Mobile advertising is exploding. Business Insider estimates that by 2018, mobile advertising will take 50% of the total digital ad spend, measuring a whopping $42 billion. However, for a long time, advertisers simply left mobile advertising out of consideration even though time spent on smartphones grew tremendously. A major reason for this was that they could not target their audience as effectively as they could with desktop advertising (thanks to the highly celebrated cookie). So what has changed? Personagraph explains the inner workings of the mobile advertising ecosystem.

History of mobile ads

Mobile advertising was introduced in the late 1990s when a Finnish news network began to send advertising sponsored headlines to people over SMS. Back then there was very little possible in terms of targeting and ad creatives, so a “blanket or carpet bombing approach” with nothing but text was the result. Also, carriers were almighty (even more than today) because they formed the only gateway to mobile phones. Through the early 2000s mobile phones and its ecosystem improved drastically (mobile internet, color screens, touch screens, etc.) but mobile advertising wasn’t catching up. After Admob and Millenial Media were founded in 2006 things became a little better for advertisers’ mobile aspirations. Although still mostly relying on carpet bombing advertising, the possibilities of ad creatives expanded greatly with mobile banner ads. Especially when the mobile operating systems advanced with iOS and Android things started to take off.

In 2007 the first mobile ad exchanges started to pop up which formed a marketplace where app publishers could easily sell their ad inventory, supported by advertising technology platforms such as AppNexus. SSPs (Supply Side Platforms) appeared that would cater specifically to mobile publishers with tools and services to optimize their yield. Conversely, DSPs (Demand Side Platforms) did the same for advertisers. Since then the ecosystem has grown tremendously in size and complexity because ad exchanges, SSPs, DSPs and data providers and management platforms (DMPs) started to adopt different functions and activities from each other which makes them almost impossible to distinguish. However, even with all this specialization in serving both app publishers and advertisers, the amount of money advertisers spent on mobile in no way reflected the amount of time people spent on their mobile devices. Mobile advertising was (and still is) simply less effective than other ads because they lack the behavioural and contextual targeting options cookies offer in normal desktop advertising. Also, there is a lack of transparency which makes fraud a big problem and advertisers guessing whether their ads are actually viewed by people. On top of that many different screen sizes and slow internet connections form another technical barrier. And perhaps the biggest factor, many ad creatives interfere with the UX and are therefore hated by consumers.

However, the ecosystem today is becoming more and more sophisticated in order to tackle these problems and unleash the true potential of mobile advertising.

Current landscape

Today a plethora of players provide wide variety of services to display an ad from an advertiser to a smartphone user. LUMA Partners created an overview of how the display advertising landscape looks like as is displayed in the image below.

Advertising ecosystem

One glimpse at this image is enough to give you an idea of how complex this industry is. Each category hosts many companies in varying sizes, from giants as Google to startups as Personagraph.

The path from advertisers to consumers

Brands want to have their ads where people see them and since recently, people are spending more and more time on their smartphones. So how does an ad move from the advertiser to the consumer? It starts with the brand often hiring a media agency to create and plan the advertising campaign. The media agency manages the campaign with tools offered by ad servers. The agency can choose to deliver the ad straight to the publisher, feed it into an ad network or an ad exchange or work with a DSP. DSPs offer the ad buyer a centralized system where they can manage bidding, connect with many ad networks and exchanges simultaneously and measure performance. DSPs calculate the value of impressions that are offered in ad networks and exchanges with the help of data management platforms (DMPs) and other data suppliers and optimizers. These are sophisticated services that try to predict ad campaigns outcomes based on historical data. Often creative optimization services are used to enhance the ad, by layering on rich media for example. Verification and attribution companies monitor the impressions to check for fraud make sure ads are displayed where and how they should be displayed. Ad exchanges, SSPs and ad networks are where the supply of ad inventory is aggregated and offered to the buying parties. On the publisher’s side, yield optimization platforms help the publisher with optimizing revenues by allocating ad inventory where it generates the highest bids. The ad is then served through the ad networks on the publishers ad space in an app, where the consumer sees it. 

What will the future hold?

As mentioned in the introduction, the future of mobile advertising is said to be bright. Adtech will become even more sophisticated and will be able to target consumers, based on behavioural, location (highly precise with beacon technology), demographic and contextual data on an individual basis in real time.

As funding keeps pouring into the adtech industry it looks like that future will come sooner than later. The annoyance of irrelevant interfering ads on your smartphone will soon be a problem of the past. This is good news for everyone: consumers, advertisers and of course app publishers. It is up to the adtech industry to make it happen and Personagraph is on the forefront of innovation to make these predictions come true.

This article was originally published on the Personagraph Blog 

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