Analytics, App Monetization, Industry News

3 Thoughts on Apptopia’s Top Grossing Study

Looking at Apptopia's recent top grossing study and some thoughts regarding.

Last week, Apptopia published an interesting study about the apps in the top grossing charts. You can read more about it here. This report triggered some interesting thoughts about the mobile eco-system and particularly about games.

1st Thought – 2,624 games in the top 50 – wait, what?

One of the most interesting points of the study is that over 4 years, 2,624 have been in the top 50 grossing chart in US. That’s a bit counter intuitive since one might expect only 50 games in the top 50. However, there is obviously games coming in and out of the charts which increases the number of companies that have been there.

When thinking about the size of the mobile game ecosystem, people tend to think it’s highly concentrated in a small number of companies but this study means there are at least 2,624 meaningful games which clearly indicates the existence of a strong mid market. We can also play around with the numbers and extrapolate what would happen if the analysis was to be made on the Top #200. Based on the shape of the curve, this is a power function and so the same number of games in the top #200 might have been 50,000 different games. I think it’s safe to assume that all these games made significant revenue taking into consideration that they generated money in other countries and not only from IAP.

Here is the extrapulation.

Spot Apptopia Extrapolated
Top #1 14
Top #2 25
Top #5 60
Top #10 142
Top #25 525
Top #50 2,624
Top #100 10,000
Top #200 50,000

2nd thought – App intelligence companies still focus on IAP

Looking at the analysis that Apptopia made about the top grossing games immediately led me to think “what would happen if they made the same analysis for the top downloads chart. This chart has more games come and go and while these games don’t show up in the top grossing charts most of them make very nice revenues from advertising.

As noted in this Pokcet Gamer article, one of the biggest trends of the last 2 years in mobile was hyper-casual. An analysis that is more focused on the top downloaded chart or one that would fix the top grossing one to include ad revenue would be much more interesting. However, this is exactly where app intelligence companies come short as noted by Eric Suefert. and also on our blog post analysing AppAnnie’s top 52 publisher report.

3rd thought – Who will win the app intelligence race

If you look at the app intelligence market there is a very clear winner today – Appannie. An evidence to the lack of a true contender is that it charges annual licenses of $500K – only a monopoly can do that. Their leadership position hasn’t stopped other companies from trying and there are multiple providers who try to compete: Priori Data, Sensor Tower, Apptopia, Similarweb and probably others

The weakness of this space as mentioned above is in tracking ad revenue and this weakness could also be the biggest opportunity. More than half of the revenue in mobile today is made by placing in-app ads inside the app. While the half that is made by IAP is pretty well covered, the half that is made with ads is not covered at all.

It’s not an easy task but some companies already made some progress in this direction. Apptopia specifically are offering estimations for ad revenue but those might not be accurate enough to win yet. If they were, maybe Apptopia’s study would have been about ad revenue.

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Hyper Casual Games – Thoughts about Voodoo and Gram Deals

Hyper Casual Games - Thoughts about Voodoo and Gram Deals with SOOMLA's CEO, Yaniv Nizan

Towards the end of May, the mobile game industry received news about 2 mega deals in 2 consecutive days. First it was Voodoo that announced a funding of $200M with an estimated valuation of over $500M. Then, the day after, Gram Games announced it’s acquisition by Zynga for a sum of $250M with additional sums to be paid against future results. Not surprisingly, these two companies share a similar philosophy and have been focused on games that monetize via ad revenue. Also, not surprisingly both, apply advanced measurement and optimization techniques for their ad monetization.

The new type of games that have been dominating the app stores since the beginning of 2017 is often called hyper casual games. The term first appeared in a series of articles written by Johannes Heinze from Applovin and published in the Applovin blog and in Pocketgamer. While the games have been visible on the app stores, the companies responsible for them often went undetected by press and analysts and remained an industry secret. One good example of these companies not getting detected is that both companies as well as Outfit7 (bought for $1B) were not included in AppAnnie’s top 52 publishers list.

Also, interesting to note is that these new direction of innovation is coming mainly from Europe. In addition to these 2 companies we can also add Ketchapp games, Outfit7, Tabtale as well many other smaller companies in Europe who are embracing ad driven models alongside a data driven approach and are dominating the hyper casual genres. From the US, companies such as Zynga starts to understand the potential and are compensating by acquiring such studios. Specifically for Zynga, the acquisition of Gram seems to be part of a strategy as the company also bought Harpen and paid Peak games $100M for their casual card game studio.

SOOMLA blog also picked up on the trend as early as 2016 when we noticed $300M going into companies that pioneered ad driven games. And then in March 2017 immediately after Harpen’s acquisition by Zynga, we identified Voodoo and Gram as strong potential for bigger deals in the future. Here are some additional companies who specialize in ad driven games that we recommend following.

  • Tabtale
  • Mobilityware
  • Etermax
  • Gazeus
  • Kwalee
  • Ilyon
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Analytics, Announcement, Industry News

New Loot Box Regulations – What it Means for Mobile Games

New Loot Box Regulations - What It Means for Mobile Games

About 3 weeks ago on December 21st, Apple added a small term to it’s T&C for app publishers.

