In-app advertising revenue is booming, but users are getting turned off by the content
The Issue
Consumer habits, which have been further accelerated through innovation and mobile technology, are creating new and exciting ways to reach customers. These interactions are becoming even more immersive with new technologies like augmented reality and artificial intelligence, and brands are now able to reach customers through authentic communication that provides value and builds trust. Today, it is more likely for customers to browse with their smartphones when considering a purchase, which has also driven brands to invest in mobile advertising.
Advertisers did not adopt SMS until the year 2000, while mobile data services were introduced nine years earlier in Finland by Radiolinja (now Elisa) on the 2G GSM standard — the world’s most common mobile technology. A Finnish news provider decided to utilize the technology; offering free news headlines via SMS, sponsored by advertising. This led to more experimental mobile ads and mobile marketing initiatives, which also resulted in the world’s first mobile advertising conference in 2000 that was sponsored by the Mobile Marketing Association.
Africa is one of the fastest-growing regions in the app market. With a young and mobile-savvy population driving a booming app culture, Nigeria leads the growth of the continent’s mobile app installs with a 43% rise between Q1 2020 and Q1 2021. South Africa’s market increased by 37% and Kenya increased 29% according to a report by Appsflyer and Google. Clearly, this reflects a booming market for in-app marketing.
Largely, because SMS was such an unobtrusive means for advertisers to communicate their brand messages, mobile phone companies, advertisers and the media industry all took notice of the emerging technology. In fact, by 2015 consumers were spending 88% of their online time in-app, with just 11% on mobile web. This huge shift was also largely due to an increase in new mobile ad formats, including the highly effective mobile video. In twelve months, Facebook, for example, grew its revenue from virtually no mobile advertising revenue to earning 41% of its overall revenue through mobile app.
“We’ll see a larger share of mobile advertising budgets shift towards mobile app inventory versus the mobile web, which is indicative of where consumers are spending time on their smartphones and devices,” said Karim Rayes, Chief Product Officer, RhythmOne. “Location-based targeting will continue to be top-of-mind and become more elaborate, and creatives will focus on video more so than display. We’ll also see app-ads.txt become a mandatory requirement for app publishers to help mitigate the increasing app fraud issue — and to continue combating fraud, savvy advertisers will continue to work with partners that maintain direct publisher relationships and offer transparency surrounding supply and measurement alike.”
The shift of digital advertising budgets from mobile web to mobile apps will continue as local and hyper-local targeting will become even more widespread among online ad platforms. A previous report in 2018 already revealed the power of in-app ads: According to Medialets, the click-through rates for apps is 0.58% whereas mobile web only has a 0.23% CTR. A different study also showed that in-app ads perform 11.4 times better than normal banner ads, demonstrating why in-app ads are often superior. Given the high correlation between CTR with leads and conversions, this is one of the primary reasons companies have kept targeting users through in-app advertising.
The Question
With the massive growth of revenue and investment in in-app advertising, experts have also warned that consumer privacy will play a more prominent role in ad targeting based on people’s data collection. A key strength of mobile marketing is the ability to target individual devices with Mobile IDs, but data privacy is becoming a significant concern for mobile users following high-profile data breaches and unauthorized sharing of personal data, which could temper growth on mobile.
Part of the reason may be because consumers now spend more time consuming media, and we live in a time where ads even appear in-between personal stories of our network. Yet consumers prefer Netflix-like experiences where interruptive ads seem outdated, archaic, and distracting. But even as the market revenue continues to grow in Nigeria, consumers now have newer reasons to detest these ads – they have become highly intrusive. What makes them intrusive to consumers has been traced to clutter, a feeling of dissonance and lack of coherence with the advert placement of the ad. Some of those elements are outside of their control, but they are less impactful due to horrible designs.
The pushback against intrusive ads and companies using data in invasive ways has increased over the past three years. For example, the #DeleteFacebook movement trended due to the social network’s ongoing scandal with Cambridge Analytica, in which data was collected without users’ permission for voter targeting purposes. Facebook recently shut down its Partner Categories, a product that enables third-party data providers to offer their targeting directly on the platform, but some marketing leaders believe Facebook may be reconsidering that move.
Culture Intelligence from RED’s national focus group, What The Streets Are Saying analysed the exposure of Nigerian consumers to in-app advertising, its effectiveness and how they feel about it.
The pushback against intrusive ads and companies using data in invasive ways has increased over the past three years. For example, the #DeleteFacebook movement trended due to the social network’s ongoing scandal with Cambridge Analytica, in which data was collected without users’ permission for voter targeting purposes.
What The Streets Are Saying
For the study, all the respondents who participated are smartphone users, or have previously used one. In addition, 100% of the respondents confirmed that they have been exposed to in-app advertising content. Asked to select the major platforms that consistently push brand adverts that they consume on their gadget, a majority of the respondents (87%) indicated Facebook as a significant platform, followed by Instagram, with game apps in third place at 42%.
On whether they find the in-app ads intrusive, 69.3% confirmed they do, 22% say they do not, while about 8% were uncertain. When asked if this intrusive advertising creates a negative perception about a brand in their minds, 51% of the respondents – mostly between 18 – 25 years – explained that the more an advert interrupted their phone usage, the more they disliked the advertiser. Just 16% said no, while the remaining 33% explained that they had no opinion on the issue. Interestingly, this could be related to a different issue on customer knowledge, especially in understanding what actions consumers can take to address what may be a problem.
Lastly, on whether they have actually purchased a product due to these advertising, the respondents were almost equally divided. About 52% confirmed ‘yes’ while about 48% said ‘no’.
According to Business of Apps, consumers and internet users want more choices and control over their own data and which ads they see, and the option of participating in “ad-free” zones. In a previous research by Marketing Dive, 4 out of 5 (82%) advertisers said mobile device identifiers, which are used to pinpoint specific smartphone users, are important for ad targeting, but 53% said privacy implications are an “urgent issue”. Currently, more countries and companies are beginning to adopt stricter data privacy rules.
“For Ads to become less intrusive, brands need to listen to the preferences of their audiences,” said Dare Babatunde, a communication expert and project manager. “Consumers want to move away from behavioural targeting ads ecosystems into Ad-free zones, and many of them have no problem subscribing just to avoid them. The downside is that brands who do not understand how much they can become a nuisance can actually lose the customers offline too”.
Over the past year, in-app advertising revenue has increased significantly, with 213% in South Africa, 141% in Nigeria, and 74% in Kenya with more people on their phones due to the lockdown; while non-organic game installs (from ads) increased by 56% as game marketers were increasing spending in response to increasing consumer. So, what would such a “win-win” ecosystem for brands, apps and audiences? Brands cannot place such ads at the centre of its marketing strategy. Consumers who feel ads are becoming too invasive will only continue to take actions that brands, apps and advertisers should take more seriously. For them, especially millennials and Gen Z, it means supporting systems that feel more aligned with decentralisation, and less aligned with ad-based practices.
Insights on What The Streets Are Saying are drawn from data collected through in-depth interviews and surveys with our 500-member consumer panel spread across the country, including 100 culture insiders, who are all leading thinkers and doers across media and marketing.
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