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InMobi's Mobile World Congress Thought Leadership Whitepaper Series: Defining the next phase of mobile adverting.

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  2. 2. MOBILE WORLD CONGRESS DEVELOPERS AS INNOVATORS THOUGHT LEADERSHIP SERIES: DEFINING THE NEXT PHASE OF MOBILE ADVERTISING 13 February, 2011 As 2010 came to a close, it was clear that the debate over if “this will be the year of mobile advertising” ended with it. Good riddance! Mobile advertising is clearly here to stay and it’s absolutely huge. Ad spending figures aside, consumers have announced their intentions by flocking to mobile, and advertisers have no choice but to follow. While the journalists and bloggers busily draft lists and make predictions, at InMobi, we decided to take a slightly different approach. Rather than simply add to the noise, we took a step back and asked ourselves “what will define the next phase of mobile advertising?” We chose to develop a series of whitepapers and offer in depth analysis, for a select number of topics. For the series we discuss three concepts that we think will define the next phase of mobile advertising. We invited partners in the industry to collaborate with us, and invite you to join the conversation on twitter@inmobi or on our blog at James Lamberti VP, Global Marketing and Research InMobi, ABOUT INMOBI InMobi is the world’s largest independent mobile advertising network. With offices on four continents we provide advertisers, publishers and developers with a uniquely global solution for advertising. Our network is growing fast and we now deliver the unprecedented ability to reach 194 Million consumers, in over 115 countries, through more than U.S. $31.5 Billion mobile ad impressions monthly. We recently were selected as a 2010 AlwaysOn Global 250 Company to Watch in Silicon Valley. InMobi is venture-backed with marquee investors including: Kleiner, Perkins, Caufield & Byers and Sherpalo Ventures. The company has offices in London, San Francisco, Bangalore, Tokyo, and Singapore.© 2011 InMobi. Developers as Innovators Page 1
  3. 3. MOBILE WORLD CONGRESS DEVELOPERS AS INNOVATORS DEVELOPERS AS INNOVATORS With the first decade of mobile advertising now behind us, developers can at best be described as pawns in another man’s game (Steve Jobs?) or worse, completely marginalized by monolithic telco incumbents. In this next phase of mobile advertising, developers will become the primary focus. The industry that once sought to manipulate and control them, will now find it essential to cater to their needs. The developer community will be a significant force in innovation and wealth creation in the mobile industry for 2011 and beyond. TREND #1: (LACK OF) INNOVATOR’S DILEMMA Consumers are way ahead of the advertising industry when it comes to mobile technology. In a world where the majority of media consumption among smart device owners is now mobile, ad spending should be much higher than the 1% or 2% we see today. The reason we see disparity in consumer behavior relative to ad spend is the result of a fixed web innovator’s dilemma. For publishers and advertisers in developed markets, there is simply nothing forcing advertisers to change. Consumers can be reached in many ways at scale and the existing media industry has only recently become comfortable with fixed web. Under these conditions, no one should expect a rapid shift to mobile advertising among existing advertisers. Developers are different. They are 100% committed to mobile, have no preconceived notions about advertising, have substantial technical and analytical prowess, and collectively have a product or service desired by hundreds of millions of consumers globally. As Figure 1 below indicates, mobile apps are already a U.S. $2 Billion business for iTunes alone and growing faster than payments to record labels. Figure 2 shows the wealth creation in advertising occuring also. FIGURE 1. BIGGER THAN MUSIC: ITUNES MUSIC VS. APPS GROWTHS FIGURE 2. GAINING SHARE: IN APP APPLE’S CUMULATIVE PAYMENTS TO ITUNES SUPPLIERS BY MEDIUM AD IMPRESSION GROWTH $12,000m 40% Payments to record labels Europe $10,000m Payments to Developers 35% USA 30% $8,000m 25% $6,000m 20% $4,000m 15% 31 months 10% 34 months $2,000m 5% $0m 0% Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jul -10 Dec -10 Source:, Jan 2011 Source: InMobi Network, Jan 2011 The outcome is that developers will drive innovation in mobile advertising. They have billions to gain, nothing to hold them back, and are in control of their own destiny. This last point leads to our next trend.© 2011 InMobi. Developers as Innovators Page 2