Apps offering “loot boxes” or other mechanisms that provide randomized virtual items for purchase must disclose the odds of receiving each type of item to customers prior to purchase.

Most of you probably missed it during the holiday season as did I but a few major publications caught the change and reported it quickly. Here is the report in PocketGamer and in The Verge. This change might be a response to an increasing interest of some of the regulators in the loot boxes concept. It started with Starwars Battlefront 2 criticism on reddit when a response by EA became the most downvoted comment on reddit ever. The “loot box” monetization strategy along side the game appeal to kids caused a few regulators to take notice. Most notabely, the State of Hawaii announced they will work on legistlation to ban loot boxes and Belgian officials said they would like loot boxes banned as it’s a form of gambling.

The top 25 grossing games were not effected

One might think that the change made by Apple will make a big impact on game publishers given how popular loot boxes are. In reality, however, none of the top 25 grossing games made any changes. The reason, is that none of them are selling loot boxes as in-app purchases. While loot boxes are popular, they are commonly sold for virtual currency which can be bought for cash. If you look at the top 25 grossing apps, the items that are listed in the app store for purchase are packs of: quartzes, diamonds, crystals, gold, coins, gems. The only game we could find that will have to make a change is Hearthstone.

What about in-game loot boxes

Apple didn’t entirely ban loot boxes that can be purchased inside the game with in-game currency. The regulators however might decide to address this type of loot box as well. There are many game elements that are randomized, therefore the question arises of where the distinction will take place. It’s one thing to ban something that is purchasable, but if any randomized game element is banned, pandora’s box will open. My guess is that regulators will focus on purchasable items and games that are made for kids.

CASE STUDY ON ADVERTISERS CHURN & eCPM

If gambling with VC is illegal than what about social casino

The comment by Belgian officials was that loot boxes are a form of gambling and therefore should be banned. What is a bit odd is that there are more obvious forms of gambling that are not banned yet – the social casino apps. Either these officials have a double standard when it comes to mobile games or they haven’t opened the top grossing charts recently.

The clear winner is rewarded video

Aside from kids and their parents who might get to keep more money in their wallets, the companies who provide monetization via ads and rewarded videos will probably benefit from these regulations if they happen. Ad based monetization models are becoming more popular in the mobile game industry and the fact that Apple is adding limitations on in-app purchases pushes more game developers in towards ads.

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Analytics, App Monetization, Industry Forecasts, Industry News

7 App Monetization Predictions for 2018

7 App Monetization Predictions for 2018

As SOOMLA is the 1st company to focus on monetization measurement for mobile apps it only make sense that we will take the lead on predicting some of the trends that will control app monetization in 2018. These predictions are based on our data as well as on observing the market trends in 2017. However, predicting the future is a tricky business so take these with a grain of salt. Here we go – counting 7.

1 – Let the ad whale hunting begin

In 2017 SOOMLA exposed the existence of ad whales – a group of users who contribute over 80% of the app ad revenue and can sometimes make $100 for the app publisher by watching and interacting with ads. In 2018 more and more app companies will invest resources into understanding who the ad whales are, how they behave, what are the best channels to bring more of them and how to adapt the app for this segment. Basically, the same practices app companies applied for the top spenders will be used for the users who generate the big advertising dollars.

2 – Publishers will seek tighter control on ‘rich’ interstitial ad content

2017 introduced a lot of innovation around ad-formats that can be delivered through interstitial containers: Playable ads, interactive videos, dynamic end cards and what not. Publishers who integrated interstitial ads expecting a short ad break in the app flow ended up with an experience they didn’t sign up for. The fact that a longer ad experience with an invisible ‘x’ button has a toll on retention intuitive but SOOMLA also validated that with data and will publish a report about it in Q1/18. In 2017 some publishers started pushing back on these formats and we expect more publishers will want to control these ad experiences in 2018.

3 – More publishers that are also advertisers

In 2016 there were very few ad driven app companies that could afford paid UA campaigns. In 2017 this number grew and in 2018 it will grow even more. Following the footsteps of SOOMLA, more providers are offering tools that give visibility into Ad LTV. In turn, more publishers are aware of where they stand and what CPI levels they can bid. See the post about the steady increase of CPIs and how they are here to stay.

Q1 2018 MONETIZATION BENCHMARKS

4 – Header bidding will start but adoption will be slower than expected

Header bidding was discussed in many conferences in 2017. The idea is simple and highly beneficial to publishers and some ad providers have launched earlier versions of this model. In 2018, some publishers will test out this model but it will not go into mass adoption just yet. There are too many loose ends at the moment and no sufficient coverage from ad providers. Furthermore, it appears that the some of the leading players are happy to receive bids from others but no so happy to provide the bid out. FB, Google, Mopub, Appodeal and Ironsource are each trying to become the company who will run the auction so they refuse to give a bid out. This means each that each one of them insists on exclusivity which will be a big turnoff for publishers.

5 – Better control over ad experience and creative

Publishers needs ways to control the ad experience as part of the overall app experience. In 2017, SOOMLA and SafeDK started providing solutions in this area. We expect more solutions will become available, more publishers will start using these and ad providers will also start adding more functionality to control ad experience.

