of engaging your audience and convincing them to click through. Also, through the app store, developers always get permission from the mobile user to collect their data prior to installation. Ad publishers are also in a better position to identify their audience giving them more control over the ad serving process.

That being said, you have to keep in mind that recent loss of data tracking across apps pushed forward by the latest iteration of iOS 14 is expected to cut down the cost per thousand mille (CPM) making personalized advertising substantially more challenging. This will increase the value of first-party data and immersive ad units significantly.

7. Better Results

According to AppSavvy, in-app ads perform 11.4 times better as compared to banner ads on mobile websites. This is because their unique positioning within the user’s journey through the app allows them to command greater engagement from the user. Banner ads, on the other hand, can simply be ignored by a user, driving little engagement.

8. No Ad Block

If a user has installed an ad blocker, it is likely they won't see banner ads. That's not a big concern for in-app advertisers because of the freemium business model which allows them to serve ads to the mobile users who can use the app without paying any price.

Possible Drawbacks of In-App Advertising

As brands and marketers continue to increase their marketing spend on both mobile web and in-app advertising, they also need to consider the drawbacks of in-app advertising.

Without conducting a cost versus benefit analysis, it can be challenging to make your in-app  ad campaign successful. Make sure there is enough time spent on programmatic planning. Some key points you need to keep in mind are as follows:

Highly competitive channel

Since more and more advertisers are now looking to display their ads within apps, it has become an increasingly competitive and expensive marketing platform.

Depends on your business niche

If your target customer is not a savvy smartphone user or doesn't like to use app content, then mobile app ads may not be the best marketing fit for your brand. You will not get high enough click through rates.

Private Marketplace and Programmatic Deals

Customized programmatic deals, like those offered by Publift, ensure in-app advertising campaigns are optimized to deliver the maximum viewable mobile ad impressions to highly specific audiences at the right mobile moment. By offering high-quality inventory, in all the main ad formats, programmatic deals allow publishers on a supply-side platform to partner with advertisers on a demand-side platform to maximize ad revenue for ads in all app categories.

‍5 Best In-App Advertising Networks

If you are an ad publisher searching for top mobile app networks, here are some of the leading ad networks that you can consider using:

1. Instagram / Facebook

These social media giants are some of the best ad networks to reach your target audience through a robust and programmatic advertising campaign,within which you can include different ad formats.

With their enormous reach, Facebook pulled in a revenue of $117.9 billion in 2021 alone, they have the potential to accumulate hundreds of thousands of impressions and thousands of conversions with an effective in-app marketing strategy.

Moreover, both Instagram and Facebook's platforms allow you to be flexible when it comes to audience, timing, and advertising budget. Ad publishers can target audiences based on age, location data, relationship status, gender, job role, and likes and dislikes.

2. AdMob

Owned by Google, Admob is the mobile variant of Google AdSense. It is an effective ad network for marketers who are just starting out as it is easy to use and quite intuitive. Marketers can use video, images, text, or interactive media to serve their programmatic ad campaign. They also have the option to choose from formats including interstitial, video, banner, native and reward ads.

3. Smaato

With over 90,000 advertisers, Smaato is a great mobile ad network for those looking to publish ads. Smaato's large advertiser base means publishers have a high probability of selling ad space. You can also make the most of real-time bidding with SPX, the Smaato Publisher Platform.

4. Unity

If you are targeting gamers, then you can't go wrong with Unity, which has been especially created to display video ad content to monetize mobile gaming apps. The ad network is compatible with both mobile operating systems including iOS and Android and supports all game engines including Corona, Marmalade, and Adobe Air. Advertisers can also use this one-stop shop network to include in-app shopping which lets gamers search and purchase products without ever leaving the game.

5. InMobi

One of the leading independent mobile ad networks, InMobi is capable of handling both mobile web and apps so you can run different types of advertising campaigns using a single platform. The network supports both iOS and Android and provides ad campaigns in CPI and CPC models. Rich media, interstitial, video, banner, and native are the available ad formats.

