Smaato White Paper Global Choices in Mobile Advertising January 2009

open mobile advertising

Global Choicesin Mobile

Advertising

WHITE PAPER

International Monetization:Trends & Findings for

International Mobile Publishers

This whitepaper is presented to show some options that mobilepublishers and developers have to monetize their audience:customers that have chosen to either download the app or browse through the content on a mobile website.

A quick overview touches upon ad network performancemeasured in fill rate or response time and what that means for the choices publisher have in order to maximize the Ad ARPU of their inventory.

As successful mobile publishers quickly become attractive to an international audience, global considerations as well as learnings from the current app store economy are touched upon.

Please consider also reading the whitepaper on “Mobile AdOptimization” that was published in June 2009 and can be obtained at www.smaato.com/whitepaper as a free download.

Summary

Many mobile publishers are striving to build audiences with worldwide reach. Faced with several monetization options, many have found that the “one-size-fits all approach” does not work.

Put simply, publishers choose between one of two options: either build up their own internal full time ad operations team or work with mobile industry partners who grasp the advertising ecosystem with all of its local nuances and global complexities to maximize advertising dollars.

Smaato has been on my radar for the past few years and is a leadingsolution for publishers looking to monetize with mobile advertising.

Matthäus KrzykowskiMobile Coordinator VentureBeat & Co-Chair MobileBeat

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© 2010 Smaato Inc. White Paper on Global Choices in Mobile Advertising

Monetization Choices for Publishers with a Worldwide AudienceThere are two broad categories of mobile publishers: developers of mobile applications and publishers of mobile websites. Mobileapplications can be monetized by charging per download orsubscription, incorporating up sell opportunities (e.g. for new levels in a game through micropayments), or through mobile advertising.

Mobile websites have fewer options than mobile applications since charging for content is difficult (e.g. newspapers are finding itdifficult to charge for digital subscriptions). Thus mobilewebsites are more likely to turn to advertising as its core monetizationstrategy (besides truly innovative virtual goods or personal adplacements, introduced by companies like Flirtomatic in the UK).

Publishers who chose the mobile advertising route must makedecisions regarding selection of partners, technologies,regional approaches, targeting parameters as well as collectingdemographic data about individual users. This demographic data can be used anonymously to improve targeting and ultimately the ROI of the mobile inventory.

The following are different types of mobile advertising partners with whom publishers can work with - they can choose one ormultiple partners in the list below. However managing relationships with these entities require varying degrees of internal staffing so in choosing partners, one of the fundamental questions publishers face is deciding where their core competencies lie – do they focus on creating innovative mobile applications and/or mobile content, or do they want to dedicate a considerable amount of manpowergetting into the advertising and media space:

The broader the global reach of the Publisherpublisher, the more challenging the task of procuring and managing advertising for their audience in multiple countries.


1. Brands / Marketers (Direct Sales Accounts) – requires owndirect ad sales team, acquiring ad server and ad operationstaffing to run direct advertising.

2. Mobile Advertising Agencies - requires own direct ad salesteam, technical integrations with agency ad servers, and adoperations staffing to run direct advertising.

3. Mobile Ad Networks (Marketplaces) – requires technicalteam to integrate into different Mobile Ad Networks, as well asinternal ad operation staff to approve campaigns and ensureoptimization of traffic.

4. Mobile Advertising Optimizers/Aggregators – least amount ofeffort since these entities provide access to multiple Mobile AdNetworks and in some cases Mobile Advertising Agencies and often provide ad servers or access to an ad ops team to serve for Directdirect ad campaigns should the Publisher publisher or Mobile Advertising Optimizer have direct relationships with Brands/Marketers/Mobile Advertising Agencies.

Ad network response time is another important factor for maximizing real time ad optimization.Publishers obviously want to ensure that the userexperience of their mobile app or mobile website is notinterrupted or hampered by slow banner display loading time from ads being routed via ad networks, ad optimizers or in house ad servers for that matter.In an effort to maximize the average advertising revenue per user, the likely scenario is that multiple sources of mobile advertisements (ad networks, ad optimizers or in house ad) are sequenced in a chain to maximize fill rates. If the chain includes several ad networks that are sorted only by expected price, but the performance of the first ad source is impaired

Ad Network Fill Rates

Ad Network Response Time

Mobile publishers invest time and effort in building cool apps and/or mobile websites with the goal of monetizing their user base. Should they choose mobile advertising, theiraudience reach is measured by the number of pageimpressions generated.

