Industry News, Advertisers

Why Video is Poised to Take Over The (Mobile) World

by Adam Foroughi on Jun 5, 2015

Mary Meeker’s annual Internet Trends report came out last week, and I was glad to see others in the industry react to her take on the rise of video. Over at Forbes, for example, Meeker’s point that Facebook is driving growth in video (and its quadrupling of video views per day in the past six months) was called out, as well as her points regarding the consumption of video on mobile.

Between her report and the recent success  of HotelTonight, one company AppLovin has worked with has gotten regarding its mobile video ad strategy, I thought it could be useful to explain from my perspective why I agree that in mobile advertising, as the Facebook video explosion illustrates, video really is the future.

First, a bit of recent history on online video in general. In 2013, something really amazing happened in the advertising world: online video ads exploded. Two years later, we’re looking at some pretty astonishing and exciting stats regarding online video: it’s expected to reach nearly $5 billion in revenue by 2016 (nearly double what it was two years ago). Video is growing at such a brisk clip that it’s pretty much dwarfing the annual growth rates of other online display advertising.

There are lots of reasons why. Business Insider Intelligence notes that for  video ads, the click-through rate (CTR) is 1.84 percent — the highest CTR of all digital ad formats. Obviously, that CTR means that customers like video ads and engage with brands through them, and that advertisers make more money off them (even if they have to spend more to produce video ads), making it a win-win for both. Additionally, Business Insider Intelligence states that video ad revenue is expected to grow at a three-year compound annual rate (CAGR) of 19.5 percent through 2016.

But now let’s take a look at mobile video specifically, keeping in mind that according to Meeker, 87 percent of millennials — massive consumers of visual content offered by the likes of Instagram, Snapchat, and of course games — say that their smartphone never leaves their sides.

First of all, you can’t ignore the fact that these days, the best video on mobile is aesthetically pleasing because of the quality of the picture, sound engineering, and graphics. It’s partly because of these engaging attributes that that mobile video is the subset within digital advertising that is really going gangbusters: mobile video ad revenue is looking at an astonishing 73 percent CAGR through 2018. Yes, that’s more than three times the CAGR of video ad revenue in general. Drill down into the CTR of mobile video ads and you’ll see why: consumers are three times more likely to click on a video ad on a mobile device than they are on a desktop.

A great example of that kind of dramatic success lies with HotelTonight. Its mobile video ad strategy of zeroing in on travelers and business users in certain categories and presenting them with a highly engaging videos wound up increasing its install rate by 326 percent over previous acquisition campaigns. HotelTonight found that mobile video also has the advantages advantages of being more affordable and trackable than TV, and as HotelTonight’s CEO Sam Shank just noted in AdExchanger that mobile video provides “a good balance between storytelling, direct response and ROI.”

Should you need any more convincing that the success of mobile video ads is more than just a trend, but truly a game-changer, here’s a fact about its growth at AppLovin: After the first six months of being an available format on our platform, video ads represented just over a third of our revenue. This translates into happier, more engaged users; more effective advertising campaigns for brands; and better paid publishers.

There’s really no doubt about it at this point: mobile video advertising is a great opportunity for brands and publishers. Companies that choose not to pursue mobile video will likely quickly lose out to their competitors who do.

Adam Foroughi is AppLovin’s CEO.