Analytics, Industry News

Viewability 101 and Why MOAT Was Sold for $850M

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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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