Table of Contents
- What is an Advertisement?
- Why are Advertisements important?
- What is an Impression?
- Publishers vs. Advertisers
- In-App Advertising
- Ad Formats
- Ad Networks
- Demand-Side Platform
- Over-The-Top (OTT)
- Programmatic Media Buying
- Missed Opportunities
- Mobile Advertising Business Models
What is an Advertisement?
An advertisement (often shortened to advert or ad) is the promotion of a product, brand or service to a viewership in order to attract interest, engagement and sales. Advertisements come in many forms, from copy to interactive video, and have evolved to become a crucial feature of the app marketplace.
An advertisement is different from other types of marketing because it is paid for, and the creator of an advert has total control over the content and message.
Why are Advertisements important?
Advertisements are a guaranteed method of reaching an audience. By creating an engaging ad, and spending enough to reach many users, advertisements can have an immediate impact on business. This effect may be seen in improved trade or boosted brand recognition, among many other different metrics.
What is an Impression?
An impression (also known as a view-through) is when a user sees an advertisement. In practice, an impression occurs any time a user opens an app or website and an advertisement is visible.
Publishers vs. Advertisers
In mobile marketing, a publisher provides the capability and inventory that allows advertisers to run ads in their apps or on mobile sites. This can mean a publisher can be a website or an app. Publishers sell space on their property to buyers (app developers) and agencies (companies managing ad campaigns for advertisers).
An advertiser might be an app (like a mobile game or an e-commerce platform) or a brand who have a message they want people to see. A publisher is a place to display that message, with a viewership the advertiser is interested in converting.
In-app ads take many forms, including text, banners, push notifications and pre or post-roll video ads. Such video adverts are typically around 10-15 seconds long (although they may vary) and normally showcase the product within that time. Increasingly, ads are becoming interactive, providing more engagement for users. One such example is the use of deep linking, a feature which allows advertisers to send users directly to an install page in a single click.
Choosing the right format can be a make-or-break decision in advertising. Let’s take a look at some of the most common ad formats in mobile advertising and when they can be particularly effective.
With banner ads, the aim is to display an image and wait for users to view, click and convert – making quality graphics and a compelling call to action (CTA) essential components.
Interstitial ads offer a full-screen experience. These can be used to avoid ‘banner blindness’, when users become so accustomed to seeing banner ads that they no longer take notice. Interstitial ads can also be expandable (known as expandable ads), which start out as regular banner ads before taking up the whole screen.
Native advertising is when ads are designed to match the environment in which they are placed. For example, when you see a ‘sponsored’ tag attached to a YouTube video, this is native advertising on that particular platform.
As their name suggests, video ads are advertisements in video format. By their nature, video ads are a popular advertising method because they can be highly engaging with high click-through rates (CTRs).
By giving users access to interactive gameplay, playable ads let you try before you buy. This gives users a limited look at an app, offering highlights that should push users to install. Because users can gauge their interest before purchasing the app, playable ads can be used to reduce app uninstall rates.
An online advertising network or ad network is a company that connects advertisers to websites/apps that want to host advertisements. The key function of an ad network is an aggregation of ad supply from publishers and matching it with advertiser’s demand. Ad networks aggregate ad inventories from supply sources and match them with demand sources looking for ad slots. The supply sources in a mobile ad network typically constitute apps from publishers and app developers. Demand sources are made up of advertisers looking to place their ad in another app.
A demand-side platform (DSP) is a type of software that allows an advertiser to buy advertising with the help of automation. Because they allow mobile advertisers to buy high quality traffic at scale with minimal friction, DSPs are a powerful marketing automation tool.
There are two important stages to how a demand-side platform works. First, the advertiser uploads creative, sets up targeting and puts down a budget for their campaigns. This can all be done via the dashboard. Once the campaign creative is uploaded, the DSP scours through its network of publishers for sites and mobile apps that fit the advertiser’s criteria and makes a bid for placement. After this, the DSP resolves the bid, places the ad, and manages payment – all in a matter of milliseconds.
Inventory is the amount of ad space (or the number of advertisements) that a publisher has available to sell.
While the term originated from print, it has grown to encompass ad space on the web and on apps and mobile ads.
Why is inventory important?
