How Does In-App Advertising Work? – Understanding The In-App Stack

Smartphone users spend 90% of their time in apps versus 10% on mobile web, making in-app advertising one of the most important and valuable marketing channels for modern brands. Unfortunately, taking your first steps into the space can feel like jumping into the deep end of a swimming pool. As mobile technologies become more powerful, the opportunity for advertisers will only grow, but with it comes a wealth of technical jargon that can be intimidating.

To better understand in-app advertising and realize its full potential, marketers must first understand the in-app stack — or the levels of technology that make it all possible. Accounting for the full ecosystem can help developers and advertisers achieve mutually beneficial outcomes, but it all starts with a high-level understanding of the environment as a whole.

 

What layers make up the in-app stack?

The structure of the in-app stack remains fairly consistent across mobile platforms thanks to the historically well-defined relationships between users, advertisers, and publishers set in place by the world of web advertising in the early days of the internet. That said, the in-app stack does have some unique aspects that set it apart. From the bottom up, the layers include:

  • Mobile Distribution Platforms
  • Development Environments
  • Analytics & Measurement Platforms
  • Backend and Liveops Services
  • Marketing Automation Tools
  • Advertising Networks
  • Ad Mediation Solutions

How Does In-App Advertising Work?

In this article, we’ll take a closer look at each layer and highlight the role it plays in making in-app advertising such a valuable opportunity for modern brands.

 

Mobile Distribution Platforms

Examples:

  • iOS – The Apple App Store
  • Android – Google Play

The base of the in-app stack starts with mobile software distribution channels — where users can browse and download apps. The largest platforms in terms of market share are Google Play and the App Store, but this layer also includes the Microsoft and Amazon app stores, among others.

For advertisers, what’s most relevant here is the volume of time and attention modern audiences spend engaging with the apps accessed through these platforms. A recent Newzoo study estimates global smartphone adoption will pass 3.8 billion users by 2021, or nearly half the current world population. Furthermore, mobile users spend 90% of their time in apps as opposed to mobile web.

Combined, these two figures equate to a massive advertising opportunity. Realizing this opportunity starts with understanding the tools used to create the apps we know and love.

 

Development Environments

Examples:

  • Unity 3D
  • Unreal Development Kit
  • Java
  • Objective-C
  • Swift

This layer includes the programming languages, game engines, and integrated development environments used to build the apps that fill the distribution channels mentioned above. On mobile devices, roughly 50% of all gaming apps are based on the Unity engine, followed by the Unreal engine. Outside of these two, however, most developers build apps using each environment’s native programming languages: Java for Android, or Objective-C/Swift for iOS.

In a gaming ecosystem, developer platforms can include baked-in support for in-app advertising provided by the environment itself. For example, Unity features a built-in advertising API to help developers monetize their games and apps without having to integrate third-party SDKs. The option is cost-effective for smaller teams with limited advertising expertise, and is backed by Unity’s official support channels, but offers limited returns compared to more sophisticated ad operations involving multiple networks and/or mediation solutions.

Mobile apps are intended for massive audiences, however, and keeping track of what’s going on in your app can be challenging without the proper tools, which brings us to the next layer of the stack.

 

Analytics & Measurement Platforms

Examples:

  • GameAnalytics
  • deltaDNA
  • Adjust
  • AppsFlyer
  • Singular
  • Tenjin
  • Kochava
  • Mixpanel

Continuing up the stack we come to the tools used to track data resulting from user engagement and digital marketing. As of 2019, the right tools can allow publishers to track just about anything, including user-level data. Developers measure KPIs like retention rates and average revenue per daily active user (ARPDAU) to optimize revenue and reduce churn. Marketers, meanwhile, seek to understand demographic and behavioral data to acquire users more efficiently.

Analytics measurement tools — such as App Annie, Localytics, or Tenjin — are essential to understanding how users engage with apps as well as in-app advertisements. They act as eyes and ears for the entire technology stack, collecting and analyzing data from top to bottom. They also make it possible for app marketers to conduct A/B product tests, generate actionable insights, and leverage the most effective monetization strategies. For advertisers, these tools unlock sophisticated targeting capabilities, measure return on ad spend, and help attribute revenue to discrete player segments.

