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Growth of ad sales on mobile apps

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In a Pew Research Center article published in April of 2015, author Aaron Smith pointed out that 64 percent of American adults now own a smartphone. While that figure is impressive, the number is far higher among the nation’s future – young adults – 85 percent of whom own smartphones.

The growth of smartphones is obvious and ongoing, however the secondary results of this market expansion may not be so apparent to the average mobile device user – namely, revenue generated by ads on mobile apps.

Changing Ad Environment

An illustrative example of this growing advertising boom is Facebook, whose year-end quarterly earnings report for 2014 showed nearly 70 percent of its revenue for that period came from smartphone advertisements. In 2014 its total income from operations was $7.2 billion. Compare this to its 2013 total income from operations – $3.9 billion – and one will notice the significant impact ad sales on mobile apps can have in just one year. A few years earlier Facebook generated nothing from ad sales on its mobile version.

With impressive results that include billions of dollars, other social media giants like Google and Twitter are close behind in introducing adds on their mobile versions. Smaller companies are also looking to cash in on this emerging and lucrative market.

Although the basic model of advertising experienced by users will remain more or less the same, these developments in mobile app advertising come amidst a turbulent environment for advertisers who must walk a thin line between collecting personal information and a perceived invasion of privacy. Already a sensitive issue in its own right, this has recently been exacerbated in the wake of revelations about privacy invasions by the government with tech industry complicity.

In response, mobile app advertising techniques that may be perceived by consumers to be invasive are being re-crafted. Before these privacy issues surfaced it was largely overlooked that third-party downloaded apps had the ability to scan a user’s mobile device and report back information about the entire device and its uses to the app’s sponsoring company. Doing this provides companies with valuable information that helps them target their ads.

Recently Apple came out with a new update that blocks this feature. Some see this as a nod towards privacy concerns, however others point out the fact that this move also forces advertisers to work directly through Apple, a potential benefit for the company.

Cookies, third-party bits of code stored on smartphones and computers when those devices are used to visit the third-party’s website, are also used to target advertisements from unique accumulated information. A recent change in European Union law now requires companies that use cookies to obtain consent from individuals before these bits of information are placed or accessed on consumer devices.

Growth is Still Assured

Despite the current privacy concerns and some minor changes related to advertising, the mobile app ad industry will continue to thrive.

Ads have been around at least since they were placed along salt roads in the Bronze Age, and have made their way into the modern era first in newspapers after the invention of the printing press, then later on the radio, television, home PCs that were surfing the web, and today on mobile applications. As the mobile app market continues to grow, the increase of ads on these programs will follow in tandem.

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