  4. 4. MOBILE WORLD CONGRESS DEVELOPERS AS INNOVATORSTREND #2: THE MOBILE ECOSYSTEM’S BULLSEYEUsing an influencer grid (see below,) it’s easy to see why innovation will come from developers. The grid is organized intoseven mobile ecosystem segments going down the left side. Across the top, we have key areas of the mobile advertisingecosystem. In the cross sections we have defined three states: A notation of control, influence, or no influence. FIGURE 3. THE MOBILE ADVERTISING ECOSYSTEM: DEVELOPERS IN CONTROL Ad Targeting Reporting Ad Segment Technology Impressions Data & Analytics Spend Manufacturers NI I C NI NI Publishers C I NI I NI Carriers C I NI NI NI Developers control or influence all areas of the Developers C I C I C mobile advertising ecosystem Ad Networks NI I C I NI Ad Agencies NI NI NI NI C Brands NI NI NI NI C C = Control: ecosystem player has direct control of this aspect of mobile advertising I = Influence: Ecosystem player influence this aspect of mobile advertising NI = No Influence: Ecosystem layer has no ability to influence thisDevelopers are the only segment of the mobile ecosystem that have influence or control in every dimension. Furthermore, inthe next phase of mobile advertising the ad impressions controlled by developers will continue to grow, this will in turn pushan ever increasing share of data and ad spend into the developer segment. Developers will find themselves a highly soughtafter group given their pivotal role in the mobile ecosystem.© 2011 InMobi. Developers as Innovators Page 3
  5. 5. MOBILE WORLD CONGRESS DEVELOPERS AS INNOVATORSTREND #3: TRULY GLOBALAnother critical dimension to consider is the global nature of developers. Unlike the rest of the media community, geographyis irrelevant. Developers will chase a download frenzy in Norway just as happily and easily as one in Thailand. Figure 4shows just how global the mobile advertising app ecosystem is with the majority of iOS inventory outside the US andAndroid showing the same trend. FIGURE 4. A WORLD OF OPPORTUNITY: iOS AND ANDROID SHARE BY REGION iOS AND ANDROID BY REGION Region October Impressions Pt Chg Region October Impressions Pt Chg Asia 1,081,388,223 +20.9 North America 601,994,209 -37.0 North America 1,066,360,665 -32.4 Europe 320,438,296 +19.1 Europe 989,212,208 +4.7 Asia 219,570,270 +16.3 Middle East 177,921,371 +4.2 Middle East 6,469,837 +0.5 Africa 15,903,587 +0.2 Africa 3,667,987 +0.2 Others 85,868,084 +2.5 Others 14,976,589 +1.0 0% 3% 1% .5% 1% 5% Asia North America 19% 32% North America Europe 29% Europe Asia Middle East 52% Middle East Africa Africa 27% Others Others 31% Source: InMobi Network, Jan 2011 Source: InMobi Network, Jan 2011In this new, truly flat world, borders don’t matter. Developers will find ways to innovate in mobile advertising that we’ve yetto even consider. “Our experience on the Papaya network is that mobile advertising plays a key role in revenue generationacross all geographical demographics, whether it be the emerging markets, U.S. or Europe,” says Paul Chen, Director ofBusiness Development at PapayaMobile.Paul Chen adds, “As developers continue to find the most effective advertising solutions in different locations around theworld, they will drive innovation for specific advertising mediums in an effort to achieve maximum ad revenue in thosegeographical areas.”© 2011 InMobi. Developers as Innovators Page 4
  6. 6. MOBILE WORLD CONGRESS DEVELOPERS AS INNOVATORSTREND #4: DEVELOPERS ARE SAVVY BUSINESS PEOPLEMobile gaming is great example of evolved business models emerging from the developer community. It is a highlycompetitive industry and the competition continues to increase. Given this, dynamic developers cannot expect to create asuccessful, well monetizable game without proper business planning. Developers have taken note. They are increasinglybecoming more business savvy and understand the value in the implementation of effective monetization strategies.As an example PapayaMobile, Android’s largest social gaming platform, has continuously evolved the monetizationsolutions they provide to developers. “In game banner ads used to be the status quo for monetizing freemium games. Butas developers have become more attuned with other monetization and business solutions, PapayaMobile now must offertools for wall advertisements, in-app microtransactions, support for various billing solution, and others,” says Paul Chen.CONCLUSIONDevelopers are no longer an interesting byline of the mobile ecosystem. They are global, independent, innovative, andsavvy technicians and business people. The rest of us will end up following their lead in the next phase of mobileadvertising as a result.AuthorsJames Lamberti, InMobiContributions from Paul Chen, Papaya Mobile “Competition is tough and developers are beginning to realize that a business mentality is needed to evaluate which solutions will most effectively sustain and grow their revenue. From our perspective, we expect continued maturity of the various monetization solutions in the market, with offer, banner, and brand advertisements generating 30-40% of revenues going forward and microtransactions accounting for the rest.” Paul Chen, PapayaMobileABOUT PAPAYAMOBILE:PapayaMobile is an open, mobile social network for Android focused on casual gaming and virtual currency. Papayaoffers developers a fast and easy way to reach more than three million users worldwide and make more money instantly.Android users love Papaya because they can play multiple games and get a complete social networking experience allin one, easy to use app. Founded in 2008 by Si Shen and Wenjie Qian, Papaya is headquartered in Beijing and has anoffice in Menlo Park, Calif. For more information, please visit:© 2011 InMobi. Developers as Innovators Page 5