Smartphones and other connected devices are not only totally ubiquitous, but they are now easily the most used accessory (even more than watches and jewelry) for both men and women.  And while there is enough talk about gadget detox, let’s face it - these devices have changed our lives forever and become our office and our assistant at the same time – besides, of course, being our entertainment device, our wallet, our fitness coach among others. And yes, they are the primary communications device that we now use.

In this smart phone era, businesses have built a fortune - trying to solve our problems, make our lives easier, entertaining us and making us smarter – all by creating these wonderful apps. The business models vary for all these developers and publishers – ranging from pure brand engagements based apps, paid apps (one time and subscription), in-app purchases and ad-supported apps. With hundreds of millions of Indians getting into the connected world via these app ecosystems on their affordable android smart phones, the advertising based model (i.e. based on in-application advertising) represents the largest opportunity in the Indian market for the next few years at least. Whether its messaging, ticketing, entertainment and gaming or shopping, in-application advertising is being integrated with these applications as consumers spend more and more  of their time on their favorite accessory. All stats and data points put the In-app advertising market at well over 80% of total mobile advertising ad-spend and it's the only thing that brands, advertisers and agencies are chasing today.

Traditionally mobile game apps have used in-app advertising very effectively. Providing basic features for free (read ad-supported) and then allowing users the option of in-app purchases for premium content has worked well in the aforementioned spaces. Free usage allows a large adoption, gets users hooked on products and the usual value exchange is the data (information) that the user passes to the publisher – basis which such user is targeted for relevant ads.  Google (via Youtube & other products) & Facebook (and more recently Instagram) have built huge revenue models on this business model.

VOD Players eyeing a slice of the pie

The 4 pre-requisites to a successful in-app advertising model are

1. Large number of users (daily and monthly)

2. User data & info – that enables targeting

3. Very high engagement and time spent

4. And as a top-up - Exclusive IP or unique engagement model that allows brands to connect with the user base in a deeper way

All of the above make this an obvious model for Online Video players to look at this space. Also given the fact that subscription business in India is still harder to build and online monetization comes at a better yield on a per impact basis (vs TV), the video IP owners are looking at this space very actively. And given that India is more of an “AND” market (and not an “OR” market) – when it comes to TV and Digital, it's a great model for the large media companies - who between them probably control over 80% of all premium IP in the country - to play simultaneously in both spaces.

The sceptics will say that the market is dominated by the top 2 global internet giants as of now and they have the benefit of the enormous data / information they have at their behest. That is true. But something changed a few months ago – with the launch of JIO and the changes that played out post that – India jumped from being 150th in broadband penetration (in early 2016) to no 1 mobile data user in the world!!! As per Industry reports, the monthly mobile data consumption on Jio’s network was 1 billion GB which is 1.5X of China or the same as US. And in the next two years it is expected to double to become 1.5X China and US put together as per some estimates and reports. And then there are the other telcos too, who will control the balance market.

The number one beneficiary (from this explosion) is going to be the Online Video business – which is expected to account for 50-60% share of this online data usage. And we are not even talking about fixed line high speed broadband in your houses, which will power your set top boxes, wifi routers and smart TVs. That's another top up on this already humongous opportunity. And that is the reason why you see the explosion of the number of online video destinations in the last 12 months.

Now, the above will lead to growth in all kinds of video monetization – subscription, transaction, but most of all it will be advertising. And when it comes to Video - and engaging video that allows users to consume large volumes of content on their devices – the key is great content. And that is where the party is just beginning for content creators and premium IP owners.

But, it’s important to remember the 4 perquisites for running an ad supported service at scale. While its early days in this space, there are only 3 ad-supported video destinations (YouTube, Hotstar & VOOT) with millions of daily active users and billions of minutes of watch time per month.   

Image Source: 2one5

Exploring the various types of In-app advertising in the OTT VoD space

For the VOD app space, there are three major types of in-app advertising that marketers can choose from: The first is Advertisements placed in content. This is done in two forms – Ads placed at the start of content and ads placed in the middle of the content. We at Voot have used this model effectively. So its much like the ads on TV, but you don’t have long breaks and everything is targeted to the right audience.

The second form of in-app advertising is Product Placements or brand integrations. Product placements/brand integrations have been effectively used by television shows and movies and this model is now emerging as a fast growing opportunity on VOD platforms. Since it’s the subtlest form of advertising and doesn’t interrupt entertainment (when done well) of the viewers, it is much sought after. A good example of this was when Motorola (for Moto Z) recently tied up with VOOT through our original web series Untag. The idea behind the partnership was not just to have a brand mention but to opt seamless integration of the product and proposition in the storyline.

The last one is an Advertiser Funded Programs (AFP). AFP provides opportunity for brands to either design the entire program around their core proposition or if they see a total fitment of the show concept around their brand promise they exclusively want to own the space (in this case be the core partner for the show and virtually have 100% share of brand voice on the program). TV has done this well over the years and we will be seeing this happen on premium digital platform soon – in an even more effective way.

In app Video advertising on premium content platforms combines the major advantages of delivering the message as effectively as TV and then adds a new dimension of targeting + measurement that is only possible on digital. This has resulted in advertisers now for the first time seriously looking at building brands on the internet. And with BARC coming in to measure and report the key digital video services – and then enabling the media planners & buyers to plan for TV +digital video together in a year or so, I would say that the party is just getting started.

The author is the Chief Operating Officer at Viacom18 Digital Ventures, a part of Viacom18. The views expressed here are his own.

Master Image via MetroMediaWorks

Tags : Mobile App, in-app advertising