Inventories are important for publishers because the more inventory a publisher has, the more they can sell. For advertisers, it’s important to find the best space and the right type of inventory at a cost which is optimal for the campaign.
What is native advertising?
Native advertising is paid media designed to match the content of a media source. An example of mobile native advertising would be paid video content on the Youtube app. This media is designed to match the visual design and function of natural content, appearing in your feed of recommended videos.
There are laws and legal guidelines in place to prevent native ads from being deceptive. For example, you will often see text such as ‘promoted by’ or ‘sponsored’ within a thumbnail, banner or header – indicating that users will be linked to paid content.
Over The Top (OTT)
OTT stands for ‘Over The Top’ and refers to any streaming service that delivers content over the internet. The service is delivered ‘over the top’ of another platform, hence the moniker.
In previous years, a consumer would take out a cable subscription and their cable TV provider would be responsible for the supply and availability of programming. In the modern era, users can sign up for services like Netflix or Spotify and access their offerings over the internet. The cable provider now only provides the internet connection and has no ability to control what you consume. This separation has big implications for advertising.
Because OTT is a relatively new phenomenon, there is a huge amount of growth potential. Lots of companies are entering the OTT space, leading to a wide variety of options for consumers, and increasing quantities of ad inventory for advertisers. As more people ‘cut the cord’ and move towards online-only media consumption, the way to reach these consumers will increasingly be via OTT services. How marketers can take advantage of these platforms remains, widely, to be seen.
Benefits to OTT
In legacy media ad buying, it can be hard to measure impact. As users move towards the OTT space, the ability to show them personalized ads and track their click-through rate will mean the benefits of old media in terms of attractive packages of content, but with a very modern ability to quantify impact and leverage measurement.
Types of OTT Services
The type of OTT service you probably interact with most regularly is video OTT. Services like Netflix or Hulu are video OTT services, which provide users with a number of programming options, both in terms of a licensed library of TV shows and films, as well as original programming.
Another major OTT market is audio, with services such as Spotify now almost synonymous with music streaming. Users can access a massive library of recording artists and podcasts via an internet connection.
Remember text messages? Most users now use OTT messaging services like WhatsApp, Telegram or Signal, which allow them to use their internet connection to share information.
Similarly, voice OTT services, like Skype or WhatsApp, are increasingly common instead of phone calls.
Many OTT services operate on a paid subscription basis, but a large number also run advertisements — or offer tiered packages that allow users to either pay for ad-free experiences. OTT advertising is much like legacy media advertising, usually taking place between songs or episodes, but it is delivered through the streaming media on OTT platforms.
There are two main types of OTT advertising set-ups, client-side and service-side.
In a client-side setup, the viewport for the streaming media loads the ad before the episode or film is shown. In a server-side ad insertion, the ad is integrated seamlessly into the frames of the media, meaning it is not possible to ad-block. However, it is a much more technically challenging proposition to support server-side ad insertion, so it is still relatively uncommon.
Programmatic Media Buying
Programmatic advertising is the use of automated technology for media buying (the process of buying advertising space), as opposed to traditional – often manual, methods of digital advertising. Programmatic media buying utilizes data insights and algorithms to serve ads to the right user at the right time, and at the right price.
To understand programmatic media buying, you must know the terminology related to this process. Firstly, programmatic media buying can be categorized into three different types:
- Real-Time Bidding (RTB)
- Private Marketplace (PMP)
- Programmatic Direct
Ad inventory is usually bought via a real-time auction. Using programmatic channels, advertisers can buy per impression, thereby targeting the right audience. Since the process is automated, programmatic media buying guarantees speed and efficiency that is not matched in the traditional media buying.
Real Time Bidding (RTB)
Also known as an open auction, Real Time Bidding is when inventory prices are decided through an auction in real time. As the name suggests, this is open to any advertiser or publisher. RTB is considered to be a cost effective way to buy media with a large audience.
For Advertisers, RTB means more streamlined, efficient and targeted buying. It provides them with the ability to fine-tune targeting and focus on the most relevant inventory results in higher ROI. Ultimately, users see more relevant ads.
For Publishers, RTB increases revenue and fill rates by opening inventory to a wider variety of buyers in a competitive auction. Finally, publishers gain visibility of who is buying which inventory and can leverage this knowledge to charge more for their premium placements.
