Craig Palli, chief strategy officer at Fiksu, explains how Facebooks app ad success has changed the mobile advertising landscape.

A year or so ago, Facebook introduced mobile app install ads with the intent of giving app marketers a more efficient means of targeting high-value users. After recently reporting an 82 per cent year-on-year increase in mobile ad revenues, it’s safe to say it worked. And that success is kicking off a cascade of similar ad products across the industry.

Understanding Facebooks success
By leveraging its highly granular segmentation and targeting tools, and by offering dedicated ad space with direct links that drive immediate installs, Facebook allows app markets to reach users with the unique characteristics and interests they deem a fit. The result is a targeted platform that is far more effective than traditional banner advertising. In fact, recent research we undertook found that the social media giant is the most productive source for generating ROI from mobile games.

The findings come from a report entitled User Acquisition for Mobile Games on Facebook. Most notably, the research found that Facebook mobile app install ads resulted in an 11x improvement in conversion rates, a 1.4x improvement in purchasing rates, and a 28 per cent improvement in cost per purchasing user. Quite frankly, that’s outstanding when you consider larger advertisers get excited about 5 per cent and 10 per cent reductions in costs.

But because successful innovation brings competition, other industry heavyweights are rolling out their own variations on dedicated advertising products for app marketers. In recent weeks, Google, Twitter, Yahoo, and AOL have all joined the app install game, and while they all share some of the characteristics of the successful Facebook product, they all bring different technologies and expertise to bear. What can we expect?

Google
With a unique position in the industry that includes search, an OS, a browser, shopping, video, home automation, navigation, and the ever-popular YouTube under one expansive umbrella, Google has all the ingredients for a winning ad product. Success should just be a matter of execution. And, at this point, can you really doubt them?

Twitter
Twitter is no stranger to mobile. It began life as an SMS service and currently sees over 75 per cent of its usage originate from smartphones and tablets – the highest rate of any of the five platforms. The addition of MoPub should also help, as the mobile app startup sells native adds that can now be augmented with Twitter data.

Yahoo!
Although relatively new to the mobile space – the company’s 2013 year-end earnings report deemed mobile revenue “not material” – Yahoo has more than a few things going for it. It has been in the advertising business for over a decade – longer than anyone else listed – saw 430m unique mobile users in Q1 this year, and boasts mobile-friendly services like Tumblr and Flickr in addition to top-ranked news and weather apps.

AOL
Owning an impressive bunch of properties including TechCrunch, The Huffington Post, DailyFinance, Engadget, AOL Mail, and Autoblog, AOL reaches about 86m unique mobile viewers a month. It also has plans for a coming “premium environment” in which users can download apps. We shall see.

Additional capabilities
One reason that app ads are appealing to so many major players is that they offer capabilities beyond just finding new users. Mobile app install ads can also be used as engagement ads that target dormant users: those who have downloaded the app but have stopped using it. The ads promote new content or features, using deep links to specific locations within the app.

Since combating user decay in today’s flash-in-the-pan mobile marketplace is a significant marketing challenge, resurrecting even a small subset of a dormant user base is a huge coup, and publishing platforms are betting advertisers will pay for it.

What the future holds
If Facebook’s success is any indication, rollouts from Twitter, Google, Yahoo, and AOL should further strengthen the ability for mobile app advertisers to acquire or re-engage high-level users. So much so, that in the coming years the new app products will almost certainly outperform less-targeted banner ad networks dramatically.

I expect these types of products to make up the vast majority of mobile app marketing spend in the near future – with RTB exchanges positioned to efficiently provide access to huge amounts of inventory, not covered by the big five, and video ads finding their own high-performance niche.

Craig Palli is chief strategy officer at Fiksu