In choosing mobile ad networks to fill this potential mobile inventory there are some considerations to be made. Fill rate is usually No. 1 after the overall pricing considerations: how high is the average eCPM in the USA? Are there options to the CPC model in Asia-Pacific? Should I employ my own sales staff? Etc.

Average fill rates provided by ad networks vary by country,time, publisher category, etc. Recent Smaato metrics data reveal that theaverage fill rate of ad networks worldwide vary between 26% to 77% as shown in the graph to the right.

The fill rates provided by ad networks also vary by the category of thepublisher’s content (e.g. sports, entertainment, or mobile socialcommunities). Increasingly, performance based mobile ad campaigns are the dominant currency based on CPC (cost per click) models. As might be expected, the average click-through-rates (CTR) in mobile social communities are very low compared to news sites. That being said, ad networks calculate with anexpected CTR of each category and request publisher inventory often based on the requested category site or app.

As a publisher, choosing an ad network partner purely on fill rate ismisleading.Looking at the expected effective Price (eCPM – cost per mille/thousand page impressions) together with the fill rate is crucial. MobileAdvertising Optimizers provide a value added service of automatinganalytics and business rules to maximize both eCPM and fill rates by managingand optimizing ad inventory from multiple ad networks and some on a global scale.

by slow response time, then the publisher risks an empty ad impressionaltogether.

The graph on the right shows that the network with the highest fill rate (third from the right) also has the second longest response time. This introduces the risk of no ads being delivered because if the response time for the first in the chain is too long, there may not be enough time left for a second request to fulfill the ad request.


%

msec.

© 2010 Source: Smaato Network Data Analysis

Smaato Index – Fill Rate of Mobile Ad Networks, December 2009

The Mobile App Phenomenon

Mobile is Global – Advertising is Local

Everyday an increasing number of applications are flowing in to market places run by handset providers. Apple has been the market leader with the launch of their app store which now boasts over 100,000 apps.

The rise of mobile app marketplaces with an easy to accessecosystem and cohesive developer program has created newmonetization opportunities for mobile developers. Not so long ago, there were only a few sites such as Handango or Motricity who were the primary players in the Smartphone market providing a marketplace from which apps could be downloaded from their online portals.

Many successful mobile publishers or app developers quickly find that they are building an audience that spans the globe. For example, successful mobile social communities have seen that in addition to a dominant position in their home market, that suddenly, they are receiving traffic from all across the world.

A significant amount of users will be grouped into three large regional pockets: USA, Asia-Pacific and EMEA. Within EMEA, the UK and South Africa have the highest concentrations of mobile users.

Challenges for a global presence:


1. Publishers with a global audience face the challenge of providing technical support questions in various languages and thus face the following question: can additional global traffic add to the bottom line for its mobile advertising efforts, or can global audiences only be monetized through costly efforts or through third party mobile expertise?

When calculating the ROI to extend mobile advertising effortsglobally, Publishers must take into consideration that there are countries and regions with very low CPC campaigns (often the case in emerging markets) which require the same and possibly moreattention to detail than monetizing in developed markets where there are higher CPM based ad revenue streams.

2. The ability to combine global reach along with anunderstanding of local markets is important for successful mobileadvertising on a global scale. Identifying ad networks in each regionand developing partnerships on an individual basis is a timeconsuming and costly task for publishers to take on themselves. Mobile Ad Optimizers who operate on a global scale can provide this value added service to mobile publishers who are looking for access to leading local ad networks in each region to maximize coverage.

The mobile advertising ecosystem as a whole can only benefit fromservices that span the globe, but advertising budgets still remainentrenched deep in local markets.

SOMA™ – The Mobile Advertising CloudGiven all the choices facing a mobile publisher with a worldwide audience, adding a Mobile Ad Optimizer to the mix makes a lot of sense.

