How developers can regain value in the mobile marketing chain

Sephi Shapira is CEO and founder of performance mobile ad company MassiveImpact.

Across all industries — old and new, mobile, web, and even traditional retail — whenever there’s a marketing opportunity, there’s a middleman. They add expertise, faster time-to-market, and additional value through the supply chain. They also take their cut. Legitimate business. Right? Well…

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In the mobile advertising ecosystem middlemen, like affiliate networks, exchanges, and ad networks, have become center-men. As fast-changing technology, complex ecosystems, and scalability challenges prevent developers from doing their own buying and bidding, these middlemen have taken control over channels between buyers and sellers, and the cash is flowing through them.

Mobile developers, creating the products themselves, get the leftovers.

App developers are experts in mobile content creation and focus on the creativity required to differentiate their offerings from the scores of new apps flooding the market daily. Finding ways to monetize these mainly free apps can therefore be daunting, as they try to stay competitive with the abundant competition. Relevant, well designed in-app advertising is becoming the easy, user-accepted solution to finance mobile development, monetizing on every single install without charging users or compromising the product.

The challenge is ad relevancy, currently a major hurdle for the mobile app ecosystem.

Ad offerings need to match each end user individually in order for ad space to have any true value for advertisers — and this is precisely where ad networks, affiliate networks, RTBs, exchanges, and others come in to mediate and take their chunk of the publishers’ profits. Current manual solutions still used by the ‘middlemen’ to leverage traditional and manual ad-serving techniques incur disproportionate commissions of typically 25 to 50 percent each, carried by both the advertisers and publishers.

How can developers regain pole position?

Publishers must first recognize the motive of self-interest for the middleman. Ad networks are set up to push for clicks because their hefty commissions depend on it. The end game is solely an attractive banner. No incentive then to track or share consumer information that otherwise could be spun into gold by advertisers. This dysfunctional relationship de-values inventory and obstructs additional profits for the publisher.

So it won’t be easy and the middleman’s job isn’t yet fully redundant, but the good news is it can be done. There’s no advertising without ad space and no optimization of that space (for ad relevancy and ultimately sales) without relevant targeting. Emerging technologies now effectively match the end-user to the right offer, based on each user’s real time mobile behavior, ensuring a dramatic increase in both the publishers’ bottom line and the advertisers’ mobile campaign efficiency.

An advanced technology called ‘Real Time Performance’ allows for serving ads, based on each user’s mobile purchase history, eliminate the manual matching currently conducted by the middlemen, and the commission involved. All sides win: Ad networks get better targeting capabilities through direct access to the end-user, consumers get more relevant and meaningful offers and publishers gain control over their own mobile traffic assets, while multiplying their income along the way.

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This also switches the business model. Ad networks can now offer deep in-app targeting technology. This will provide networks with the ability to profitably guarantee advertisers’ ROI on their mobile marketing budgets, or ‘Mobile Performance.’ At this point, ad networks will no longer get paid on a click of a banner, which is easier to optimize for, but rather push for actual transactions, using technology created and optimized for scalable campaigns that turn promotional dollars into sales.

China, the world’s fastest growing smartphone market already operates this way, with advertisers demanding direct ROI on mobile marketing campaigns. The rest of the world is fast following China’s lead.

Mobile marketing is still in its infancy

Its learning curve is an accelerated reflection of the web advertising industry in the early 2000s. A banner-ad click is still the most common model, despite its great limitations for advertisers who struggle to bridge the gap from click to buy, and for publishers who continue to hand over substantial proportions of their income to the ad networks, affiliates and others who are still failing to accurately serve more relevant ads to users.

Consumers also miss out with too many irrelevant ads, a shame really because well-implemented in-app advertising could provide great value on all fronts.

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Filling this gap is inevitable and market demand, especially on the small, always-on mobile screen, is more relevant than ever. The point of impact is precisely that point of taking advantage of the personal experience that is mobile, where advertisers are able to serve individualized advertising to each customer, at a relevant time. Technology doesn’t care where a customer is located, what language they speak and in what time zone.

The result is more direct bridge between advertisers and publishers, leading to a more profitable ecosystem that benefits all players, eliminating the unnecessary middleman with sophisticated, scalable, cost-effective technology.