According to App Annie, in-app advertising is set to triple in value in the next few years, going from $72 billion in 2016 to $201 billion in 2021.

So, what are the benefits of in-app ads exactly? Here’s a look at the various types of in-app ad formats, they’re usage, and why in-app advertising is a worthy investment.

Ad formats to consider

There are four commonly-used ad formats for apps. The first is banner ads, which is the oldest and most standard format used on mobile, consisting of text and/or images displayed at the top or bottom of a screen. These ads tend to be the most annoying to users, and can be distracting and intrusive. According to Retale, 60% of banner ad clicks on mobile are accidental – a fact that undoubtedly ramps up the annoyance factor. The creative on these also tends to be poor, contributing to a lack of engagement.

Interstitial ads are full-screen ads (of video or text) that appear during transitions within an app. This makes them feel less intrusive than if they popped up at any time, as they naturally align with pauses or breaks in content. The full-screen nature also makes them more immersive. Relevancy is key, however, as interstitials have proven to generate a flight or fight response. One study found that ad viewers fixated 22% of time spent looking for the ‘X’ button.

Native ads are designed to blend in with the look and feel of an app, so they look less like traditional ads and more like regular (and relevant) content. As a result, they can generate much higher levels of engagement. According to IHS Research, a native ad unit commands between an 18% and 200% higher CPM than a standard banner ad.

Rewarded video is perhaps the newest ad format, and one that is proving to be effective for a number of businesses. These ads offer something to the user in exchange for watching or interacting with an ad, such as prizes or bonuses in a game. This type of ad isn’t just for gaming apps, however. The format can also be used to unlock premium content of any kind. Spotify is one good example of this. Its ‘Sponsored Session’ feature offers (free service) users the chance to watch a brand video in the app in exchange for 30 minutes of free music streaming.

So, while some formats are clearly more effective than others, why should marketers be considering the strategy in the first place?

More time spent in-apps

Flurry’s State of Mobile 2017 report states that time spent in apps grew 6% last year, with users now spending an average of five hours per day on their smartphones.

While this figure is down on the growth of 11% in 2016, it suggests that users are diversifying their behaviour, and shifting attention away from old to new apps (instead of squeezing more time in overall).

Interestingly, it’s not just social media apps like Facebook and Instagram that are taking precedence. Flurry also states that the ‘shopping’ category grew by 54%, suggesting that consumers are feeling increasingly comfortable browsing and making in-app purchases.

Similarly, ‘music, media, and entertainment’ grew 43%, cementing the fact that users are shifting away from traditional viewing habits. Another fact which proves this point: Netflix was named as the top earning app (that isn’t a game) in 2017.

Of course, just because users are spending more time than they used to in-apps doesn’t mean this type of advertising results in higher conversions than mobile web ads.

However, research does suggest that impressions in-app are far more valuable. An Opera Mediaworks study found that apps produce more than double the CTR of web and 13.5x as much revenue.

A unique reach opportunity

Apps can offer a unique opportunity for marketers to reach users at times when other marketing channels can’t. This is largely because apps are used consistently and frequently throughout the day, often in moments when users are unable to consume other media, or in moments of down-time.

For example, as soon as people wake up, on the commute to and from work, or during meal-times.

Ipsos dubs this behaviour as ‘snacking’, as users consumers small amounts on a regular basis, with visits to new apps averaging three visits per day at just eight minutes a session.

Ipsos also suggests that 78% of games app users and 82% of news app users access them every day. This certainly provides food for thought for marketers, especially those who are considering or have considered mobile ads in the past.

In comparison to the mobile web, where browsing and usage might be more infrequent, app usage can often be a daily habit, meaning ads are more likely to reach and engage an already-invested audience.

In terms of what in-app ads are being used for, it’s still the case that in-app advertising is seen as a form of monetisation – generating revenue alongside in-app purchases and pay-to-installs.

However, in a wider sense, the strategy is also being used as part of brands’ cross-channel advertising strategies, with many including the channel alongside others (like social and email) in large scale campaigns. This means investing in in-app advertising in related categories or for a specific target audience. Lastly, in-app advertising can also be enhanced by using location data, with marketers geo-targeting users based on where they are.

