In-App Advertising: Understanding Market Size, Revenue & Trends

In today’s digital age, mobile applications have become an essential part of our lives. As a result, in-app advertising has emerged as a popular form of marketing for businesses, which refers to the practice of displaying ads within mobile applications. 

The ads can be in the form of banners, videos, or interactive content. In this blog, we will discuss the in-app advertising market, its size, and revenue model.

Market Size of In-App Advertising

The market size of in-app advertising has been steadily increasing in recent years. According to a report by eMarketer, the global mobile advertising market is expected to reach $290 billion by 2022, with in-app advertising accounting for a significant portion of this market. 

The report further suggests that in-app advertising will be the fastest-growing segment of the mobile advertising market, with an expected growth rate of 19.4% in 2022.

Another report by data.ai (previously App Annie) reveals that the average time spent on mobile devices has increased by 20% in 2020. As people spend more time on their mobile devices, it presents a significant opportunity for businesses to advertise their products and services through in-app advertising.

Revenue Model of In-App Advertising

There are various revenue models for in-app advertising. The most common ones are:

1. Cost Per Mille (CPM) – In this revenue model, advertisers pay a fixed amount for every thousand impressions of their ad. The advertiser is charged regardless of whether the user interacts with the ad or not.
2. Cost Per Click (CPC) – In this revenue model, the advertiser pays a fixed amount for every click on their ad. This model is commonly used for ads that aim to generate traffic to a website.
3. Cost Per Action (CPA) – In this revenue model, the advertiser pays when the user takes a specific action, such as downloading an app or signing up for a service.
4. Cost Per Install (CPI) – In this revenue model, the advertiser pays when the user installs their app after clicking on the ad.

The revenue model that businesses choose depends on their marketing objectives and the type of ad they are displaying.

Benefits of In-App Advertising

In-app advertising offers several benefits to businesses. Here are some of them:

1. Highly Targeted – In-app advertising allows businesses to target their ads to a specific audience based on factors such as age, gender, location, interests, and behavior. This targeting ensures that the ad is displayed to the right audience, increasing the chances of conversion.
2. High Engagement – In-app ads have a higher engagement rate compared to other forms of digital advertising. This is because users are already engaged with the app, and the ad appears in a non-intrusive manner.
3. Cost-Effective – In-app advertising is cost-effective, especially for small and medium-sized businesses. Advertisers can choose a revenue model that suits their budget and marketing objectives.
4. Measurable – In-app advertising allows businesses to track the performance of their ads. Advertisers can track metrics such as impressions, clicks, installs, and conversions, allowing them to optimize their ads for better performance.

Challenges of In-App Advertising

In-app advertising also presents some challenges for businesses. Here are some of them:

1. Ad Blockers – Ad blockers can prevent users from seeing in-app ads, reducing the effectiveness of the ad campaign.
2. App Store Guidelines – App store guidelines can restrict the types of ads that businesses can display within their app. Advertisers must adhere to these guidelines to avoid getting their app banned from the app store.
3. Ad Fatigue – Users can become tired of seeing the same ads repeatedly, reducing the effectiveness of the ad campaign.
4. Fraud – In-app advertising is susceptible to fraud, such as click fraud, where advertisers are charged for clicks that are not generated by real users. Advertisers must take measures to prevent ad fraud and ensure that their ad campaigns are reaching real users.
5. User Experience – In-app advertising can negatively impact the user experience if the ads are intrusive or irrelevant. This can result in users uninstalling the app or developing a negative perception of the brand.
6. Ad Format Limitations – Different ad formats work better for different types of apps and audiences. Some apps may not support certain ad formats, limiting the options for advertisers.

Trends and Future of In-App Advertising

In-app advertising is constantly evolving, with new trends emerging every year. Here are some of the latest trends in in-app advertising:

1. Native Advertising – Native advertising is a type of in-app advertising that blends in with the app’s design and user experience, making it less intrusive and more effective. Native ads match the look and feel of the app, resulting in higher engagement rates and better user experience.
2. Programmatic Advertising – Programmatic advertising is an automated process that allows businesses to buy and sell ads in real-time, using data to target the right audience. Programmatic advertising is cost-effective and efficient, as it eliminates the need for manual ad buying and optimization.
3. Interactive Ads – Interactive ads are a new form of in-app advertising that allows users to engage with the ad content, leading to higher engagement rates and better user experience. Interactive ads can be in the form of playable ads, augmented reality ads, or 360-degree video ads.
4. Influencer Marketing – Influencer marketing is a type of in-app advertising that involves partnering with social media influencers to promote a brand or product. Influencer marketing is effective in reaching younger audiences and building brand awareness.

The future of in-app advertising looks promising, with new technologies and innovations driving the market. Here are some additional trends that are expected to shape the future of in-app advertising:

1. 5G Technology – 5G technology is expected to revolutionize the market by enabling faster loading times and higher-quality ads. 5G technology will also allow for more interactive and immersive ad experiences, such as virtual reality and augmented reality ads.
2. Artificial Intelligence – Artificial intelligence will play a crucial role by allowing businesses to personalize ads based on user behavior and preferences. AI-powered ad optimization will also enable advertisers to make data-driven decisions and improve their ad performance.
3. Privacy Regulations – Privacy regulations, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), will impact the market by requiring businesses to obtain user consent and provide more transparency regarding data collection and usage.
4. Voice-Activated Ads – Voice-activated ads will become more prevalent with the increasing usage of virtual assistants, such as Siri and Alexa. Voice-activated ads will provide a new way for businesses to engage with their audience and promote their products and services.

Conclusion

In conclusion, in-app advertising is a growing market that presents a significant opportunity for businesses to reach their target audience effectively. The market size is expected to continue to increase, with new revenue models and targeting options available for advertisers. However, businesses must also consider the challenges of in-app advertising, such as ad fraud and ad fatigue, to ensure that their ad campaigns are successful. By keeping up with the latest trends and innovations, businesses can create effective campaigns that generate higher returns on investment.