As the name suggests, real-time bidding works in real time. Likewise, inventories are sold in real-time and hence advertisements are displayed in real time. It starts with a visitor launching a web page which is showing real-time ads. That’s when a bid request is created, where the supply-side platform picks the bid request. A supply-side platform receives many bid requests every second and uses yield management platforms to manage them. These bid requests are coupled based on inventory type and environment.
Bid requests are sent to advertisers based on the user’s demographics. For example, advertisers interested to show their ads to a 20-30 aged female living in Portland who is also interested in physics will receive the bid request. This may sound very specific, but there are tons of advertisers who design their ad campaigns for such users to see their ads.
Once the bid request is received, the advertisers place their bids and send a bid response with their amount. The highest bidder gets to display the ad. And this entire process takes less than a second. However, if the user refreshes the same webpage, a new bid request will be generated and the process will start all over again.
A bid request comprises certain lines of code containing the details required to sell inventory and display ads. It’s a set of information sent by ad exchanges to the advertisers containing inventory details about the platform, number of impressions, and keys to user-data (IP, pixels, tags, cookies). Using this bid request, the advertisers place their bid for the inventory and then finally place their ad.
Bid requests are used for real-time bidding, exchange bidding, and header bidding. To further understand bid requests, you need to know about the bidding process first.
Here are some basic metrics that are contained within a bid request:
The above-listed information may vary.
Sometimes users install software to block sharing of personal information; restricting advertisers from displaying personalized ads.
A special class of first-price auction in which buyers can place competing bids on reserved inventory in real-time. This allows buyers to compete for premium inventory and helps publishers to maximise their ad revenue.
This is the minimum price that a publisher is willing to accept for their inventory. Setting the right price floor can help publishers protect their ad inventory from being undersold. Price floors can be fixed or adaptive based on how they have been configured.
Private Marketplace (PMP)
These are similar to open auctions, but PMPs have restrictions on who can participate. Only selected advertisers have access to PMPs on an invite-only basis. However, in some cases publishers may have a selection process which allows advertisers to apply for an invitation.
This is when a publisher bypasses auctions, selling media inventory at a fixed cost per mille (CPM) to an advertiser (or multiple advertisers). The programmatic ecosystem also involves three main components – Sell-Side Platform (SSP), Demand-Side Platform (DSP) and Ad Exchanger.
The traditional media buying process involves a lot of manual work, typically with several requests for proposals (RFPs), human negotiations and manual insertions of the orders (IOs), which makes it slow and inefficient. Additionally, ads are purchased in bulk and advertisers have little control over the inventory and placement.
Sell-Side Platform (SSP)
This is software that allows publishers to sell display, mobile and video ad impressions to potential buyers automatically in real time. This includes ad exchanges, networks and DSPs (see below). This gives publishers greater control of their inventory and CPMs.
Demand-Side Platform (DSP)
This is software that enables agencies and advertisers to buy ad inventory cross-platform.
This is how the supply-side feeds inventory into the ad exchange. The DSP connects to the ad exchange, enabling advertisers, agencies, networks and publishers to buy and sell ad space. Inventory prices can then be agreed upon through the bidding process.
In 2012, the IAB released VAST 3.0 and introduced the concept of ad pods, outlining specs for delivering a set of sequential ads. At first, adoption was slow, but as the programmatic backbone for desktop and OTT/CTV video continued to evolve, podding became increasingly important for publishers and media owners to deliver a high-quality user experience on long-form content.
In a nutshell, podding provides publishers the ability to return multiple ads from a single ad request. Those ads are then played in sequence, similar to a linear TV commercial break.
Pods are a better way to monetize long-form content to maximize efficiency and fill. Podding is a more efficient means of filling an extended ad break that offers a familiar user experience. A single call that fills multiple ad slots means fewer ad calls between various platforms easing latency and infrastructural loads. Additionally, since ad pods inherently play multiple ads, they also typically see higher fill rates.
Pods offer more control to publishers. A common problem publishers face when monetizing multiple ad slots without a podding solution in place is ad duplication, i.e., the same ad playing multiple times within a single commercial break. Without podding, an individual request is sent for each ad within the break. These requests typically occur in a vacuum such that each ad returned is unaware of the other ads it’s running next to. As a result, these ads could be the same or competing ads. Calling for impressions as a pod provides a mechanism to organize and separate those ads.
