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Data Desk 7: Mobile Video Ad Spend Has Nearly Tripled in 2015

by John Krystynak on Oct 29, 2015

With the proliferation of high speed LTE data, and more and more phones capable of playing video, the mobile video ad format is gaining popularity. A Business Insider Intelligence report from December 2014 estimates that mobile video ad revenue in the US will top $4.4 billion in 2018, up by a five-year CAGR of 73 percent from 2013, and grow five times faster than desktop video ads. A slightly more conservative eMarketer study from June 2015 predicts that mobile video revenue will grow three times faster than that of desktop throughout the year 2020. But no one is debating that the fact that mobile video has tremendous momentum.

In partnership, AppLovin and AppsFlyer took a look at data from over one billion devices worldwide and analyzed the growth of mobile video and how effective it is at retention for app installs globally and cross-platform. Retention is a crucial metric for publishers because it measures an app’s stickiness. The companies found that mobile video is the fastest growing advertising format — to the tune of 190 percent growth in the first three quarters of 2015 — and is up to 40 percent more effective at user retention than non-video ad formats. Additionally, in terms of retention for gaming apps, video ads on iOS outperform those on Android.

Methods

Between AppLovin and AppsFlyer, the two companies have access to hundreds of billions of data points detailing the usage and retention of mobile users.

To examine the growth, we looked at video ads as a total percentage of our advertisers’ spend, over a network that processes 100 TB of data a day, and hundreds of millions of dollars of advertiser revenue annually. The eight months of AppLovin data analyzed represents billions of data points, from AppLovin’s internal DSP (demand side platform) and from RTB (real-time bidding) exchanges. This included both gaming and non-gaming apps.

Because the hyper-competitive gaming vertical is so focused on keeping players playing, we used this vertical to look at retention. We analyzed over 300 million gaming app installs across hundreds of gaming apps running on hundreds of ad networks, and we recorded the effectiveness of each app install and isolated video ads and compared them to other formats. We calculated the normalized retention rate by looking at the unique number of users who were active on days 1, 7 and 30 out of the total number of unique users who first launched the app in the selected timeframe: July 1 through August 31, 2015.

The Results: Unprecedented Growth

Industry reports project massive growth for the mobile video ad format, and a review of the AppLovin network to highlight the spending of major mobile advertisers corroborates this:

 

Applovin_AppsFlyer_VideoTotalSpend_2015

As you can see in the above chart, the video format has grown from 23 percent to 66 percent of ad spend from January to August 2015, an increase of 190 percent.

Applovin_AppsFlyer_GamingvsNonGaming_Infographic_Final1

Segmenting out our non-gaming advertisers, the global ad spend on video rose from 16 percent in Q1 to 46 percent of ad spend in Q3. Gaming advertisers, who were early adopters of the video trend (and who in general are on the cutting edge of mobile marketing), saw global spend on video rise from 20 percent of ad spend in Q1 to 71 percent of ad spend in Q3.

Retention and the Video Ad Format

Why the explosive growth? It makes sense when you look at the effectiveness of mobile video ads. We see this when we look at retention rates of video and compare that to non-video ads. Because retention rates between multiple apps are relative, we normalized the rates on a scale of 0 to 1.0. We measured retention over days 1, 7, and 30. Retention is a crucially important metric for publishers to monitor, because the average Android app on Google Play loses 77 percent of its daily active users within three days of the install.

Overall, the normalized retention gains from video ad formats over non-video formats is 34 percent. In other words, if a player downloads a game after seeing a video ad, they are a third more likely to stick around than if they downloaded the game after seeing a non-video format ad.Applovin_AppsFlyer_NonVideovsVideoAds_InfographicVideo ads on iOS performed better than those on Android in terms of normalized retention, 40 percent to 30 percent, respectively.

In Summary

It’s clear that video is both growing and effective, but why? It’s because consumers like it much better than other formats. Specifically in regards to retention, mobile video ads let consumers know what to expect from an app or game, so they know what they are getting into before they download. It makes sense then that this self-selecting sample (those who watched the video then chose to download it) would stick around longer.

In the early days of mobile advertising, video ads were impractical. Most phones couldn’t handle displaying them, and cellular networks certainly couldn’t either. But as this report suggests, the conditions right now are perfect for the success of mobile video ads.

 

 

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John Krystynak is AppLovin’s Chief Technology Officer.

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