Best In-App Pricing Models

There are several in-app pricing models that have different pros and cons for publishers and advertisers. Listed below are the different pricing models along with their benefits and drawbacks. 

1. Cost Per Mile (CPM)

In CPM, advertisers pay publishers whenever an ad receives 1,000 impressions and works best for marketers looking to improve brand visibility.

Pros

For advertisers: Cheapest in-app pricing model.

For publishers: Displaying ads is enough to receive payment.

Cons

For advertisers: Simply showing the ad doesn’t guarantee conversions or clicks.

For publishers: Low payout compared to other pricing models.

2. Cost Per Click (CPC)

In this model, the publisher is paid for every ad click. CPC is a great model if you’re looking to increase traffic to your page and have a fixed budget for doing so.

Pros

For advertisers: Only pay for clicks, which indicate user interest. 

For publishers: Can demand high price per click based on the advertiser and campaign objectives.

Cons

For advertisers: Pay for every click, even if some are unintentional or accidental and don’t generate any revenue.

For publishers: Requires more effort as you might have to serve more impressions to achieve your targets.

3. Cost Per Action (CPA)

CPA model sees the publisher being paid after the target audience engages in a desired action, such as a sale or registration. It’s best for advertisers looking to achieve a specific result or action.

Pros

For advertisers: It’s a low-risk pricing model that ensures targets and budgets are aligned.

For publishers: Good results can quickly lead to higher rates.

Cons

For advertisers: Focusing on revenue outcomes might obscure an ad’s brand awareness potential.

For publishers: No guaranteed income unless the customer performs the desired action.

4. Cost Per Install (CPI)

In CPI model, publishers are paid each time the app is installed by the customer. This is ideal for advertisers looking to increase install numbers.

Pros

For advertisers: Only pay for users interested in using your app.

For publishers: High-paying pricing model that allows for a premium price.

Cons

For advertisers: Paid user installs don't guarantee long-term user interest.

For publishers: Needs persistence and optimized campaigns that require continuous monitoring.

In-App Advertising Formats

When it comes to displaying third party mobile ads, you need to ensure you are delivering the best content and user experience by using the right ad format for your target audience.

Popular in-app ad formats you can use include interstitial, rich media, video, rewarded video, native and banner ads.

Here's a quick guide to the different ad formats available:

1. Interstitial Ads

This ad format consists of full-screen banner ads that appear between different game levels.

In-app advertising formats interstitial ads

2. Rich Media

These mobile in-app ads are served in the banner as well as in pop up formats using HTML, JS, CSS, and image files.

Rich Media

3. Rewarded Video Ads

This ad format, as the name suggests, offers incentives to the gamer by watching video ads.

In-app advertising formats rewarded video ads

4. Video Ads

Native video ads are served in mobile video format and may allow the users to skip in a few seconds if they are not interested. Mobile video ads can be a great tool to engage users.

In-app advertising formats video ads

5. Native Ads

These are video or textual ads that mimic the appearance of editorial content present on the website. They are non-intrusive and blend in with the design.

In-app advertising formats native ads

6. Banner Ads

These are simple and static ads that are either displayed at the top or bottom of the app. They are highly affordable and are supported universally.\

In-app advertising formats banner ads

7. Playable Ads

Playable ads are types of ads that provide a playable or gamified version of the game for improved demonstrability.

In-app advertising formats playable games

Final Thoughts

Publishers should consider in-app advertising as a key monetization strategy to target the potentially mobile app user segment.

Remember to keep in mind some of the best practices for in-app advertising success:

  • Keep an eye on where your mobile advertising is coming from.
  • Choose full-screen ads for better engagement and banners for higher reach.
  • If you are looking to maximize engagement, consider using video in-app ads.
  • Ensure you are making the most of programmatic deals and private marketplaces.
  • Ensure your targeting and content is optimized to serve engaging ads to your users for better responses.

Publift has helped its clients maximize their ad revenue with the help of cutting-edge programmatic advertising technology. 

Reach out to us to know more about how Publift can help grow your business by maximizing your ad revenue.

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