It may make sense for publishers focused on building an audience limited to a specific local region or those with a dedicated direct ad sales team to build their own in house ad operations unit andengineering team dedicated to mobile ad serving. However for publishers publishers looking to monetize on a global scale, it is a costly and time consuming task to add multiple ad networks from different countries and to build an in house ad operations team to manage monetization in multiple countries.

Think of the aggregation and optimization of mobile adnetworks worldwide as a Mobile Advertising Cloud™ - one technicalconnection and one agreement brings in multiple ad networks into one ad stream. A service platform like this basically adds ad ops staff to your team without the payroll, but with the benefit of added experience working on this specific task day and night.

Dealing with the ever-changing liquidity in the landscape ofmobile advertising markets can be a daunting task. Experienced andfocused service platforms, such as SOMA by Smaato, provide aautomated optimization engine and 24/7 staff local in the USA,Europe and Asia time zones.

Everyday we look afteroptimizing the revenue for our mobile publishers.

The Mobile Advertisingmarket is as liquid as a stock exchange.

Prices vary throughout the day, high price campaigns are available for a shortperiod of time and click through rates change with the quality of the banner and the audience of the publisher.

Harald NeidhardtCMO & Co-founder, Smaato

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Now, the primary market places of choice are those provided byhandset manufacturers such as the Android Market or Nokia’s Ovi Store, followed by newer players like GetJar and Mobango as theleading alternative sites for downloading apps.

With the advent of the mobile app stores, discoverability hasbecome a big issue for developers: “an app is a song” as Vodafone’sDaniel Applequist pointed out. That being said, mobile developers arechallenged to develop either a one-hit wonder with a superperforming app; or better yet to build an audience for their brand witha loyal following for their entire catalogue of apps. In-application mobile advertising requires the flexibility to change and/or add new ad networks on the fly without resubmitting their apps, for example to Apple’s approval process for their app store.

Thus it is an advantage for mobile app developers to integrate an in-app ad solution (mostly via a SDK) that provides the maximum number of ad networks and ad revenue sources for any given region covered by the app store selected.

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Glocal is a term that has shaped the success of Smaato in the mobileadvertising space.

It is the marriage of a complete global inventory plus crucial local market advertising to enrich the impact of any mobile marketing campaign.

Bena Roberts, Founder & Editor GoMo News

© 2010 Smaato Inc. White Paper on Global Choices in Mobile Advertising Text: Harald Neidhardt | Design: Hugo Candeias

Smaato is a pioneering mobile advertising company that operates the mobile ad optimization platform called SOMA (Smaato Open Mobile Advertising) and partners with mobile publishers, developers, ad networks and operators.

Smaato’s SOMA mobile advertising platform aggregates more than 34 mobile ad networks worldwide andoptimizes mobile advertising revenues according to automated rules overseen by an experienced adoperations team. More than 2.000 publishers have signed up with Smaato as a partner to monetize theircontent in 215+ countries and Smaato is managing 3 billion ad requests per month.

SOMA’s unique feature is the aggregation of multiple leading ad networks globally to maximize mobileadvertising ARPU. SOMA can be easily integrated with ad networks, ad inventory owners (publishers, developersand operators) and 3rd party ad technology providers.

Smaato is an active member of the Mobile Marketing Association, the dot.mobi Advisory Group and the German Digital Media Association BVDW. Smaato received a Top 100 Private Company Award by AlwaysOn Media (2009 & 2007) and was an Andrew Seybold Choice Awards finalist at CTIA 2008 for best Newcomer, among other awards.

Smaato Inc. is based in Redwood Shores, California. The privately held company was founded in 2005 by anexperienced International management team. The European headquarters are in Hamburg, Germany and the Asia-Pacific presence of Smaato has been established in Singapore.

3 Lagoon Drive, Suite 170Redwood Shores, CA 94065

T: +1 (650) 286 11 98F: +1 (650) 240 07 08

Gerhofstrasse 220354 Hamburg, Germany

T: +49 (40) 34 80 94 90F: +49 (40) 49 21 90 55

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Smaato White Paper Global Choices in Mobile Advertising January 2009