6 – More apps will advertise competitors in 2018

Advertising competitors was a big no-no for many app publishers who were concerned their users will churn away and move to the competitor app. In 2018 there are already tools that allows monitoring the eCPM and churn caused by specific advertiser. This means app publishers will be able to apply a data driven approach to this question that was decided with gut instincts until recently. Based on the data we have seen – more publishers will feel comfortable with advertising competitors as a result.

7 – Ads will surpass IAP for mobile game monetization

2017 ended up with a tie between the different monetization models for games. Some studies claimed IAP revenue was still bigger while others showed ad revenue as the winning monetization model. In 2018, there will be no question any more and the clear monetization winner will be ad revenue. Part of the reason for that is the emergence of data tools to measure ad monetization. This makes more publishers feel comfortable with building games that relay heavily on ad revenue.

That’s it – 7 predictions for the new year. Write them down and check if we were right in 12 months.

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Analytics, Announcement, Industry News, Tips and Advice

GDPR 101 for Mobile Apps or How to Avoid a €20M Fine

GDPR 101 - How to avoid the €20M fine for your mobile app

Some of our customers started asking us about GDPR, so we created a GDPR Compliance FAQ page to answer most questions. To those of you who haven’t heard about it, GDPR is the new European privacy regulation that will take affect on 25th of May 2018. The new set of rules is causing many companies to lose sleep also due to the recent Disney lawsuit and the lawsuit against Kiloo, maker of Subway Surfer. The first suit includes not just the company itself but also tech providers such as Kochava, Upsight and Unity.

This means that while the app companies are on the front, the technology companies behind them should also learn GDPR carefully. In the rest of the post, I’ll try to describe some of the key differences and explain what actions companies should consider. So lets jump into what’s new with the GDRP:

The price tag difference

One of the new aspects of GDPR is that it names a price for non-compliance – fines can reach up to €20M Or 4% of annual gross revenues – the greatest of the two. What this means for app companies is that they have a strong business case to invest money and effort in complying. For tech companies, it means that the level of liability will be pushed up. If tech companies were able to get a way with capping their liability at a $0.5M or $1M dollar, that will no longer be acceptable by the app companies.

US companies also on the hook

Another key difference is that GDPR makes it clear that as long as companies have users in EU, the rules apply to them regardless of their location. For US companies, this is a major difference as privacy rules in the US are less restrictive.

Everything is personal

One thing that the GDPR makes very clear is that all device identifiers including IDFA (Apple devices’ ID for advertising), GAID (Google’s advertising ID) and IP address are now considered personal data and any data stored with it in the same record should also be considered personal. This have been a gray area a few years ago but was getting less and less gray in recent years. With GDPR there is zero doubt about this. For app companies and, advertising companies and analytics companies this means that all data becomes personal and should be treated as such.

Encrypting and protecting and documenting data transactions

Another requirement that GDPR makes more clear is the need to encrypt and protect personal data as well as document any transaction in which encryption was not possible. This is not a new requirement but since all data is considered personal now it becomes a requirement for each company and each piece of data. Here is an example of one process that is likely to change for App companies and has already affected some of the tech providers. In the past, companies used Facebook’s highly effective lookalike modeling service by creating custom audiences based on divide identifiers. The practice of exporting a CSV file from you analytics or attribution platform, storing it in your personal computer and uploading it to Facebook is now considered a non-encrypted transaction that has to be documented. Not many app companies will want to cumbersome their process with the documentation requirement and so some of the attribution companies have responded with audience builder tools that make this transaction encrypted.

CASE STUDY ON ADVERTISERS CHURN & eCPM

Is your data coming to US for business or pleasure

Another area that app companies and tech companies serving them should be aware of is the transfer of information outside the EU and specifically to US. This has been a key topic for previous legislation but the requirements became stricter with GDPR. This topic is known as cross border transfer. In a nut shell, EU knows that US is more liberal when it comes to privacy and specifically in the Federal’s government ability to force companies hand in providing private data. One example of the FBI power over companies was last year when Apple confronted the FBI and refused to help them crack an iPhone. While Apple stood up to the FBI, very few companies will risk disobeying a court order.

To adapt to the new regulations, companies can no longer rely on gaining the user consent for transferring their data. This practice is required but not sufficient anymore. Instead companies should do one of the following:

  • Keep data about EU users in Europe and comply all tech providers to do so
  • Make sure all providers are part of the Privacy Shield initiative
  • Execute model clauses to document each data export from EU to US

Keeping data in EU

This may sound easier than it is. If you are an app company, you are probably using at least a dozen services to help you monetize users, analyze them and improve your app. Most likely, you also have homegrown analytics tech that reads and writes data to a database stored by a cloud provider. Keeping the data in EU means you need to go to your cloud provider and each one of the other tech provider and make sure they also keep the data in EU. In turn, the tech providers will have to go to their tech providers and cloud providers and do the same. While the major cloud providers: AWS, Google and Azure have data centers in Europe it’s unlikely to ensure 100% of the data staying in EU given the number of providers involved especially when the app is serving ads.