Pods create satisfied advertisers. Building on the previous example, in non-podding scenarios, when a buyer receives three ad calls they have no way of knowing whether those requests will be played back to back. As a result, they may bid and win each impression opportunity, leading to serving the same ad three times.
Mature podding solutions not only deduplicate ads, preventing the same advertiser from running multiple ads, but also competitively separate ads from the same category. This minimizes ad fatigue from viewers and helps publishers manage advertiser relations by preventing competing brands from running in the same pod.
Pods enable a better user experience. In addition to minimizing ad fatigue due to de-duplication, since ad pods mimic the traditional linear TV commercial delivery format, the user experience is familiar for viewers.
Missed opportunities means the targeting on your supply tag does not match the targeting on your demand tags. For example, if a supply tag is targeting English speaking geos and your demand tags only target US and UK, everything coming in from CA and AU will register as a missed opportunity. You can run the same type of report recommended for high blocked rate, and see what type of targeting is causing these missed opportunities. From there you can discover what kind of demand should be added to the waterfall or you can add targeting to your supply tag. If you apply supply tag targeting, make sure to share your targeting with your supply partner so they implement it on their end as well.
Missed opportunities do not necessarily mean that there is a problem. Aligning your supply tags and demand tags is a recommendation, not a requirement.
Mobile Advertising Business Models
All mobile ad networks provide users with several types of business models to run ad campaigns with. There are 5 major types – CPM, CPC, CPI, CPA and CPV.
With CPM (cost-per-mile) type, an advertiser is charged each time her or his ads are shown 1,000 times (so-called ‘a mile’). It’s the best business model for publishers, because it allows to make money every time an ad was displayed. If they have a stable predictable traffic, it allows publishers to forecast their revenue. The down side is that they may loose some extra revenue, if their app or website audience is really interested in a product or service they advertise. For that case CPC model would allow them to make more money.
With CPC (cost-per-click) model an advertiser is charged for each click made on her or his mobile ads. This model works better for advertisers, because it allows them to pay only for instances when an interest to their product or service is explicit (their ads were clicked) and, as mentioned above, in some cases may work for publishers as well. For a publisher this model always presents a certain risk of him serving lots of ad impressions for free.
CPI (cost-per-instal) model implies that advertisers are charged only when a click on their ads resulted into an actual mobile app install. It’s a specific case of a more generic CPC business model. Cost-per-install price has become one of the most important metrics for mobile app marketers to measure and keep track of, because essentially it represents a price they pay to acquire customers and hence it should be factor into ROI calculations.
CPA (cost-per-action) type is more advanced version of CPI, when an advertiser is charged for specific action (in-app sale, subscription, form submit, sign up and more) users take inside an app that is advertised on a mobile ad network. This type of a business model presents more opportunities for publishers to monetize their inventory on one hand and more options for advertisers to grow their business on the other.
And finally CPV (cost-per-view) type is applicable to mobile ad networks that provide advertisers with video ad campaigns. With this model, advertisers are charged for each instance their video mobile ad was viewed. With the current pace of a video advertising growth, this model becomes more and more popular.
Cost Per Mille (CPM)
Originating from Latin, the word Mille stands for a thousand views. Consequently, CPM is a cost of your ad per 1000 impressions. An impression occurs whenever the ad gets successfully loaded on a viewed webpage or application. This form of pricing is most common with ads that score a lot of impressions, which usually comes down to banners and native ads. CPM rates usually range from fractions of a dollar to just a few bucks.
Cost Per View (CPV; aka PPV – Pay Per View)
The CPV model is quite unique. Unlike the CPM, it’s a cost for just a single view, and hence, it’s not used for traditional banner ads. You can encounter the CPV model when setting up a campaign utilizing alternative forms of advertising, such as video ads or pop ads. Beware that CPV rates are usually small fractions of a dollar, so mistaking the CPV for CPM can drain your budget in no time.
