Image of Saurabh Bhatia, CEO and Co-Founder of Chocolate Platform

Why 2019 Could Mark A Massive Push To In-App Header Bidding

We get past the hype to dissect and discuss the major trends sure to have a significant impact on mobile app marketing in 2019, starting with the buzz around in-app header bidding. The concept is about allowing the app publisher to offer up all of their inventory at once to all of their demand sources to get the best deal. Our host Peggy Anne Salz brings back Saurabh Bhatia, CEO and Co-Founder of Chocolate, a leading mobile video advertising firm, for an encore appearance on Mobile Presence for a hard-hitting analysis of the benefits and the challenges, which include lower latency (offering audiences a better ad experiences) and open auctions, promising app publishers increased ad revenue and improved yield management.

Transcript

Hello and welcome to Mobile Presence.  I’m your host, Peggy Anne Salz, with Mobile Groove, where I plan, produce and promote content that allows my clients to reach performance goals and scale growth.  And we look at mobile, we look at apps but we’re going to look at the intersection of both around what I think is definitely the hottest trend out there and what you’re going to be hearing more about in 2019.  It’s about mobile video advertising in-app and I would just say – wouldn’t necessarily say on demand but let’s just say on the terms of the users that you want to address and to talk about this trend, many others as well, we have back for an encore, because he, you know, you said it, you want him back, we got him back – we have Saurabh Bhatia, he is CEO and Co-Founder of Chocolate.  Saurabh, great to have you again on Mobile Presence.

Hello Peggy, nice to meet you and glad to be back, it’s always a pleasure.

It was something about the way you were just like straight on into that people liked and that’s what we have, we’ve brought you back and before we dive into your take on trends, because I’m sure that’s going to be edgy and interesting and we won’t want to miss a moment of that, how was 2018 for you over at Chocolate?  What was that year like for you?

2018 had been a pretty amazing year for us, number one in terms of the new product and the initiatives that we launched but I was also fascinated by the pace at which the industry is moving, it’s evolving.  Personally, I’ve never seen this kind of pace or this kind of change or evolution in the industry over the past few years and I’m really amazed by it.

I mean, it went quickly, I mean, we were talking, just to stay on like mobile video, it’s like “Yeah, it’s coming, it’s important” – we saw, I think it was Merrymaker or something at the very start of the year that mobile was eclipsing television but then who expected it so quickly.  Is it mobile video, the big one for you or what was the trend that just caught you by surprise?

I think mobile video or the growth of mobile video for us it’s always expected because we’ve bet on that trend so that was not a surprise.  What has been fascinating and a surprise for me personally as an observer of the industry and as someone who has been deep into apps and advertising is the speed and pace of the new technologies, new algorithms and new phenomena that are being introduced and video is a trend but what is also extremely powerful and amazing is the introduction of, if I may use the word, “artificial intelligence”, if I may use the word.  How quickly and rapidly the advertisers are changing their buying patterns, how rapidly the users are evolving or the consumers are evolving to these new trends and as a result of which what I am finding is two sides of the funnel.

On one side you have trends and those companies, those organizations, those professionals that adapt to those trends, they are seeing home runs and on the other side, the people who missed those trends, they are completely caught off guard and they are left wondering “What the hell just happened?”

It’s interesting you say AI because I was just reading something today, I read the MIT Technology Review and it was like AI is not a surprise, it’s not magic, let’s stop talking about it as if it is and we still do.  It’s like AI, oh, that’s really something out there but, you know, it’s really about doing all the drudge work in the data to get results faster and to make ultimately more money because you have cracked the code in some level of what you’re doing in advertising, be that the bidding or some people are using AI to figure out the creatives, even creatives or approaches in mobile video, for that matter.  I mean, where do you see the application of AI?  What’s so surprising or what do you expect from your perspective?

So, what I personally expect from AI in the calendar year 2019 is something that every single professional that is in the advertising industry – I mean, it could be said about many industries but I stay focused on the apps and monetization – and my message to the app developers would be that if you are in the business of apps, monetization, and advertising, there is no way that you can escape from the impact that artificial intelligence will have on your business in the calendar year 2019.

And if as a business professional, if as an app developer, you have witnessed in the calendar year 2018 that massive fluctuation in trends, massive fluctuations in revenue or unpredictable behavior, I can tell you, you can contribute a lot of it on these massive sets of data points, these massive sets of algorithms that are all playing at the background.  You don’t see it at the surface but you will feel the impact – it could be positive or it could be negative depending on how you look at it.

To drill it further, I will go ahead and make a bold claim in saying every single job, I’ll repeat, every single job in the advertising and the app industry is at stake or is being influenced by the impact of artificial intelligence and you better make the right decisions otherwise your business would be at risk.