Privacy Shield

This is essentially a certification that companies can get if they do store their data in the US. Being listed in the Privacy Shield list of certified companies is an alternative requirement to keeping data in EU. It means that tech providers who don’t keep EU user data in EU can get a Privacy Shield certification and help the app companies comply with GDPR. In the list below, you can find popular SDK providers that already obtained Privacy Shield certifications and the ones who didn’t. The extensive list can be found here – https://www.privacyshield.gov/list . Note that:

  • Providers that store data in EU don’t need the Privacy Shield (e.g. Adjust)
  • Providers can give an EU model clause document to app companies as an alternative to Privacy Shield and still comply with GDPR.

SOOMLA is already in compliance with the regulations and has started a process to obtain a Privacy Shield certification. Ask us about the current status by emailing – privacy@soomla.com.

EU Model Clause

As mentioned before, providers who don’t keep their data in EU and don’t have a privacy shield certification can still help app companies comply with GDPR by providing an EU model clause document explaining exactly how and what personal data flows from EU to US.

The right to be forgotten

Another key requirement by GDPR is that every user has the right to be forgotten. This means that a user can request an app publisher to delete all his data including data about him that is stored by 3rd party providers.

What you should ask from your providers

While there are a few changes app developers might have to implement in how they handle their users’ data most of the work will probably be with ensuring their providers’ compliance and more specifically their advertising related ones. The decision to treat IDFA, GAID and IP addresses as personal data puts all the advertising industry in the spotlight as most of it was operating under the assumption that IDFA will not be considered personal data.

Here is quick compliance checklist for your providers.

  • Do you protect and  encrypt any record that contains IDFA or IP address?
  • Can lists of IDFAs or IP addresses be exported? Do you send such lists over email?
  • Do you keep the data in EU or US? If in US – are certified under privacy shield? Can you provide model clause explaining all data transactions?
  • Forgetting users – Make sure you know all instances of the user record (log, backup, main DB, …) and what’s the mechanism to delete.

Providers Not Certified with Privacy Shield [updated Nov-2017]

  • Appodeal
  • Chartboost
  • Ironsource
  • Fyber
  • Adjust (But already has a stricter certification)
  • Heyzap
  • Lifestreet
  • Media Brix
  • AOL / Millenial
  • Tapjoy
  • Vungle
  • Upsight/Fuse
  • Unity / Unity Analytics / Unity ads

Providers Certified with Privacy Shield

  • Google – including Cloud, Admob, Analytics and Firebase services
  • Amazon – including AWS and Amazon Ads
  • Microsoft – including Azure
  • Applovin
  • Adcolony
  • Appsflyer
  • AppAnnie
  • Mixpanel
  • Facebook
  • Kochava
  • Amplitude
  • TUNE
  • Mopub

 

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Analytics, Industry News

Viewability 101 and Why MOAT Was Sold for $850M

IMG_4209

Last Thursday, the mobile ad-tech space was surprised to hear the news about Oracle buying mobile viewability company MOAT for 850 million dollars ($850M).  This reflects a very high multiple on revenue and a very nice return for the investors that put in an aggregated amount of $67.5M – most of it in 2016. If you have been mostly involved in mobile apps – you might have not heard about mobile viewabilty at all and are wondering how can such an unknown aspect of mobile advertising can be worth so much money to someone. To understand this – we need to dig a bit deeper.

Over 95% of the impressions are ads for installing other apps

In a recent blog post we announced a new and super exciting feature that was recently added to the Traceback platform. At SOOMLA, we are all about giving visibility to the publishers to know more about their in-app ads so knowing who is advertising in your app is a big part of that.

One of the things we quickly realized when starting to look at this data is that most of the advertising activity is driven by demand coming from other apps. These are typically CPI campaigns that only pay when the user installed the advertised app. The surprising part is that the number of ads coming from brand advertisers is very low. In the last 2 years we have seen a growing number of indications that the brands are coming to mobile.

Chart showing US mobile ad spending by industry in 2015. Retain comes first with $6.65B followed by the financial services with $3.49BIn this link you can find a report from eMarketer breaking down mobile ad spend by category. In the image to the right you can see that while retial ad spend might have a mix of brand and app install campaigns, the following categories are dominated by brand ads:

  • Financial services (Capital One, Geiko) – $3.49B
  • Automative – $3.43B
  • CPG (Procter and Gamble) – $2.33B

With at least 10 billion dollars ($10B) being spent on brand campaigns, we would have expected more of these ads to show up in mobile apps. We are not alone in our expectation of course, in 2014 Eric Seufert wrote:

“If the largest brand advertisers shift just 10% of their overall budgets to mobile, they’ll match or exceed the money spent by the app economy’s behemoths – and they’ll be competing for the same ad inventory.”

Well, according to the eMarketer report, almost 50% of the digital ad spend of these brands have shifted to mobile and yet these ads are no where to be seen. Eric was not wrong to expect a change but we all missed one important thing – the ‘other’ mobile industry.

