But that money isn't coming from brand advertisers. It is the
domain of small, performance-based marketers and, by a large
margin, games. Other marketers and ad buyers praise the social
media titans for finding a way to reach consumers where they spend
most of their time -- on mobile apps -- but say the uses for
app-install ads are limited.
"They don't solve for the brands having good, mobile-optimized
content," said Douglas Rozen, chief innovation officer, MXM.
Do they need to? Do Facebook and Twitter need brand dollars to
shift to app-install ads, or can they keep riding the Candy Crushes
of the world to fuel their growth?
Most industry insiders agree the phenomenal growth of the
app-install business will soon peter out. In their latest moves on
mobile, Facebook and Twitter are grabbing land and technology in
the hopes it paves the way for major brand advertisers to jump
aboard the format eventually.
"I believe that we're going to see it; there's so much riding on
its success," said Larry Chiagouris, marketing professor at Pace
University's Lubin School of Business. "Otherwise, Twitter is going
to go away."
"Even Facebook has got to be nervous about how things are
unfolding," he added.
An end to the euphoria
Announcing Facebook's first-quarter earnings last year, CEO Mark
Zuckerberg said selling
app-install ads had brought in "real revenue." Then, his company
netted 30% of its ad revenues on mobile. A year later, the
proportion was 59%, roughly $1.48 billion.
On July 1, Facebook
declared that App Links, its feature for easily linking among
mobile apps, had been deployed over one billion times since its
introduction in April and was now compatible with ads. App Links
touted some notable users, including Spotify, Hulu, and Goodreads, which
Amazon owns. But you likely haven't heard of the other applications
deploying App Links.
For now, app-install advertising remains the gamers' game.
Mobile gaming companies account for "well over 50%" of all the
format's ad buying dollars, according to the analytics firm
Flurry. Lagging behind are other marketers
for lifestyle, entertainment, social network and travel categories.
Each represents less than 10% of app-install campaigns.
Young format
Two years ago, the ad format didn't exist. And despite its rapid
growth, mobile-ad executives do not expect it to keep exploding.
"It's not going to go away 100%," said Harry Kargman, the CEO of
mobile-ad network Kargo. "But the euphoria that exists today
won't continue."
One major app-install buyer, the game-maker EA, is facing fresh regulatory obstacles in
the United Kingdom. Others have seen their money-making potential
come under siege by recent rule changes from Apple.
"App-install dollars are not going to grow faster than they did
four quarters ago," said Brian Wong, the CEO of Kiip, a mobile ad
company funded by Interpublic Group. "It remains to be seen whether
that unit is sufficient for the brand marketer's needs."
Twitter, for its part, is aware of this. In an interview with Ad
Age, Richard Alfonsi, Twitter's VP-global online sales, explained
the decision to acquire TapCommerce as a step toward diversifying
the company's offerings to marketers.
One click mobile commerce
With its recent acquisitions, Twitter is also working to diversify
its mobile-ad inventory beyond the Twitter stream. TapCommerce buys
across several thousand applications; MoPub, Twitter's exchange, reaches onto other
apps as well.
Facebook, with its brand-new mobile ad network, is doing the
same.
For the social giants, it's an immediate way to profit from the
app-install rush -- and hedge against its potential end.
"When the dollars start to dry up," said Mr. Kargman, "they'll
start thinking about, 'How do we repurpose that same real estate
that we've carved out in a way to capture brand dollars?'"
Challenge to brand advertisers
Some brands have a experimented with promoting apps -- building
their own, sponsoring others or even creating branded mobile
games.
Yet that requires muscling (and spending) through the thicket of
millions of apps offered by Apple and Google. And capturing waning
consumer attention:
a recent Nielsen study reported that consumers are spending
more time with apps, but aren't using many more of them. And games
still command most of the time spent.
A more plausible path for brand dollars is to use the
app-install format to run mobile coupons or e-commerce, said Mr.
Rozen. Soon, you may be invited to buy a movie ticket or detergent
with one click from an ad in your Twitter app.
Yet that avenue for brand dollars depends on significant
progress in mobile wallets, fraud protection and retail acceptance.
For now, it remains in beta.
"There's a ton of pilots that the CPGs are exploring this
summer," Mr. Rozen said.