I have to say it’s a bold statement but it is on the mark because it really does dovetail with a lot of what I’m seeing out there and maybe yourself because one step about in this direction is that app marketers are doing a lot more in-house, they’re pulling a lot more back in because it’s not necessary anymore, perhaps any longer to look at individual agencies but to get the intelligence, to get the platforms, to get the technology in-house is a big trend.  Are you seeing that as well, is that what you’re referring to?

Yes, you are absolutely right, Peggy, I would actually go even one step further and say why is that happening?  It is happening because today’s tools, today’s technologies, today’s algorithms are much, much smarter than the smartest human being that is out there doing that job.  If you extrapolate that to the app developers or the publishers who, and I’ll take an example – if you are an app developer and advertising is how you generate your revenue or even in-app purchase, there are hundreds and thousands and millions of decisions that are made during the duration of a year that determines what your revenue will be.

Historically, you had someone manually doing that job which is called maybe “operations”, maybe “optimization”, maybe “revenue maximization”, taking pricing decisions – all of that, leave that to machines.  You focus on something else, something creative.  If you are an app developer and you want to maximize your revenue in the year 2019 and you are doing it by yourself without taking the help of specialist organizations or specialist machine learning-based algorithms, you will lose.  There are no ifs and buts about it, that’s the number one fact.

The number two fact is, and this is a message to all of your listeners and I’ll again focus on the app developer community that if you are an app developer and whether you are an entrepreneur yourself or you are working in an organization that is in the business of monetization and making apps, please go ahead and find, look at your team, look at what you are doing and figure out how you can automate it and how you can bring in smart technology that will help you otherwise it will be extremely difficult for you to compete in the next twelve months.

That’s also what I’m hearing out there.  It sounds on the face of it, it sounds like it’s a disaster waiting to happen, you know, if you don’t embrace machine learning, algorithms, AI, you will not be in business next year but it’s not really – you’re not really saying that it’s about phasing that into your company, starting to use AI, where do you start to use it?  Do you start to use it in bidding, is what I’m hearing, it’s a great place to start.  Other places to use it.  So it’s not like you just bring it in and do everything but you have to start moving parts of your company to that technology.  Now we do have to go to a break shortly so I don’t want to get you started on that but just in a word, Saurabh, where would you tell someone to start with AI right now?

Where the money is.

Which is?  Bidding?

Which is how you make money.  If it is advertising and monetization, that’s where you start.  If it is in-app purchase for you, that’s where you start.  We as an organization focus on advertising, monetization and that’s where we would recommend to start using AI.

Well, it’s what I’m hearing because that’s also the smartest place because that’s where this is a mountain of data that you really can’t get through on your own and if you don’t have the help from machine learning, AI, you’re just going to be doing that manually and things are going too quickly out there to be doing this manually.  So, to your point, that’s a great place to start and we have to stop right now at this point, so listeners, don’t go away, we’ll be right back after the break.

And we’re back with Mobile Presence.  I’m your host, Peggy Anne Salz with Mobile Groove and we have today Saurabh Bhatia, he is CEO and Co-Founder of Chocolate.  And Saurabh, you’re also sharing with us today your view into 2019, into some of the major trends, one of them clearly AI, machine learning.  You’re going to have to get your head around it, app developers and app marketers, that’s the message I’m hearing here but how do they concretely start?  Where does it start?  You said where the money is, OK, so it’s monetization, I want to do monetization machine learning.  How am I going to do it, give me some easy steps to follow, Saurabh.

Pretty simple.  The fact number one, monetization by advertising has emerged as the number one preferred way of app developers to generate revenue from their apps.  So, that’s the number one fact.  If you are an app developer, you must follow advertising, you must embrace advertising for your apps.

The next question is, “How do you do that?” and that’s where tools and technology like mediation comes into the play.  I’ll share a very simple statistic that we have realized from our research and that statistic is even though, even though mediation has proven to be a smarter way of monetizing your app, as of today only 25% of the top 3 gaming apps are utilizing mediation.  There is still, I would say, an ocean to cross because majority of the app developers have still not embraced mediation and you know what?  Those are the app developers that are leaving money on the table and the fact that they’re trying to do it manually, they are also hurting their business.

So my simplest recommendation or the simplest mantra that I would like to share with the app developers who are interested in making money from advertising or who are interested in growing their revenue from advertising is to embrace smart mediation.  That would be my message.

So, I’m going to interrupt for a moment – smart mediation?  What is that as opposed to mediation?  This would be mediation with what?  AI machine learning and how do they embrace it?