Mobile web and mobile apps – two separate ecosystems

From a user perspective, mobile is a single experience. Opening the URL www.weather.com or opening the weather app will result in a very similar experience. The technological aspects are very different between mobile web and mobile app and each one has a separate eco-system when it comes to mobile advertising with very little overlap in between. The mobile web ecosystem was pretty much inherited from the desktop space. Each desktop advertising player in the ecosystem gradually started adding mobile web support so eventually the mobile web and desktop web ecosystems operate in a very similar way. The mobile app ecosystem evolved mainly from the need of gaming apps to acquire massive amounts of users. This resulted in an install focused industry with a great focus on attribution – a concept that mobile web companies haven’t even heard about.

What is viewability and how it evolved

In 2013, early reports started coming in showing that when brands are paying for users to watch their ads, they are often not getting what they paid for – nearly half of ads are not seen according to Comscore report from 2013. In 2014, a report from Google claimed it’s actually 56% of ads that are not viewable. This made brands worried about buying display ad inventory online and gave a big push to a category called viewability measurement. Here are some of the problems causing low viewability rate:

  • Ads can be shown In a window that is in the background and hidden by another window
  • Users sometime scroll away from the part of the page where the ad was shown
  • Time on screen is to short or video playback was stopped early
  • Traffic generated by bots rather than humans

MOAT has put it together nicely in this web image:
Non-viewable impression can be caused by 4 things: Out of focus, Out of sight, missed opportunity (area), missed opportunity (time)

The need for a solution forced the digital advertising industry to act together and set official guidelines. The Internet Advertising Bureau (IAB) together with the Media Rating Council (MRC) has published a first set of guidelines in June 30th 2014 which later evolved into version 2.0 of the guildelines in August 18th 2015.

Viewability in mobile web

As mentioned before, the mobile web ecosystem is a replica of the desktop web ecosystem in terms of advertising at least. Viewability measurement quickly became an issue in this industry as well and in June 2016, MRC published their mobile guidelines for viewability measurement. These guidelines are for mobile apps but we will touch on that later on. The main guidelines in the publication are these:

  • Client side measurement
  • Measurement of offline activity for apps
  • Filtering non-human ad views
  • Differentiate viewing from pre-rendering and pre-fetching
  • Detect when ads are out of focus
  • Pixel requirement: at least 50% of pixels were on screen
  • Time requirement: 1 continuous second of a post-rendered ad that meets the pixel requirement

The MRC is also accrediting viewability measurement companies who meet the criteria based on an annual audit.

Who can measure mobile viewability

The top 3 providers for desktop viewability measurement have all been accredited for mobile viewability measurement. Here they are:

These companies cater for both advertisers as well as publishers.
Brand advertisers are willing to pay for viewability measurement to know that their ads are getting viewed. They would typically deduct the non-viewable ads from the media campaign when calculating delivery and payout. However, most brands would also consider publishers with low viewability scores as non-safe and illegitimate media. It is common for brands to have a viewability threshold of 90% or 95% for publishers. This means that publishers with a low score will simply not get any brand ads.

On the other side, publishers also have an incentive to have their sites and apps measured. The basic reason is that if you don’t allow measurement you will not receive brand ads. On top of that, publishers who sell directly to brands or ad-networks who represent them want to know the metrics and data points about their media so they can use it in their pitching.

Mobile apps have been a slow adopter of viewability

When you check how many app publishers have a viewability measurement SDK installed you discover that most of them don’t. We can look at the 200 most downloaded apps (top free chart) on both iOS (Top chart link) and Android (Top chart link). These are typically the apps who will have advertising in them as they attract a lot of users.

  • On iOS – only 5 out of the top 200 have viewability SDK – 2.5%
  • On Android – only 21 out of the top 200 have viewability SDK – 10.5%

Our assumption is that the more you advance towards the long tail the less likely apps will have a viewability SDK since the long tail apps are still focusing on more basic aspects.

SDK fatigue slowing down adoption and enticing provider collaboration

One of the problems slowing down the adoption of viewability measurement in the app ecosystem is the need to integrate an SDK. To make things even worse, an app would need to integrate the SDKs of all 3 providers (MOAT, IAS and DV) to enjoy the full benefits. A recent open source initiative is aiming to solve at least part of the problem. It started out of IAS but was later handed over to the IAB to manage the project. The 3 providers have agreed to collaborate and support the single open source SDK that will make things a bit easier on app-publishers.
At the same time, some of the ad-networks have increased their interest level in viewability measurement as a way to be more attractive to brand campaigns. Some of them are working on bundling the viewability SDKs inside their SDKs so that their entire inventory will become available to brand campaigns. That however, brings another risk. Most apps user multiple ad-networks so if many ad-networks follow the same path an app could carry a number of viewability SDKs at the same time.

