Where Should Your Mobile Ad Budget Go?

We’ve received many requests to discuss each comparison of our recent infographic on in-app and mobile web channels in greater detail. It’s taken a little while, but what follows is a detailed treatment that will help you decide where to allocate your mobile ad budget.

When allocating your budget, it can feel like there is a multi-front battle taking place. At first glance, everything looks like it holds the same level of importance, making it difficult to decide which front to address.

What to do, what to do? Admittedly, it will never be a simple black and white answer. If you wanted black and white, you should’ve gone into accounting. Alas, we’re in advertising and operate in shades of gray.

Reach

People spend more time in-app than mobile web…quite a lot more. While great for publishers, session length is not always of great importance for advertisers. For instance, most advertisers implement frequency caps that limit the number of times an ad is shown to the same user.

What is important for all campaigns? Reach

Mobile users appreciate the convenience that mobile web browsers provide for accessing content. Specifically, users like that they can access the majority of their content without the need to switch between apps.

Meanwhile, the Google-spearheaded AMP project to make mobile pages load faster is demonstrating promising results. As convenience is maintained and load times reduced, it is likely that mobile browsers will continue to give greater access to unique and varied users.

However, there is a trade-off: campaign impact. It is like adjusting the nozzle of a water hose. You can adjust the nozzle to spread the water over a greater area, but it will lose pressure. You may reach more people, but your message will have less impact.

Winner — Mobile Web…with a trade-off

Targeting

Ad targeting is a function of precision and persistence. The more information, the more precise your targeting; the more persistence, the greater amount of information you can gather.

Smartphones have a Unique Device Identifier (UDID), a permanent serial number for each handset. Due to privacy concerns, advertisers have access to semi-permanent proxies, known as advertiser IDs.

These IDs anonymize user while recording their in-app behaviors. This data can be sliced, diced, and sold to advertisers who use it to tailor their ads to the user. Apps also provide the user’s precise longitude and latitude.

Coupled with the granularity of demographic and behavioral information, apps provide incredible targeting opportunities to advertisers

Meanwhile, mobile web browsers rely on network-based IP addresses. These addresses provide relative approximations of who and where the user is. For example, many users can have the same IP, such as in office buildings.

Of course, when a user completes an action, a proxy ID can be created and the user is “identified”. However, the user can’t be removed from the ad pool because the proxy ID is attached to the network IP.

Advertiser IDs are also more persistent. Although users can change them and limit ad tracking altogether, the majority of users don’t appear to care to so long as some benefit is provided.

Cookies are still the standby for mobile web browsers and, are less stable and persistent than advertiser IDs…they typically don’t last for more than 30 days. The result? Less information to target with.

Winner — In-app

Engagement

Targeting precision and environment are the keys to engagement. Advertisers can tailor their ads better when more information is provided. A well-tailored ad is like a bespoke suit, it fits better.

Even if apps and mobile web provided the same level of targeting, mobile web can’t match the app environment. The app environment is curated and immersive — this encourages greater engagement.

When features are added to an immersive environment, the features become an extension of that environment. The best amusement/theme parks do this, turning goods into features of the environment.

The same is true for in-app ads, especially video. Think back to an in-app game you’ve played; it probably imposed game breaks through video ads. How are they designed? They may or may not have CGI sequences, but all provide examples of gameplay.

Even if the video has a different micro theme, e.g. genre, the macro theme is identical. Thus, it is psychologically camouflaged and considered less intrusive because of its theme congruence.

Coupled with targeting, in-app ads can possess both micro and macro theme congruence, encouraging even greater engagement. It’s simple, if we like something, the worst we can feel is neutral toward similar things.

Winner — In-App

Conversion

There are a number of factors that influence conversion. Ad format, design and copy quality, targeting and timing are only a few of them. However, at the end of the day, we’re talking about engagement.

These and other factors underly engagement, which underlies conversion

Generally, app conversions are on another planet than mobile web. Why? Apps are like prime real estate; the space is limited, the location ideal, and anything within it derives value from the space. Likewise, the value of the space can be enhanced by what is placed within it.

Ads within the app derive value from the mere fact that they are within the app and ad quality also influences app value — the relationship is bidirectional. For example, if two apps provide the same functionality, features, and number of ads, the user will choose the app that has higher quality ads.

We can also infer the user’s affinity for an app from the amount of time he uses it. Remember from above, we tend to feel positively towards things we consider similar to those we like.

We also tend to feel positively towards those things that are liked by the things we like — it borrows credibility. An ad is essentially borrowing credibility from the app, which makes us more likely to engage with them…and remember…

Engagement produces conversions

Winner — In-App

Conversion Tracking

A draw is a draw…Let’s leave it at that and continue.

Winner — Draw

Budget

Aside from having less advertising space than mobile web, fewer formats are available in-app and the popular formats have high conversion rates, such as interstitial video.

As discussed in Targeting, in-app provides better targeting. With better targeting, traffic quality improves. Additionally, app store approval processes are stringent and apps are considered more brand safe as a result.

These factors drive prices upward.

Aside from the above, the mobile web market shares the same traffic pool with desktop. In general, if supply is saturated, prices will be lower. These factors drive prices downward.

Therefore, you get more bang for your buck when you advertise through mobile web. The further you stretch your budget, the more boost you get with  your reach as well.

Winner — Mobile Web

Ad Blocking

Ad blocking is here to stay, and advertisers are noticing. I won’t quibble over their level of impact here, but everyone can agree that there IS impact. Yes, ad blockers are available for both apps and mobile web browsers.

However, it’s unlikely that there will be widespread adoption in-app because people don’t like to pay for apps and likely never will. Although publishers can monetize their app through other strategies such as in-app purchases, paywalls, subscriptions, sponsorship, etc…it’s not enough.

It is partially due to a cognitive bias called anchoring, which directly impacts our perception. For instance, if two people are told that a building is around 200m and later asked to estimate its height, their estimates will “anchor” around 200m, regardless of its true height.

The app market anchor is 0…a big fat zero. What does this mean? No ads, no apps.

Winner — In-App

So, which channel wins the battle for your mobile ad budget?

If you just look at the score, it appears that in-app is superior to mobile web. But, appearances are misleading in this case. Mobile web still has a place in advertising and best practices would suggest that you should use both channels.

You have to generate leads and convert prospects. By using both channels, you have more opportunity to bring more people into the top of your funnel (lead generation) while sending more out of the bottom (conversion).

What we have here is not two opposing channels, but two sides of the same coin. Each channel has its respective role and the importance of that role will change as your goals change.

If your goal is to grab more leads while stretching your budget, then you will tip the scale toward mobile web. If you’re happy with the top of your funnel and want to concentrate on the bottom, then you will tip your budget towards in-app.

But, when you change your goals, you change your balance. More likely, you will most often take a balanced approach with your mobile ad budget. So, the question isn’t where should you allocate your budget, it’s which channel should you give greater weight to now?