A major shift is taking place in the advertising industry, and it is being led by the unlikeliest of sources. What was borne from the necessity of mobile game developers to seek revenue out of their free-to-play titles is now on the verge of becoming a critically important revolution in advertising.
I’m talking, of course, about rewarded advertising, in which publishers offer some type of in-app reward or premium content in exchange for a consumer’s engagement with an ad. Early on, the model was predominantly used by game developers looking to drive app installs. But these days, big brands — and their big budgets — are adopting this model, and for good reason.
Traditional advertising has operated for more than 50 years under the implicit understanding that advertising is what pays for valuable content, and that there is a clear value exchange between ad viewing and access to that content. But that understanding is eroding. Online display advertising has trained consumers to think that content is free, and advertising is viewed as an annoying distraction on the periphery. Add to that the adoption of the DVR and skippable commercials, and even the advertising-content value exchange on television has been forever altered.
On the media device of the future, the smartphone, there is literally no room for a paradigm in which ads are not embedded within the content experience. Pure display advertising that attempts to exist on the periphery of the content, like mobile banner ads, is too small to be anything but annoying to the user and ineffective for the advertiser. Full-screen display ads that take over all of the real estate certainly can get the message across, but when those ads are not related to or improving the overall experience of the user they are just as likely to get negative attention as positive. Consumers are simply too engaged in their content, form factors are too small, and devices are too personal for consumers to accept having ads muck up their experience. And yet, with mobile platforms accounting for 60% of all digital media time spent, brand advertisers are eager to find some way of breaking through to mobile consumers. They’re looking for a better way.
Increasingly, consumers, developers and brands are turning to the rewarded model as the solution that works. What makes the rewarded model so appealing is that it means advertising is no longer relegated to the sidelines — something unrelated to the user experience that is placed in, on, or around the real content that consumers are trying to engage with. Rewarded advertising is inherently integrated into the users’ content experience, and the value exchange proposition — that advertising enables access to premium content — is completely transparent.
A Forrester study published earlier this summer showed that 74% of consumers find traditional in-app ads annoying. It’s no wonder that click-through rates on such ads are so minuscule and that the click-through rate itself is rapidly becoming a dated measurement metric. That same report showed that not only do a vast majority of consumers want to be offered a reward for their engagement with ads, but the percentage of consumers who feel positive toward a brand almost doubles when the brand sponsors, provides content for, or unlocks experiences within the app.
The rewarded model works because instead of ignoring consumers’ preferences, it puts them front and center. It makes the value of advertising more transparent to everyone. Consumers gain a clear benefit for engaging with ads and are given the power to choose both when to engage and which ads to engage with. Rewarded ads are tightly integrated into the user experience, adding to it rather than detracting from it. With all of the current buzz around “native advertising,” rewarded ads are about as native as they get, but at the same time they do not try to masquerade as anything other than an advertisement or sponsorship.
One important factor driving this movement is that app analytics technologies are becoming significantly more advanced, allowing developers to understand user behaviors better than ever before. With that knowledge, developers are able to segment users more effectively and deliver personalized, hyper-targeted ads during very precise moments of app activity.
The advertising industry was built on the premise that consumers would be willing to exchange their time and attention in order to access valuable content. But the traditional advertising value proposition has largely been lost. Until recently.
Game developers were the first to realize that a new dynamic was necessary, but over the past year, app developers ranging from comic book publishers and children’s storybooks to fitness apps and movie streaming services have all embraced the rewarded ad model. Likewise, big brand advertisers such as RadioShack, Samsung, Dodge, Clorox, Google and many others have used rewarded advertising to effectively achieve their objectives on mobile.
As smartphone engagement continues to rise, there’s no denying that advertising is in the midst of a major transition, and with the momentum building behind the rewarded ad model, advertising is in a position to deliver benefits to the end-user, the advertiser and the publisher…..finally.