Viewability might not be enough

It’s clear that brands would not advertise in mobile apps without having viewability measurement. If you haven’t heard about the P&G $2.8B Ultimatum to the media industry – you can read about it here. However, it’s not clear if having viewability measurement is sufficient to make brands start advertising in mobile apps. The condition might be necessary but not sufficient. In other words, there could be other road blocks for brands to advertise in mobile apps. Here are some other reasons why brands could be staying away from mobile apps:

  • 50% of mobile app traffic is in games and brands have shied away from games historically
  • Brands often have issues with incentivized advertising and rewarded video falls into the category
  • The lack of audience data and tools for advertisers to target specific segments
  • Today brands are separated from mobile apps by multiple hops which takes a cut and reduces the eCPMs for the publisher so his mediation provider might not allow them to show

Oracle might be the last one laughing

So if you think of the projections for mobile viewaiblity. MOAT is already positioned as the one of the top 3 and some say the leader of mobile viewability in a market that is expected to double itself in 3 years. Considering that mobile viewability hasn’t even made it into mobile apps – the market can double in size again when Apps realize that they can get the brands competing for their inventory as well. So if MOAT can still grow 4x in 3 years, maybe the price Oracle paid is not that high after all.

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App Annie’s Top 52 Mobile App Publishers – But Who is Missing

Facebook is the app publisher to top App Annie's top 52 mobile app publishers

Last month, App Annie released it’s annual index of the top App Publishers in the mobile eco system. This is a tradition that App Annie has been going at for 3 years now. The winners not just get recognition but are also getting a very nice present. You can find the full list for 2016 in the image below as well as in the table where I also added some revenue numbers based on the companies financial reports.

App Annie used IAP revenue as the criteria for the list

There are obviously many ways to compare between companies and App Annie had to select one. Based on my analysis, App Annie is using revenues as the index in this list. This means that a publisher with 4.5B total downloads to date is not in the list while Miniclip is closing the list with a reported downloads number of 500M across all titles. That’s a fair decision, revenue is more important than downloads in the eyes of most people.

The other choice that App Annie made is a bit odd in my opinion. App Annie is ignoring ad revenue and is only measuring IAP revenue for the Index. It seems that Supercell and MZ are high on the list without any advertising revenues while companies who relay only on ad monetization are not on the list at all. Sure, the industry has been focused on In-App Purchases as the main monetization model but even App Annie reports that this is all changing.

FREE AD NETWORK COMPARISON SPREADSHEET

App publishers who monetize with ads like Facebook were ignored

The one app publisher that is clearly missing from the first spot is Facebook. They are obviously the #1 app publisher in the world. In 2016, the company made $22.5B from mobile advertising revenues out of their total $27.6B. One might say that Facebook is a tech giant that shouldn’t be on the list but if you look at the company who currently holds the first spot on the list – it is Tencent. Tencent has almost twice as many employees and a similar size user base on it’s messaging and social networking apps as Facebook.

Here are a few companies that should have made the list based on publicly available information:

Company Headquarters IAP Revenue Ad Revenue Total Mobile Revenues
Facebook United States - $23B $23B
Twitter United States - $1.8B $1.8B
Cheetah Mobile China $61M $500M $561M
Snapchat United States - $348M $348M

Another company that would probably make the list but we couldn’t find public revenue number is Outfit7. The company was recently acquired for $1B which suggests an annuarl revenue of at least $250M based in industry benchmarks such as the acquisition of King.com with a multiplier of 3.3x ($2B reported in 2015 and valuation of $6.6B).

Google would also easily make this list with mobile apps such as YouTube, Chrome and the Search app. However, they are the operators of the Google Play App Marketplace and are also in the business of selling Android based phones such as the Nexus and the Pixel so they should be excluded from this race.

The top 52 publishers according to App Annie

Below you can find the table of App Annie’s top 52. I added the revenue stats for some of the public companies so you can see what are the thresholds for different spots in the list.

# Publisher Headquarters IAP Revenue Ad Revenue Total Mobile Revenues
1 Tencent China $15.7B $3.9B $21.9B
2 Supercell Finland $2.3B - $2.3B
3 NetEase China $4B $0.3B $4.3B
4 MZ United States
5 Activision Blizzard United States $1.6B - $1.6B
6 Mixi Japan
7 Line Japan $840M $360M $1.2B
8 Bandai Namco Japan
9 Netmarble South Korea
10 Niantic United States
11 GungHoOnline Entertainment Japan
12 Square Enix Japan
13 Electronic Arts United States
14 Sony Japan
15 Elex Technology China
16 COLOPL Japan
17 GAMEVIL Sourt Korea
18 Ceasers Entertainment United States
19 CyberAgent Japan
20 DeNA Japan
21 Zynga United States $443M $157M $600M
22 KONAMI Japan
23 Chrchill Downs United States
24 InterActiveCorp (IAC) United States
25 Spotify Sweden
26 SEGA SAMMY Japan
27 IGG China
28 Perfect World China
29 Kabam United States
30 NEXON Japan
31 Time Warner United States
32 Playrix Russia
33 Happy Elements China
34 Snail Games China
35 Netflix United States
36 Glu United States $160M $40M $200M
37 Baidu China
38 Scientific Games United States
39 GREE Japan
40 International Game Technology United States
41 Scopely United States
42 gumi inc Japan
43 Marvelous Japan
44 Microsoft United States
45 Klab Japan
46 Aristocrat Australia
47 G-bits China
48 Vivendi France
49 Kunlun China
50 Long Tech Network China
51 Ateam Japan $207M - $207M
52 Miniclip Switzerland

This table is also available as a google spreadsheet here

Here is AppAnnie’s original list in an infographic format.

