When you want to find out what’s going on with mobile advertising, there’s no better place to get that information than with a company that deals with a wide variety of mobile advertisers on a daily basis. That describes Tapjoy perfectly. The company has an enormous network, as befits a firm that calls itself “the leading Marketing Automation Platform to monetize mobile freemium apps.” Tapjoy has 10,000+ active apps, a 520 million global monthly reach, 4.23 million daily ad conversions, and over 1 billion total app downloads.

Paul Longhenry, SVP of strategy,  corporate and business development for Tapjoy, spoke recently with [a]listdaily about the current and future state of the mobile games and mobile advertising industries.

Paul Longhenry
Paul Longhenry, Tapjoy SVP of strategy, corporate and business development

What’s the state of the mobile advertising market today, and where is it heading? “It’s probably getting less crowded, with larger players duking it out with one another, but less startups and new entrants,” Longhenry said. “The table stakes for providing a meaningful solution are too high for new entrants.”

The mobile ad marketplace is changing as well, and Longhenry sees brand advertising playing a bigger role in the future. “In terms of how it’s evolving, mobile advertising has been dominated by app distribution for the last five or six years,” Longhenry recalled. “Early on it was banner ads, which tended to be remnant direct-response type demand, but then app developers took the mobile advertising ecosystem up an order of magnitude in size. That market is probably growing at a slower rate than it would have two years ago. Part of that is the app market is maturing—what genres are more powerful, who are the established players? They don’t need to continue to pour 75 percent of their opex [operating expenses] into marketing. You’ve got large players like Facebook and Google that provide a lot of app distribution and user acquisition for those places. There’s not as much opportunity there.”

“What’s starting to happen is [that] brand advertisers are coming, and they’re coming in a variety of ways,” Longhenry continued. “They are certainly investing in content-du-jour experiences like Snapchat. They’re starting to flow in through programmatic channels as well, where they’re buying cross-platform audiences. It’s still really early days, though. If you look at mobile brand advertising as a percentage of digital, it’s still really tiny. That’s what most of us are solving for now. We know that brand advertising eventually flows to where consumers are spending their time, and we know that we can deliver a great user experience and brand impact that’s putting all the pipes and measurement systems in place that brand advertisers can get measure everything they’re used to on web. Over the course of the next year, year-and-a-half, I fully expect that brand advertising will become the largest percentage of mobile ad spend. Those of us that cater to that and do it well will do very well.”

There’s been plenty of competition in mobile marketing, and Tapjoy has managed to prevail despite that. Longhenry sees that Tapjoy’s advantage is taking the long view, and he describes the environment in stark terms. “Our approach is to look at how this ecosystem is going to play out over time,” Longhenry said. “Adtech is a very competitive, innovative space, so where do you build long-term value? Our strong perspective on it has been that simply focusing on delivering demand tends to be a short-lived opportunity. It all comes down to who’s got the best data. As inventory channels become more open to different demand sources, it’s really hard to be just focused on the demand side unless you’re deeply embedded with the advertisers themselves. Folks like Oracle, SAP, Salesforce—that’s really what they’ve focused on. They’ve used all their enterprise systems to deeply embed themselves into making client data actionable from both a marketing and an advertising perspective. That’s a sustainable position. But if you don’t have control of the proprietary data of the advertiser, playing a middleman on the demand side is really tough.”

“We focused on the publisher community, the content developers,” Longhenry continued. “Where we knew the space the best was in freemium apps, where it’s an order of magnitude more complicated than traditional apps. You have 2 or 3 percent paying users who generate 50 percent of revenue, and then 97 percent non-paying users who need to be monetized with advertising. We’ve been solving for that use case. How do you have a single application experience that is tailored to this type of person? Are they going to buy content or are they not? How do leverage a big data platform and predictive analytics to quickly figure that out and deliver the experience that people really want without having to perpetually hit them over the head with marketing messages trying to get them to buy content? Where we differentiated ourselves is to solve for that publisher use case, to make sure our SDK is embedded with larger studios, and then monetize through the ad solution. We are the only players in the space that have taken that approach. We’ve got a strong adtech stack, and we’ve got the combination of adtech and martech, and we’ve got a strong publisher footprint that gets stickier every month as more and more publishers use our services to run their app.”

That perspective led to Tapjoy creating its unified system. “Rather than competing with every other adtech player with a CPM that’s 10 percent higher, why don’t we try to change our value proposition fundamentally?” said Longhenry. “We’re not just changing your eCPM, we’re helping you monetize everybody. You’re using our platform to drive spending behavior as you would with a marketing automation system that you pay for on a SaaS basis to someone else. When you combine marketing automation with adtech, then an ad strategy can be informed innately, on our system, by whether or not someone has been engaged with the marketing message. Similarly, the marketing messages or push notifications that you deliver can be signaled with an ad placement that you put in front of them. These systems, when you get them from multiple parties, they just don’t talk to one another. We saw there’s lots of differentiation out of the box, and you have an ability to innovate faster. That’s proven out pretty well so far.”

Turning to the hottest new game in mobile, Pokémon GO, Longhenry sees that it offers some lessons for the industry. “Answering a little superficially, I think the biggest takeaway that folks should view as really positive is that this industry is far from being done,” Longhenry noted. “It’s not that every genre of consumer experience has already been explored and replicated many times over. We’re all just starting to figure out how we use our mobile devices and what entertainment looks like. Ingress was around for a long time, and no one thought it could be a mass market. To see Pokémon GO be so successful, for those of us who have worked a long time in gaming, is fantastic. It’s not all about match-3 games or city builders; there are other things that a mass market of consumers will find entertaining.”