There are just two things if you add to mediation that would do the job for you in 2019.  Number one, historically mediation has been done in a waterfall model.  What do I mean by that?  A waterfall model of monetizing is when you work with multiple demand partners or multiple advertisers and you make manual decisions of sequencing them in priority that I believe advertiser one will generate more revenue for me so I will give that advertiser first chance to run an ad.  If that advertiser does not have an ad to run, then I will go to number two and number three.

This methodology was or is called “waterfall model”.  This is an inefficient way of doing mediation or doing monetization.  You need to replace it with something that is known as “unified auction” or it is known as “header bidding” in mediation.  What it means – it means that you have or your mediation technology is smart enough to have all the advertisers getting the ad request at the same time and in that very microsecond based on the advertiser that is likely to give you highest rate which in advertising terms is called “CPM” or the maximum revenue for that single ad opportunity, you will run an ad for that advertiser.

Now this approach leads to number one, higher revenue for you, two, it results in higher fill rate for your app and another thing which is extremely important with unified action is that it allows you to serve an ad almost instantaneously – you don’t have to wait for the manual waterfall to happen because in the manual waterfall, you lose valuable time and if you know today’s consumers, if they see an ad is not loading in an instant, they will skip the ad and they might even close your app.

So imagine it’s not just about you making more money, it is also about having the right experience for the end user.  So that’s the number one aspect of smart mediation which is having a unified auction as compared to the historical way of doing which was waterfall.

So I just want to interrupt for just a moment here and cut in.  You talked about experience, having the right user experience.  Does that also translate into the actual format of the app because when we talk about in-app header bidding, some people out there might think it’s display only and it can be many formats, that’s correct.  Which one works or which ones would you suggest?

So, with specific to format, I would share that in-app header bidding or unified auction works across all ad formats.  The second aspect is which ad format is right for you as an app developer and I’ll share just a simple data point that will make the choice pretty clear.

As of today, of all the app developers that are using advertising as a means of monetizing or as a means of generating revenue, 75% of them prefer video ads over display – 75% and the reason is extremely simple.  One, video ads generate higher revenue.  Two, the consumers have embraced the video ads because you associate rewards with those video ads and many consumers actually like it – it has become an integral part of their entire gaming experience with the apps right now.  So, that makes your choice or your decision pretty simple.

And you, Saurabh, you do this at Chocolate obviously, are you seeing this spread to other app genres because I’m hearing an awful lot about, yes, rewarded video really works well in gaming and it’s going to – you’re going to see it elsewhere.  At the very, very least, maybe commerce and coupons as a way to tie the two together.  I don’t know if you have or want to have customers outside of gaming apps but maybe you can tell me how you’re seeing this advance for 2019?

Actually, that’s extremely interesting that you brought it up because I’d totally forgotten when you were asking me what are the major trends that we have seen – one of the interesting trends that we saw for our organization in 2018 is the adoption of video ads outside of the gaming ecosystem.  Of course, with gaming, it’s pretty obvious with the rewarded video ads, it’s become the number one format.  What we are seeing is across social, especially across sports and news-related apps.  Other formats of video ads are becoming extremely important and those formats include video interstitials which are a full page video takeover and the second one is what is known as “in-view video ads” or I may go technical, 300 across 250 size video ads which take like not the complete screen but almost half the screen and those ad formats are extremely popular and I’ll give you an example.

They’re extremely popular with social media or texting apps because you don’t need the whole screen to do the text, so part of the screen you can have that video running in the background.  Another example is with the sports apps because in sports apps you have a lot of live action that is happening, consumers are absorbed in checking the score and when you are checking the score, again, the score doesn’t need the whole screen so you can have a video experience right over there.

And that has been a very interesting and a promising trend for the industry, I would say.

What’s the user experience for like – let’s take the sports app.  The rewarded video, what is it – I’m going to have – what would the offer be?  I’m, just trying to stretch the imagination here to figure out I can see commerce, it’s like “watch this video, you’ll get a coupon” – sports app – “watch this video, you’ll get…” what would you get?

So I think in the sports app, I would break it in two different components.  One component is if the sports app has a video content, then you can obviously have a video ad running before the video content because if you don’t watch the video ad, you won’t get an opportunity to see the video content which could be a game highlight or a fancy basketball or a touchdown or a goal in case of soccer.  So, that’s a straightforward application of a video ad and instead of calling it rewarded video ads, even though the reward is that you get to watch the content, it’s like the traditional preview that you see before any video content in the industry.

The second case which I was earlier mentioning was that there is no reward but as a publisher, as an app developer, you are taking advantage of the fact that your end user or the consumer, he or she is spending time glued to the screen waiting for the score to update or checking the score, and when they are checking the score, they are on the screen – you take instead of the complete screen, you take just a half of the smartphone screen is taken over by a video ad.  The video ad starts in a silent mode, which is extremely important because that’s the right user experience, and if the user feels “Oh, this is an advertising or this moving picture is of interest to me”, the user may touch upon it, interact with it or click on it and then you can have the full-blown video sound, sight, and action experience.  So these are the two applications that I can clearly see.