Viewable Cost Per Mille (vCPM; aka CPVM – Cost Per Viewable Mille)
This pricing model came up as a response to the ineffectiveness of banner ads. Sometimes ads are located in lower parts of websites, so if a user is only interested in what’s at the top, they won’t be able to see those ads or only see a small piece of them, even though, they technically count as impressions. In this case, rewarding the publisher doesn’t seem fair. vCPM lets advertisers pay only for those ads which really appear on the recipients’ screens.
Cost Per Click (CPC; aka PPC – Pay Per Click)
This one is as simple as it gets and quite self-explanatory. Advertisers pay whenever, and only if their ad gets clicked on.
Cost Per Engagement (CPE)
Even though it seems similar to the CPC model, engagement doesn’t always end up being a click. The CPE model is used for specific formats, like expandable hover ads. The engagement is complete when a user hovers over an ad, so it expands to a larger size of banner. Since this can be done accidentally, usually the pointer has to be held on an ad for at least two seconds for the engagement to count.
Cost Per Action (CPA; aka Cost Per Acquisition)
In the CPA model, advertisers pay only if a conversion – whatever it may be – happens. It means that advertisers have to set up some sort of goal, which they’ll interpret as a conversion before they start their campaign based on this model. This goal may be a sign up, a purchase, or even getting to the desired section of a website. Whenever a user achieves that, the advertiser pays the agreed rate. Obviously, this model is devoured by most advertisers, yet it’s not very popular among publishers.
Cost Per Lead (CPL; aka PPL – Pay Per Lead)
Basically a type of CPA, CPL is limited to collecting leads. It’s used in lead generation campaigns, so the ultimate goal is just to get data (like e-mail addresses) from potential customers. A CPL model is perfect for promoting newsletter sign-ups.
Cost Per Install (CPI)
The CPI model is reserved for mobile app adverts. It works just like the CPA model, but it’s just more specific. In this model, advertisers pay whenever the app they’re promoting gets downloaded by a user who interacted with an ad.
Revenue Share (REVSHARE)
Revenue share cost model is based on the percentage payouts off the revenue made on offers.
Pricing models are fundamental for calculating the costs of advertising. Some other metrics, however, come in handy when checking the effectiveness of your spendings.
Return On Investment (ROI; aka ROAS – Return On Advertising Spend)
One of the simplest, and at the same time the key metric for any business. The Return On Investment is the relation of your profits to the capital you’ve invested. The ROI is calculated by subtracting the investment from the income and then dividing this amount by the amount of investment. If your ROI is at 0%, it means that you didn’t make, but also didn’t lose any money on your activity. A negative ROI means a loss, while a positive ROI equals a gain.
Lifetime Value (LTV)
LTV metric is extremely meaningful for advertisers. Imagine that you’re running a mobile app campaign based on the CPI model. Your conversion rate may be high, you might be getting a lot of installs, but it can be all in vain if users never open and use your app. This is when the LTV comes into play. It measures an average profit made off one user, which is much more important than the number of downloads.
The general formula for calculating LTV is Average Revenue Per User (ARPU) divided by churn rate. In order to stay profitable, advertisers need to keep the CPA or CPI rate lower than the LTV.
Click-Through Rate (CTR)
The CTR metric is simply tracking the effectiveness of your campaign in terms of the number of people clicking on it. To calculate the CTR you need to divide the total number of clicks by the number of ad views. The higher the CTR, the more effective your campaign is.
Conversion Rate (CR; also abbreviated as CVR)
The CR metric is quite analogical to the CTR, but instead of accounting for a click ratio, it relies on the number of conversions, which are the goals you set up (like a purchase, sign up or reaching a particular point of a website). CR is calculated by dividing the number of total conversions by the number of people who interacted with your ad.
Effective Cost per […] (eCPM, eCPV, eCPC, eCPA, eCPI, eCPL)
What the little ‘e’ preceding the pricing model brings is the metric of the effectiveness of the campaign. These metrics have been invented with unification in mind. Thanks to them, you can calculate your true CPM, CPA, CPL and so on, regardless of the pricing model you’re operating on. For example, you can find out your rate for 1000 impressions, even if you only pay per install.
To calculate the eCPM you divide the total costs of your ad by the total number of impressions and multiply it by a thousand. To calculate the eCPA, you shall divide the total advertising costs by the total number of actions. To calculate the eCPC, divide the advertising costs by the total number of clicks. Other eXXX’s calculations are analogical.