Key findings from our Q3 2020 mobile app advertising benchmark report

We already shared that the headline story from our Q3 2020 mobile advertising benchmark report was TikTok’s nearly 5X growth in advertiser adoption year-over-year (YoY), however, there’s plenty of other insights in the report. I want to quickly summarise those key stories here and as a reminder you can get the in-depth insights in the full report.

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For now, let’s jump into the key insights from the report.

Facebook adoption falls

For the first time since we began tracking our data, Facebook’s adoption has fallen below that of Google Universal App Campaigns (UAC).

Google grew adoption 18% quarter-over-quarter (QoQ) and 7% YoY to reach 95% adoption. Meanwhile, Facebook saw a reduction of 6% QoQ and 13% YoY to fall to 84% adoption. At the same time, Apple Search Ads (ASA) grew 31% QoQ and 7% YoY to reach 80% adoption and close in on Facebook’s adoption.

So why is Facebook adoption falling? It appears that smaller advertisers (spending less than $250k per month) are moving away from the platform. In Q3 Facebook’s share of wallet for the smallest advertisers fell to just 17.2%. 

A significant portion of this spend has gone directly to Google who increased its share 19.1 percentage points to take a 56.4% share. This catapulted them past Facebook’s share of wallet at this spend level, as UAC begins to deliver better results for smaller advertisers. ASA (4.4 percentage points), Snapchat (1.2) and TiKTok (3.9) also gained share of wallet quarter-over-quarter from Facebook at this spend level. 

For Facebook, where advertiser competition is higher, there are a lot of reports that CPMs are up year-over-year and this could be a temporary blip with significant ad spend coming in around the US election or it could be a more sustainable trend. Ultimately, it appears that Facebook right now is becoming less sustainable for a smaller budget.

A note of caution on this data: A number of advertisers in our base have graduated from this lower tier of spenders to the mid-tier of spenders. This was a chunk of Facebook’s share of wallet at this level. That does swing these numbers. However, it doesn’t account for most of Facebook’s losses as falling adoption shows.

Spend returns to growth

The Covid pandemic hit ad spend fairly hard in Q2, however, Q3 illustrated somewhat of a bounce back. Spend across all categories has increased vs Q2 with overall spend up 53% QoQ.

Gaming spend was up 55% QoQ and non-gaming was up 145%. Whilst gaming spend has now returned above pre-Covid levels with a 30% increase vs Q1, non-Gaming has not recovered as strongly yet. Non-gaming spend still sits 19% below Q1 levels meaning that overall spend is still 9% below pre-Covid levels in Q1. 

If this year, unlike all others, follows a similar pattern to previous years we would expect to see gaming spend level-out or reduce in Q4, whilst non-gaming should climb again as we head into a big season for ecommerce and fitness apps. However, it is worth noting that non-gaming saw a dip in spend towards the end of Q3 as many nations around the world began a second lockdown, whilst gaming spend rose again.

Consolidation reverses … slowly

As spend starts growing again, Covid consolidation has begun to reverse, albeit very slowly with a 3% increase QoQ in the overall number of channels used.

Mid-tier spenders actually fell below the average in Q3 2020 as they saw a 17% reduction in the number of channels used QoQ falling to 5 channels. The biggest spenders increased 2% to reach 11.7 channels used on average. Meanwhile the smallest spenders moved back towards three channels used on average with a 23% increase to 2.6 channels used. Overall what we see is that advertisers use 6 channels on average to hit their performance metrics.  

Ad networks increase their share of wallet

A beneficiary of consolidation reversing has been the top 6 ad networks (Applovin, Chartboost, ironSource, Tapjoy, Unity Ads and Vungle). Despite adoption reducing QoQ they’ve increased overall share of wallet 3.2 percentage points to 10.7%, with growth coming from the largest advertisers looking to scale spend quickly.

What we’ve largely seen is Self Attributing Networks (SANs) losing spend share overall whilst Ad Networks and DSPs are gaining share.

Another example of this is DSP Liftoff increasing its overall share of wallet despite also seeing reducing adoption. This was also driven by the largest advertisers increasing spend. They gained 0.7 percentage points on their overall share of wallet QoQ reaching 2.2%. This is likely increasing alongside non-gaming spend where a lot of their investment comes from. Similarly, the “Other” category of longer-tail ad networks and DSPs also saw share of spend growth driven by the largest advertisers. They gained 1.1 percentage points QoQ reaching a 6% share. 

This is mostly driven by large advertisers looking to scale spend as they max out core channels and ad networks will scale fastest. However, there could also be some preparation for the iOS14 impact, because ad networks tend to see a higher percentage of spend on Android vs SANs like Facebook and Snapchat who see more significant spend on iOS. Ad networks are also less likely to be impacted by IDFA losses in iOS due to their mechanics. Whilst many predict consolidation from IDFA losses and potential GAID losses, what we could see is share of wallet diversify as advertisers move spend to to ad networks from iOS focused SANs, due to less reliance on user-level IDs.

Conclusion

What we see this quarter is signs of recovery from the Covid-19 pandemic with spend up and channel consolidation reversing. However, what will be interesting to see in coming quarters is whether everything returns to pre-Covid normality or whether a new normal is carved out as a result of IDFA losses from iOS14 in “early 2021”. 

We’ll be keeping an eye on a few potential trends like:

  • Does ad spend move to Android? 
  • Do ad networks gain over SANs?
  • Do Google UAC and ASA gain spend from other SANs?
  • Does Facebook’s adoption trends continue or reverse?
  • Do IDFA losses drive channel diversification or consolidation?

Stay tuned for more and as a reminder you can get the full insights from the report by filling out the form below 👍

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