Overview: Mobile Advertising & Ad Marketplaces

In this blog post, I am going to discuss about mobile advertising networks, ecosystem & industry trends. This understanding would serve as base for the future posts I plan to write around data science problems in advertising industry. Lets start in top down fashion. Advertising is a multi-billion dollar industry (estimated $500Bn a year globally as of 2010). Traditional advertising relied on TV, Radio, Prints: fliers & Billboards. With the advent of digital technologies, the advertising dollars has been fast shifting to Web and Mobile. Specifically, mobile growth has outgrown desktop growth due to availability of inexpensive mobile devices in the form of smartphones and tablets; and reduced mobile data rates in the recent days. We know Google, Facebook & Twitter makes money majorly through Ads. It is important to realize that these companies put data at the centre of all its products, which helps create targeted ads relevant to users resulting in great CTRs (Click-thru-rate: a key metric in advertising to measure ad effectiveness/relevance. More on metrics in my next blogpost)

So, what exactly is an Ad Network?
An Advertising Network is a marketplace for ads, which connects advertisers(on demand side) with publishers(on supply side). It is merely an entity which connects advertisers to publishers. It in itself doesn’t own either traffic nor the Ads. To draw similarities to e-commerce, ebay is one of the earliest marketplaces for all products ranging from electronics to fashion, which connects sellers to buyers matching demand with supply. Again, ebay itself doesn’t own any products. Similar marketplace model is followed by snapdeal, flipkart, amazon among many other ecom firms. The business model behind ad networks : It makes money, by charging a small commission to advertisers and passing the rest to publishers. Typically, ad network shares 30% – 40% of ad revenue, with rest 60%-70% passed on to publishers. The involvement of agencies on demand side, traffic aggregators at the supply side only makes this network share lesser, as they eat a small pie from the advertising spend too.

Mobile Advertising Ecosystem

To go one step lower, so who are advertisers & publishers ? By advertisers, we could think of two class of companies (i) Consumer brands like Coca Cola, Nike, Reebok, Adidas who constantly reach out to consumers for increasing awareness of brand and its products. (ii) Companies like say(snapdeal) looking to increase app installs through ads or companies wanting to acquire customers. In the advertising world, we refer earlier ones:Brand Advertisers and latter ones: performance advertisers. Publishers are app developers(either android,iOS,Windows) who have ad space(slot) to host ads on their app/page. For example, Rovio is a game development company which produced the all-time famous Angry birds.

To summarize an ad-serve process

User sends an ad request => Mobile Ad Network Receives => If matching ad is available, it serves to user (called a ‘fill’ else ‘no-fill’) => user sees the ad(Impression) => User Clicks => User Acts(Downloads, Installs, Contact form,etc.)

An ad network solves some major problems

(i) For small publishers(developers) who cant to afford to build their own ad-serving technology can integrate with ad network and start monetizing.
(ii) Provides tracking technology.
(iii)Provides advertisers with diverse audience/targeting.

So, Whats trending ? Considering mobile advertising, there are numerous startups emerging in this field time and again, some seeing huge short term success, however only few companies have remained after consolidation in the long run. Admob(acquired by Google) leads in terms of market shares. Inmobi, one of the fastest growing ad networks based out of India is staying ahead consistently by innovating across ad formats, technology (Real time bidding), User Understanding through data science applications, strategic partnerships. INMOBI was recently in news, for achieving a reach of 1B devices globally. Facebook has started its own ad network.

In my future posts, I would be discussing more about

(i) Metrics that matter most – CPM, CPC, FR, CPI, eCPM and so on.
(ii) Data Science Problems/Solutions and similar problems in other industries
(iii)Ad Formats – what’s new?

To keep this post concise and hence conclude, I would like to highlight the significance of technology & use of data science to stay relevant in this fast growing industry. Stay tuned for more….