When Small Meets Big: The Evolution of Mobile Ad Networks

Today, we see the emergence of new and specialised mobile ad networks, in addition to several large ad networks that already serve more mainstream advertising solutions. As opposed to hosting the typical banner and text advertisements, these small networks offer innovative options such as video ads, voice ads, 3D ads, location-based services, augmented reality, Bluetooth technologies, and much more. Contrast this with large ad networks such as InMobi, Google AdMob, and Millennial Media that primarily serve banner and text advertisements, in addition to add-on features such as click-to-call, click-to-download, in-app sponsorships, etc.

While it is true that large networks enjoy a wider reach, their success is not necessarily a given.

One of the issues with being a large network is that it is difficult and challenging to introduce radical innovations to their system. Instead, it is easier to build on existing technologies (e.g. banner advertisements) with occasional incremental additions (e.g. inserting a click-to-call feature above the banner advertisement).

On the other hand, small networks are able to create new advertising solutions that attract more brands and agencies to integrate mobile as a medium into their marketing strategies, such as 3D ads that offer users a 360-degree view of products; augmented reality technologies that engage users in unprecedented ways; and location-based services that provide users coupon savings while driving foot traffic to retail stores. For them, innovation is important for their survival, rather than having a wide user base.

While innovation is a key driver of mobile advertising growth, some caution needs to be taken. An industry with too many specialisations may eventually be self-defeating for the players, because competition becomes stiffer and profit margins narrower.

In response to this situation, such diversity in the industry is instead more likely to lead to the establishment of partnerships between small and large networks, where they benefit from each other’s extensive user base and innovation. Also, if large networks cannot keep pace with the trends in the industry because they lack the research and development capacity, they are likely to seek innovation from third-party networks.

For example, we already see partnerships between Microsoft and Vdopia, and InMobi and Cooliris. Vdopia and Cooliris supply the bigger players their structures for video and 3D ads respectively. In the future, mergers and acquisitions may be more commonplace as large networks take steps to acquire the technological innovations of smaller ad networks.

This trend is likely to continue, eventually leading to consolidation within the mobile ad network industry, similar to the consolidation among online ad networks in the last 10 years. From the hundreds of ad networks that first emerged in the early 2000s, today the top five online networks rake in a whopping 67.7% of the total online ad revenues in the US: Google (40.8%), Yahoo! (11%), Facebook (7%), MSN (6.1%), and AOL (2.7%).

I predict that the mobile ad network industry will follow a similar trajectory, and eventually consolidate into several large joint networks that are capable of giving the various user experiences for mobile advertising. These can run the gamut from mainstream banner ads to specialised augmented reality, video ads, and location-based services. Hopefully, the consolidation will also translate into higher adoption of mobile ads, and better tracking and measurement tools as the industry matures.

Throughout the changes that we can expect to see within the industry, I am confident that innovation will continue to flourish. It is not inconceivable that one day, the most powerful mobile ad network will be able to combine all these technologies skillfully and seamlessly. And perhaps, this network is still out there waiting to be born.