How the industry can help mobile developers survive "Apptropolis"

by Pat McCarthy, SVP, Marketing, AppNexus

As of early 2016, approximately 1.6 million apps are ready for download on Google Play. Meanwhile, on a neighboring service cloud, 1.5 million apps are available on Apple’s iOS App Store. That’s not even counting other major app stores like Amazon (400,000+ apps), the Windows Phone Store (340,000+ apps) or Blackberry World (130,000+ apps). Nor does that take into account additional app “megastores” in other parts of the world like China’s Wandouja, which adds a stunning average of 500,000 new users to its platform per day.

Welcome to a form of digital sprawl I call “Apptropolis.” While it’s not a city made of brick-and-mortar, Apptropolis has plenty in common with the boomtown megalopolises that dot our planet. It presents a near-constant stream of obstacles to the people striving to make a living within its prescribed “city limits,” foremost being the mobile developers who build apps in hopes of monetizing them.

Let’s not forget our thriving mobile ecosystem is comprised of struggling individuals. Rovio, the Helsinki-based mobile games studio, was actually on the verge of bankruptcy on the eve of releasing its multibillion-download app, Angry Birds.

Given the number of apps competing for an audience, it’s difficult enough for mobile developers to win the users that their app needs to generate a profit. But winning – in this case – isn’t even half the battle. It’s more like one-thousandth. According to Andrew Chen, Head of Driver Acquisition at Uber, today’s average Google Play app loses 77% of its daily active users (DAU) within 72 hours of initial download. In other words, unless your app is on par with the likes of Uber, Facebook or Clash of Clans, the odds of a high user churn rate are almost certain. Fickle mobile users will simply dispose of your newfangled app in favor of another, newfanglier one.

A recent study, conducted by AppsFlyer, asked users to list the reasons they chose to uninstall certain apps from their mobile devices. A full 29% of respondents indicated that “Intrusive ads” were a principal reason they chose to uninstall their apps.

That’s way too high a percentile. In fact, it’s unacceptable. What should we, as an industry, do to fix it?

First, we accelerate new and better mobile in-app video advertising formats like outstream video. This will enable all publishers – and not just video publishers – to monetize with video advertising. We already know that TV viewership is tumbling steadily in favor of digital devices, and many of these new viewers access their favorite movies and TV shows via mobile apps. But there’s another parallel between showbiz and app-biz.

Unlike the mobile web, mobile apps aren’t able to use cookies to track user behavior and target them with relevant ads. Instead, they learn about the demographics of a given app’s audience by looking at the people who rate it (e.g. women aged 18-24). It’s the same way that advertisers have long targeted TV shows with ads. Given the fact that studies show that outstream video ads increase brand exposure 10% more than their earlier pre-roll video cousins, demographic-based mobile targeting is the way they will be successful in advertising across wide swaths of Apptropolis. App developers should look at the TV buyer market, enrich mobile impressions with demographic data, and sell into video buyers.

Second, we should implement programmatic native in-app advertising on a scale that has yet to be attempted. It’s long been proven that native ads have higher CTRs than display ads, especially for mobile. But our industry should also develop new ways to use native advertising in gaming apps so that they become a seamless part of the game experience. The MRAID mobile interstitial ads of today should be replaced with outstream video, natively pre-cached into feeds.

Finally, we need to find better ways for app developers to maximize their yield. Header bidding helps display publishers improve their total yields by allowing multiple ad exchanges to bid for their inventories on a level playing field rather than just one customary exchange. Having multiple ad exchanges vying for your inventory means having a larger supply of relevant ads to serve to your viewers.

New “mobile” versions of header bidding are now cropping up in the market, allowing mobile developers to partner with multiple mobile ad networks simultaneously. Given the success of header bidding, it stands to reason that mobile app developers should adopt these new tools as soon as possible.

As an industry, we often find ourselves engaged in Herculean feats of hand wringing about the need to “create better ads,” ads able to engage and retain the interest of users across multiple digital channels. Real solutions already exist on the market that can help app developers monetize. It now becomes a question of integrating and scaling these solutions into the marketplace that’s able to provide them.