They’re more memorable

Recent research by Ipsos also suggests that in-app ads are effective for driving action. One of the main reasons for this is because ads in apps are more memorable than on other channels.

The study found that – while participants are slightly more likely to remember ads if they saw them on a PC than on an app – people are more likely to remember the finite detail of an ad when viewed on apps and mobile websites. 47% of respondents said they could remember ‘a lot’ or ‘some’ of an ad when they saw it on an app compared to 36% who saw it on a PC.

This is likely to be because, while attention is limited overall, users tend to be more engaged in apps from the get-go, with usage attention (especially in games and entertainment) being more focused rather than passive or distracted.

Interestingly, Ipsos also found that people are more positive towards brands in general who advertise on apps. Those who were exposed via an app or mobile website were more likely to say that they felt ‘good’ or ‘very good’ about the brand in question, versus those exposed via a PC or laptop.

Again, this appears to be due to the personal nature of mobile devices, which people using apps regularly, and during leisure time. As a result, users are more likely to feel a closer connection to brands reaching them here, and more open to seeing advertising.

Driving engagement and revenue

Another reason in-app ads tend to resonate is that they are more visually appealing in comparison to ads on other channels. Participants in Ipsos’ study were more receptive of advertising via apps and mobile sites. 50% who saw ads in apps or on mobile websites thought the ads were visually appealing, compared to 44% of PC users.

Meanwhile, fewer said the ads distracted them from the content, compared to 27% of those who saw the ads on a PC.

The level of engagement depends on the format, of course. A study by Adcolony surveyed the world’s top-grossing app developers to determine typical performance levels. The large majority of survey respondents rated rewarded in-app video as the most effective for delivering the best user experience, as well as the most effective monetisation method.

Other than video, the best-performing ad units were reported to be well-integrated with the app UX, short in duration, and highly engaging. The least favorable ads were those that auto-played either before or during app content.

In terms of monetisation, the study also found that the overall greatest contributor to advertising revenue is mobile video ads – accounting for 31% of total publisher revenue. In contrast, display ads make up 20% of total revenue, and native ads generate just 5% of all app revenue.

Another important factor for engagement is the ability to tailor ads according to the user’s behaviour, location, and other key data.

From this, marketers can serve ads that are most relevant to the user, based on real-time products and services.

In-app ads to boost programmatic

According to reports, mobile advertising is projected to account for roughly 70% of all programmatic ad spend, climbing to almost 90% by 2020.

Apps are a hugely important channel for programmatic, and this is due to a couple of reasons.

First, unlike mobile web ads – which rely on cookies to track users –  programmatic uses in-app SDKs to collect device identifiers. From this, it is then possible to track and target users, and to measure impressions, conversions and other important real-time data.

Secondly, thanks to this real-time data, programmatic also allows for real-time campaign optimisation – in terms of inventory, pricing, and creative. Essentially, programmatic is an effective way to ensure that in-app ads reach the right audience at the right moment.

Finally, increased transparency in programmatic is another reason why in-app is becoming more appealing to advertisers. Earlier this year, IAS released a solution that allows buyers to target mobile in-app inventory that promises to be fraud free and viewable. IAS’ tech only targets the apps that meet brand safety expectations, giving advertisers the transparency needed to execute campaigns.

A note on viewability

One problem that has previously plagued in-app advertising has been measurement, and in particular, viewability standards.

Last year, however, IAB’s Tech Lab announced an initiative to allow a unified standard for measuring viewability – eliminating the need for multiple SDKs (software development kits) from third-party viewability companies.

Now, ‘OM SDK’ only requires a single SDK integration, instead of one for each individual provider. Effectively, the measurement process has been made far simpler, with the new OM SDK able to collect a common set of data that can determine performance. It also means that discrepancies among publishers, advertisers and vendors will be significantly reduced.

So, given this, the surge in app usage, and increasingly engaging formats – it’s not surprising why so many marketers are keen to invest.

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