App Annie Top 52 Publishers of 2016: Tencent, China Supercell, Finland NetEase, China MZ, United States Activision Blizzard, United States Mixi, Japan Line, Japan Bandai Namco, Japan Netmarble, South Korea Niantic, United States, GungHoOnline Entertainment, Japan Square Enix, Japan Electronic Arts, United States Sony, Japan Elex Technology, China COLOPL, Japan GAMEVIL, Sourt Korea Ceasers Entertainment, United States CyberAgent, Japan DeNA, Japan Zynga, United States KONAMI, Japan Chrchill Downs, United States InterActiveCorp (IAC), United States Spotify, Sweden SEGA SAMMY, Japan IGG, China Perfect World, China Kabam, United States NEXON, Japan Time Warner, United States Playrix, Russia Happy Elements, China Snail Games, China Netflix, United States Glu, United States Baidu, China Scientific Games, United States GREE, Japan International Game Technology, United States Scopely, United States gumi inc, Japan Marvelous, Japan Microsoft, United States Klab, Japan Aristocrat, Australia G-bits, China Vivendi, France Kunlun, China Long Tech Network, China Ateam, Japan Miniclip, Switzerland
As well as in a text format:

  1. Tencent, China
  2. Supercell, Finland
  3. NetEase, China
  4. MZ, United States
  5. Activision Blizzard, United States
  6. Mixi, Japan
  7. Line, Japan
  8. Bandai Namco, Japan
  9. Netmarble, South Korea
  10. Niantic, United States,
  11. GungHoOnline Entertainment, Japan
  12. Square Enix, Japan
  13. Electronic Arts, United States
  14. Sony, Japan
  15. Elex Technology, China
  16. COLOPL, Japan
  17. GAMEVIL, Sourt Korea
  18. Ceasers Entertainment, United States
  19. CyberAgent, Japan
  20. DeNA, Japan
  21. Zynga, United States
  22. KONAMI, Japan
  23. Chrchill Downs, United States
  24. InterActiveCorp (IAC), United States
  25. Spotify, Sweden
  26. SEGA SAMMY, Japan
  27. IGG, China
  28. Perfect World, China
  29. Kabam, United States
  30. NEXON, Japan
  31. Time Warner, United States
  32. Playrix, Russia
  33. Happy Elements, China
  34. Snail Games, China
  35. Netflix, United States
  36. Glu, United States
  37. Baidu, China
  38. Scientific Games, United States
  39. GREE, Japan
  40. International Game Technology, United States
  41. Scopely, United States
  42. gumi inc, Japan
  43. Marvelous, Japan
  44. Microsoft, United States
  45. Klab, Japan
  46. Aristocrat, Australia
  47. G-bits, China
  48. Vivendi, France
  49. Kunlun, China
  50. Long Tech Network, China
  51. Ateam, Japan
  52. Miniclip, Switzerland
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Industry Forecasts, Industry News

Harpan’s Secret Sauce – Why Zynga Paid $42M for 2 Person Company

Zynga buys harpan llc. Pays $42M for a 1 person company

Some of you might have heard about the recent acquisition of Harpan LLC. by Zynga. Forbes have reported it last week and so have Busienss Insider and PC Mag. Reading these articles, you can’t help but notice the surprise of the reporters as they write about the amount of money spent to buy a 2-person company with 4 versions of the same game that was not even invented by them. Is Zynga out of their mind? Actually – it’s quite the opposite.

Zynga doubling down on ads

If you have been reading Zynga’s financial reports you might have noticed an interesting trend also highlighted in another post we published on this subject. Zynga has been depending more and more on ad revenues. In 2011 only 6.5% of their revenue came from advertising while in 2016 this number grew to 26.1% or $194M in absolute numbers. We will soon how this relates to the acquisition of Harpan.

The macro trends all point in the same direction

This shift in Zynga’s strategy might be a smart move in response to macro trends in the industry. There is a concensus in market forecasts provided by different intelligence companies. eMarketer projected that ad spending worldwide will increase from $101B in 2016 to $195B in 2019. So far their projection is coming true.

Emarketer report projects a growth in mobile ad spending reaching $195 by 2019
More recently AppAnnie projected that the amout of reveneu mobile game app companies are generating from in-game ads will increase from $21B in 2015 to over $50B in 2020.

