4 Trends That Will Shape App Monetization in 2018

Tapjoy’s SVP & GM Developer Relations, Ben Chen, shares his thoughts on the top 4 trends that will shape app monetization in the coming year.

This week, we’re excited to share a guest blog from Tapjoy’s own Ben Chen, GM & VP of Developer Relations. Ben shares with us his thoughts on the four key trends that will shape the world of app monetization this year, including innovation in UA, the shift to mediation 2.0, and the continued rise of value exchange advertising.

If there is one constant in the world of app monetization, it is that nothing is constant. Ever since Apple launched in-app purchases with iOS 3.0 in 2009, developers’ monetization strategies have been in a state of steady evolution. New technologies come and go. Consumer preferences change. Regulations appear. Knowing that change is always around the corner is practically the only thing developers can rely on when setting their monetization strategies.

This year figures to be no different. As the App Store enters its tenth year, app monetization is certainly more mature and sophisticated than ever, but at the same time it continues to rapidly evolve. Strategies that worked in the past won’t necessarily work now, while new, unforeseen factors will surely come along to disrupt even the best laid plans.

To help app developers roll with the tides in 2018, we’ve identified the top 4 trends that we believe will shape app monetization this year.

1. User acquisition looks downstream

Nearly 5 billion people worldwide own a smartphone, including the vast majority (95%) of Americans. That means that smartphone penetration has basically peaked, and that app growth can no longer come by virtue of smartphone growth. In 2017 we began to see app marketers focusing less on a quantity of new users and more on their existing user base — for example, how many times they engage with an app, how long they keep it installed, and, most importantly, how much revenue they generate over time. This shift will continue in 2018, as we predict that app developers will get ever more sophisticated about tracking downstream metrics and at optimizing both advertising and monetization campaigns accordingly. UA will become less about the actual install and more about user behavior post-install. As a result, CPI rates may climb, but, driven by a stronger focus on downstream optimization, we are likely to see a better return on ad spend as well.

2. Mediation 2.0 is here

Today, the majority of freemium app publishers work with choose to work with a mediation provider to ease the technical aspects of integrating multiple ad networks and ensure that they show the highest-paying demand for all of their available placements. However, mediation platforms have long relied upon a traditional waterfall model to prioritize demand, which requires developers to filter through their integrated networks in a particular order — either manually ranked or auto-optimized based on their historical performance within a particular window, typically a day or two.

But the mediation landscape is undergoing a transformation, one that is seeing a majority of platforms evolve from a traditional waterfall model to that of a real-time auction. In a real-time auction, all demand sources bid simultaneously for a single impression. It “levels the playing field”, so to speak, and allows all ad networks to bid on a request in real time, with the highest-paying bid taking the win.

This shift has already started to take place — as we saw last week with the launch of Fyber FairBid, which kicked of its beta with Tapjoy as an initial partner. But we predict that the momentum behind programmatic mediation (parallel bidding) is unstoppable, and in that 2018 we will see more and more mediation providers evolve their offerings to support this shift.

3. Acceptance and popularity of value exchange advertising will continue to grow

In 2017, we already saw that value exchange ads — or ads that provide users with access to premium content or rewards in exchange for their attention — were rapidly becoming the preferred form of digital video advertising. In fact, last year’s Mary Meeker report confirmed that value exchange ads were by far the most popular video ad type among consumers, preferred almost 3x over traditional pre-roll. This bodes well for app publishers, who have long relied on the value exchange model to support freemium apps. This, compounded with the fact that users are spending more time in-app than ever before, and that brand advertisers are finally making the shift to in-app buying, means that the value exchange model will simply continue to gain steam and acceptance. In fact, we predict that more and more publishers outside of the gaming world will look for ways to apply this model to their business. We already saw it happen in 2017 with Pandora, who scrapped their subscription-only model in favor of an ad-supported, value exchange approach. We expect that in 2018, many more digital media brands will experiment with this model to better monetize and maximize overall revenue.

4. Brands are here to stay

Last year, US in-app advertising spend exceeded $45 billion, an increase of $11 billion — or 32 percent — over 2016, according to eMarketer. What’s driving such rapid growth? Consumer media habits, primarily. Mobile apps now dominate the media landscape, with US consumers spending more time in apps than they do watching television. It has taken brand ad budgets a couple of years to catch up with this shift, but now that they have, there appears to be no looking back. Thanks to the success of companies like Supercell and Rovio, mobile game publishers are now considered premium media producers. Plus, with the mainstreaming of e-sports, brands are finally starting to show interest in all sectors of the gaming industry, including mobile. That’s good news for app developers looking to grab their share of the brand advertising pie.

Whether you’re a developer looking for a non-disruptive way to monetize your app, or a marketer looking for an innovative way to reach your audience, we’d love to chat more about how value exchange advertising can work for you. Contact our team to get started.

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