Well, I’m sure there’s more to talk about there.  Just before we go to a break, what about playables, what are you hearing about those?  That was another hot topic for 2018 – it is going to be hot in 2019?

So I think playables will still remain as an ad format but I would say their application would be limited around the gaming apps only because playables are essentially mock games that give an opportunity to the user to see “Oh, this is how the game experience could be”.  So what we are predicting is the playable will grow their share but still compared to video it will be a much smaller play.

OK, we’ve got a couple more trends we’re going to deep dive into, a little bit of what I like to do which is sort of like myth busting – this is what I’m hearing, what are you seeing, but listeners, we do have to go to a break so don’t go away, we’ll be right back.

And we are back to Mobile Presence.  I’m your host, Peggy Anne Salz with Mobile Groove and we have today Saurabh Bhatia, he is CEO and Co-Founder of Chocolate.  We’re having a great time here today, Saurabh, going through the trends, what you’re seeing, what’s exploding.  Another trend is probably, you know, it always was a global mobile app economy but there are some opportunities out there that are just, well, too good to ignore any longer.  What are some countries top of radar with you and then we’ll talk about why – so what’s your number one growth market?  If you were to say to an app marketer, app developer, “This is where you need to market your app”, what would it be?

I would recommend to app developers, go to Asia, wherever you can find English speaking language because for that there is the maximum ROI with minimum effort.  You don’t need to do any language localization and the interesting fact is over a period of next three to four years, one billion new, I’ll repeat, one billion new smartphone users will be added in the Asia-Pac English speaking countries.  Imagine.  That is three times the population of the United States.

And that’s new users.

That’s new devices, these are new smartphone users – to give you a trend.  As of today, the penetration of smartphone in India is possibly 28%.  In the next three to four years, it’s going to become more than 60% so you do your maths with over a billion people.

That is exactly what I’m reading, in fact I am now researching a piece I want to do about media apps in India.  They are crushing it, it’s like 60% growth, it’s just huge.  India is a big one, you said across all of APAC, wherever they’re speaking English – let’s talk for just a moment about what we thought was the hot revenue opportunity but maybe not – China, China a freeze on apps.  How do you see the Chinese market?  Do you say then, you know, really just, you know, everything else but or – it used to be that’s another huge market, we have to focus on it, but it’s really, really tough to crack and now there’s a freeze – what do you say about China?

So I think at least for the next twelve months, it is going to be an extremely tricky market for multiple, multiple reasons.  Number one which everyone has talked about extensively over a period of last one year is the freeze or the new censorship with regards to the change in processes about approving new games and that has been pretty crazy as far as the app developers are concerned because what ends up happening is that you have an app in the China market and you spend tremendous amount of resources on localization and in China you have different kinds of Android so you have to do even technology localization, you have to do different marketing and publishing deals and after that, you don’t know when your app is going to go live and that is pretty tricky.

The second macro-trend with regards to China is that the growth is no longer there which means there are no new smartphone users are getting added, it’s the same users that are being churned and the macro-trends of the economy are not great especially because of the US-China trade war and that is having an adverse impact.

And the third trend which is especially about China is that if you are an app developer that is based out of either Western Europe or North America, just the fundamental business environment is not necessarily the best because of the macro-economic and political issues that are completely out of your control as far as doing business is concerned.  So I would rather recommend a wait and watch policy with regards to China.

Okay, so we’ve got a lot of opportunity out there, India a big one, listeners, to note if your app is a fit.  How do our listeners stay in touch with you, Saurabh, in between the next time you might show up on our show?  What’s the best way to stay up to date with you and with Chocolate?

So I think the best way to reach out to me is on my email address, I’m happy to share with you, I’m pretty available – saurabh@chocolateplatform.com – your listeners can go and visit our website at chocolateplatform.com, we are pretty active on social media as well on Twitter or LinkedIn, they can reach out to us over there and we’re happy to respond.

OK, and listeners, if you want to keep up with me throughout the week or find out more about how you can be a guest or sponsor on Mobile Presence, then you can email me, peggy@mobilegroove.com, Mobile Groove is of course also where you can find my portfolio of content marketing and app marketing services and research articles and insights around the mobile app economy.

So that, my friends, is a wrap of yet another episode of Mobile Presence.  You can check out this and all earlier episodes of our show by going to webmasterradio.fm or you can find our shows on iTunes, Stitcher, Spreaker, Spotify and iheartRadio simply by searching Mobile Presence.  So until next time, remember, every minute is mobile, so make every minute count.  We’ll see you soon.

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