 

Backend & Liveops Services

Examples:

  • Firebase
  • Playfab
  • Amazon Game Tech

Backend services include all features not built directly into a mobile device’s operating system, like account credentials or a tracking currency balances in a mobile game. Developers and advertisers access these tools using mobile backend as a service (MBaaS) providers that bridge an app’s frontend with any backend functionality. Google’s Firebase and Microsoft’s Azure platforms are prime examples.

Of all in-app stack levels, backend services tend to be underutilized by advertisers, though they have the potential to facilitate unique advertising partnerships that can make brands stand out. Although typically uncommon, one example is Sephora’s campaign with Puzzle Social, during which they promoted a Sephora-branded crossword puzzle in the publisher’s Daily Celebrity Crossword app.

 

Marketing Automation Tools

Examples:

  • Tapjoy
  • Airship
  • Leanplum
  • Braze

These tools help marketers manage customer relationships at scale. As users interact with an app, automated processes can be made to periodically trigger specific messaging or functionality — such as ad impressions or in-app purchase offers. Developers can also leverage marketing automation tools to deliver push notifications that alert audiences to new promotions or to call users back after a period of inactivity. This strategy can be incredibly valuable, as push notifications have an average CTR of 7.8%, a figure that has grown each year since 2016.

Marketing automation is where Tapjoy first appears in the stack. Marketers can learn more from our whitepapers and reports to better understand how they can use marketing automation tools like ours to glean more value from their users.

 

Advertising Networks

Examples:

  • Tapjoy
  • Facebook Audience Network
  • Chartboost
  • ironSource
  • Unity Ads
  • AdColony

Ad networks are the bridge between developers and advertisers, often enabled through an integrated in-app SDK. The purpose of an ad network is to aggregate available advertising supply, sell that supply to advertisers, and fulfill the ad requests by delivering campaign creative to the appropriate audience segments. When combined with marketing automation and mediation, this process can be scaled, optimized, and targeted to maximize performance for advertisers while earning publishers the highest possible eCPM. As an advertising network, Tapjoy provides these services to our partners alongside our other in-app stack features, like ad mediation.

 

Ad Mediation Solutions

Examples:

  • Tapdaq by Tapjoy
  • ironSource
  • MoPub
  • Appodeal

Mediation gives app developers the ability to prioritize advertising demand from multiple ad networks and exchanges in order to ensure fill and earn the highest possible revenue per impression. Publishers can manage their mediation processes manually, automatically, or through a hybrid model. In the manual model, demand is prioritized in an ad waterfall, based off of pre-determined bids and negotiated payment terms. In 2019, however, more publishers are discovering the benefits of managing ad monetization programmatically through a process called header bidding, wherein multiple SDKs bid on ad impressions in real-time, ensuring the highest possible revenue for publishers.

Tapjoy provides programmatic mediation services through Tapdaq by Tapjoy. Take a look at our mediation resources for more detailed examples of these features.

 

What the In-App Stack Does for Marketers

Historically, advertisers have focused their efforts on the ad networks portion of the in-app stack. In recent years, however, they’ve begun to view the entire in-app landscape more strategically. For example, advertisers increasingly leverage the in-depth user data offered by analytics platforms to optimize targeting and attribution. They plan campaigns with knowledge of developer marketing automation and strive to differentiate their presence. They may also choose to bid for ad space programmatically to maximize ROI. Some brands even engage in creative partnerships with app developers to leverage backend tools for native advertising placements.

Foundational knowledge of the in-app stack gives marketers a greater understanding of the user journey and the tools required to optimize their media spend. Even beyond the stage of ad delivery, this background is essential for comprehensive data collection and analysis. With this understanding, marketers can optimize campaigns to account for the entire stack, increase conversions, and elevate their in-app advertising strategy.

For more information on navigating the in-app stack, contact Tapjoy’s mobile advertising experts today.

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