App Annie projects growth in ad revenues generated by mobile games. From $21B in 2015 to over $50B in 2020The increase in ad spending is exceeding the growth in mobile users and creating inflation in two important KPIs of the industry:

  • CPI -cost of install / bringing a new user
  • ARPU and LTV from ads

This is also covered in some of our recents posts – AppAnnie: View to Play is here to stay and CPI Increase is here to stay

Harpan is part of a trend – acquisition of ad driven app companies

So if Zynga is indeed following the trends and made a strategic decision to base more of their business on advertising the acquisition suddenly makes a lot of sense. Sources in the industry suggests that Harpan was making almost all of it’s revenue from ads. These revenue streams are on the rise due to the mactro trends and the current worth of Harpan could double in 3 years due to increase in ad revenue monetization opportunities.
But Zynga is not alone in reading the market and pretending for the change: in 2016 we covered a peak of funding and M&A deals targeting companies with a strong focus on ad based monetization. You can add to that list the acquisition of Outfit7 for $1B and the acquisition of Ketchapp games by Ubisoft. I’ll not be surprised if we will see even more activity (funding and M&A) around ad-driven mobile game companies in 2017. Some companies to follow are:

  • Tabtale
  • Mobilityware
  • Gram Games
  • Voodoo
  • FuturePlay

 

 

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Industry News, Marketing

Apple’s Master Plan for Search Ads

Apple search ads - what's the master plan - header image

About a week ago, Apple launched it’s Search Ads platform into existence and there are many app publishers who are trying different tactics to use this medium to their advantage. You can read about some of these here:

Once the dust settles, you might want to ask yourslef what is Apple’s master plan for this? Why is Apple doing it? Here are my thoughts on this subject.

Search Ads aren’t enough for Apple

Apple’s revenue is well over $200B. When they go after a new revenue stream they ask themselves – is this channel going to be meaningful for us. If the channel has the potential of being at least 5% of their total revenue or in other words $10B/year they might consider it. If it’s lower, it might not be worth the efforts and risks. For example, the app-store revenue for Apple were $6B in 2015 but it’s growing fast and are likely to reach $15B in a few years. App-store search ads can’t deliver these revenue volumes on their own. There is simply not enough supply.

Apple is looking at the mobile ad spend forcasts

Some of you might have seen this report by eMarketer forcasting $195B in mobile ad spending by 2019.

Emarketer's forecast showing global ad spend on mobile will reach $195B by 2019

[Image credit: www.emarketer.com]

Everything we have seen until now tells us that this forecast is going to come true. Apple is 75% percent ahead of Google when it comes to App Store revenues but it knows that it’s far behind when it comes to advertising. The Apple ad-network – iAd was shut down as of June 30th 2016 after failing to become a major monetization channel for apps but Apple didn’t give up hope. Their mistake was that they didn’t understand the importance of consistent demand. They were fucosing on bringing big brand campaigns which is important in order to drive eCPMs up and stay competative but without consistent demand, publishers remove your SDK in favor of other SDKs. Apple learned from this mistake.

When Google launched their search ads product Apple were watching and they realized that Google did a sloppy job this time. Unlike Adwords, the Google Play search ads are not available as a market to the public but are instead offered as a managed service through Google account managers. Apple saw this opportunity to create a more appealing open product that allows anyone to set up their own campaigns. They created high demand for it’s search ads and more importantly this time the demand will be consistent.

Apple’s next move is for the supply side

The revenue potential of search ads alone is limited as we mentioned before. The demand is huge but the supply is the problem. Following the moves of other tech giants can give you a hint as to what Apple’s next move might be:

  • Google generated consistent demand with Adwords and then launched Adsense to improve supply
  • Facebook generated consistent demand with Feed Ads and then launched Facebook Audience Network (FAN) to enhance supply.

It’s likely that Apple will try to do the same once they aggregate enough demand for their ad products. They have tons of data about their users so they can offer the same levels of demographic targeting offered by facebook in addition to leveraging search data to indicate interests of users. Since they are the platform owner, developers will trust their SDK and give them a shot again. This time the demand will be consistent and allow developers keep them as part of the monetization mix. It might take a year or even 2 years but eventually this has to be Apple’s plan.

 

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Industry News, Marketing

Apple Search Ads Launching Today – 3 Immediate Actions to Take

img_3345

In the last WWDC, Apple announced that they will be launching Search Ads into the App Store in one of the biggest changes since the App Store was first launched. Later in Jun/16 they also revealed additional details about how the new feature will work. The release date was recently announced as October 5th – today. If you haven’t done anything about it yet, now will be a great time to start moving so you don’t get surprised and might actually benefit from the chaos that will break lose following the launch.

Bidding on brand searches for your own apps

One of the standard practices from search ads in Google will also work well here. Buying the name of your own app as well as small variations and mistakes allows you to to defend against Conquesting.

Conquesting – getting the top search result when the user was clearly searching for a different app than yours


I can imagine that its frustrating to pay for something you used to get for free. However, not doing this will be much more painful as your competitor will conquest your brand searches. In addition, Apple explained that they will optimize the algorithms based on user interaction and relevancy so even if you place a low bid you are likely to win as your app is the most relevant one.

Conquesting your competitor brand searches

The flip side of this is that a few of your competitors will be less prepared and you can catch them off guard to conquest their brand searches. This will give you highly targeted users and can work especially well in genres where apps offer similar services or gameplay. For example: casino games, card and board games, dating apps.

A mile wide and a cent deep

One of the interesting choices that Apple made is not to enforce any minimums on the bidding. That’s right – you can bid as low as $0.01 per click. This calls for a wide net strategy. If you set up enough keywords at $0.01 there will be a period of time where demand is still picking up and it will allow you to get some really cheap installs.

 

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