According to a new report by IHS and Facebook, media buyers will spend US$85 billion on mobile ads, what will be 76% of the global digital ad spend by 2020. Additionally, in-app native advertising (ads not running on first party Facebook) will significantly drive mobile ad growth and generate 63% of mobile display advertising revenue, which is US$53 billion.
The report predicted in-app native advertising to grow at a 71% compound annual growth rate between 2015 and 2020, which will account for 11% of mobile display ad spend at US$9 billion. APAC is also forecasted to have the largest increase in the next five years at a 177% compound annual growth rate between 2015 and 2020.
Reasons to use native ads
The Interactive Advertising Bureau (IAB) defined native ads as ads which match the surrounding space of the site or app where they appear - different from content marketing. As a result, native ads drive higher engagement rates than traditional mobile ads. It is also found that engagement rates are 20% to 60% higher for native ads compared to traditional mobile ads, and have retention rates that are three times higher.
Facebook noted in the report that CPMs for native ads are seven times higher than traditional mobile ads. Additionally, it is predicted that third-party in-app advertising will increase due to the growth of programmatic selling and the capabilities of ad tech providers to handle native ad formats. The popularisation of mobile commerce also contributes to the increase in mobile ad spend as more advertisers want a piece of the digital advertising pie.
Additionally, a combination of geo-targeting with native advertising offer higher engagement level and provide a more seamless experience for mobile users. It is also the perfect tool to reach out to your target audience.
Currently, North America is the leading region in in-app native advertising (out of Facebook), in both absolute and relative terms, according to IHS. It is also found that utilities, news and social apps are reigning in in-app native advertising, with the gaming sector lagging behind due to the hesitation of adopting new ad formats.
Key challenges to adopting native ads
The report cited reasons such as a lack of awareness of native ad formats, restricted infrastructure and technology as the key challenges to adopting native advertising by app developers and publishers.
With developers still struggling with limiting scale, the low sophistication of native ad formats and a lack of universal pricing and measurement, it is not surprising that the growth of native ads did not happen sooner.
The study was conducted by IHS Inc. and commissioned by Facebook, and included more than 70 interviews with industry stakeholders, including publishers, app developers, agencies, advertisers, trade associations, ad tech vendors and networks in 25 countries.
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