by Nima Wedlake on January 12, 2017
As investors in the digital advertising space, we closely track emerging technologies that impact how media dollars flow between advertisers and publishers. Header bidding emerged as such a technology in 2016 — it has been embraced by publishers and inspired a spirited discussion within the industry on its benefits and potential drawbacks.
So what exactly is header bidding? In short, it is a technique wherein publishers offer inventory to multiple ad partners simultaneously before making calls to their ad servers by placing code in the header (hence the term) of their webpages. This allows all demand sources to compete side-by-side for a given ad impression, which increases bid density and ultimately yields higher CPMs for publishers. We’ve created a report detailing the mechanics of header bidding, which is embedded below and can be downloaded directly here.
The concept of header bidding has been around for several years — Amazon and Criteo have a history of working directly with publishers to access inventory through the header. Over the last 12 months, however, we’ve seen much broader adoption of header bidding by publishers as a means of connecting to demand partners.
What prompted the change? Publishers who have implemented header bidding report significant revenue gains vs. a traditional waterfall ad server setup. It’s due to a small, but critical change to how demand partners are called to bid on a particular ad impression. In a header bidding setup, partners are called simultaneously, meaning each partner has a shot at bidding on a given impression. In a waterfall setup (common in most publisher ad servers like Google’s Doubleclick for Publishers), publishers are called sequentially until an acceptable bid amount is placed. We’ve illustrated each setup below:
The waterfall model is inherently inefficient, as ad partners who may have provided winning bids are often not called to participate in an ad auction. The resulting revenue gains from header bidding can be significant — publishers report advertising yield improvements of 10% to 70%, according to Business Insider. It’s no surprise then that the many publishers have rushed to implement the technology. We analyzed the top 100 hundred media publications in the U.S. — 69% of these publishers had at least one header bidding partner integrated.
We expect more publishers to embrace header bidding in the coming year, especially as technology providers develop solutions that streamline the implementation and management of header setups.
by Kareem Aly on December 12, 2016
Even the most intelligent security minds are struggling with how to resolve the current cybercrime epidemic. Data breaches are at an all-time high. The costs to remediate these breaches are at an all-time high. Hackers are more collaborative than ever. Attacks are more sophisticated than ever. Malware has become so incredibly dynamic that it can change shape, alter form, manipulate appearance the second it senses that it is on the brink of being detected. We are witnessing the prevalence of cybersecurity wars between nation-states, with the US parked firmly in the middle of things. The days where we could feel secure entering personal data are long gone.
We at Thomvest believe the security market is poised for vigorous growth over the coming years, and we are believers in companies who are alleviating the ineffectiveness that is present within the current security paradigm. Whether it involves the cloud and applications, the new BYOD (bring-your-own-device) landscape, or the ever popular Internet of Things, security is at the forefront of executives’ priorities.
Feel free to peruse our latest overview on the security industry, available on SlideShare as well as below:
by Nima Wedlake on December 1, 2016
It’s no secret that the Chinese advertising market – much like the broader Chinese economy – is large and growing rapidly. As investors in advertising technology, we’ve seen many of our portfolio companies rapidly scale their businesses in China over the last several years.
In order to better understand the Chinese advertising market we kicked off a research project earlier this year, which included a trip to China in July. Our goal with this research is to grasp the many nuances of advertising technology in China – what role does programmatic play, who are the key vendors in the space, what challenges do these vendors face, and how do we expect the market to evolve over the next several years? This report is a culmination of those efforts.
The full presentation is available on Slideshare, and below we’ve included some highlights from our research:
Fueled by mobile adoption, the advertising ecosystem in China is flourishing
There are more than 620 million Chinese consumers with access to internet-connected mobile devices. These consumers have come to rely on mobile devices for commerce, communication & entertainment – Chinese mobile users between ages 16 and 45 spend nearly 40 minutes more per day on their devices than consumers in other countries.
As such, advertising spend on mobile devices has ballooned over the last several years, from $8B USD in 2014 to more than $27B USD in 2016. China is far and away the fastest growing digital advertising market globally, by both impression volume & ad spend.
However, most digital ad spend is being captured by a small set of premium publishers
As Chinese consumers have come to embrace mobile connectivity, we’ve seen the rise of three dominant technology companies – Baidu, Alibaba & Tencent (collectively known as “BAT”). Through both innovation & acquisition, these companies have developed full-stack consumer experiences, including messaging, commerce, gaming, entertainment, and payments. Chinese consumers are constantly using apps owned and operating by either Baidu, Alibaba, or Tencent – 71% of time spent on mobile devices is within a BAT-owned application.
Because these companies capture so much consumer attention, they’ve become advertisers’ primary destination for deploying ad dollars. According to eMarketer, Baidu, Alibaba and Tencent will nearly 73% of China’s mobile internet ad market in 2016.
Cross-border M&A is driving competition & innovation in the advertising sector
In spite of BAT’s dominance, the broader advertising ecosystem continues to thrive, evidenced by the uptick in M&A over the last year. In particular, we’ve seen a number of acquisitions of US and Europe-based companies by Chinese buyers, including the $1.4B acquisition of AppLovin by Orient Hontai Capital & the $900M acquisition of Media.net by Miteno Communication Technology. While these acquisitions are often driven by financial arbitrage opportunities, they are also a sign of the growing role of digital advertising in China. We expect these acquisitions to continue into 2017, especially among western companies with a strong presence in the China market.
by Daphne Ewing-Chow on October 26, 2016
In a recent research report, we shared our findings around the rise of mobile device usage and its effect on the advertising ecosystem. We found that adults in the U.S. spend more than three hours on mobile devices each day – playing games, connecting with friends and consuming media. As consumers have shifted to mobile, so have advertisers: ad spend on mobile devices is expected to exceed $40B in 2016. in this post, we dig deeper into the psyche of consumers on mobile in order to better understand its implications on e-commerce.
The Monetate Ecommerce Quarterly provides purchase conversion rates across several device types. The chart below shows that buyers are increasingly more likely to purchase items on tablets; however, the story is quite different for mobile devices which convert at about one-third of the rate of desktop computers.
Statistics from eMarketer’s US Mobile Time and Activities Stat Pack reveal that smartphones are more of a browse or research platform rather than a buy platform, and that consumers tend to use smartphones in tandem with tablets and other larger screen devices when making purchase decisions. The eMarketer study shows that although 8 out of 10 US Smartphone users shop on their mobile devices, less than half actually buy something.
This picture is made clearer when paired with data from Signal around multiscreen shopping behaviors. According to Signal, nearly two-thirds of consumers begin the “path to purchase” on a smartphone. Among those consumers, 61% continue their shopping experience on a PC or laptop.
What’s driving the use of multiple devices along the path to purchase? The higher conversion rate on tablets and desktop computers can be attributed to convenience, perceived trust and a larger device screen. It thus makes sense that the consumer tendency to conduct research on products via mobile devices would also be based on the convenience factor. Further, the increasing convenience and trust of using apps to make retail purchases and the trend of mobile phones increasingly having larger screens is having a positive impact on mobile conversion rate, although conservatively so.
Implications for Advertisers
These findings beg the question, with the rapid increase in mobile ad spending, what would the most cost-effective ad-format be for mobile shoppers, and would this vary by type of type of item?
In terms of format, mobile video ads have the highest conversion rate of all forms of mobile ads. A study conducted by Trusted Media Brands in January reveals that video ads are expected to replace banner ads as the top mobile ad format by the end of 2016. This study found that increased brand awareness is the primary benefit of video ads on mobile.
It is clear that mobile advertising dollars should be spent in ways that facilitate comparison and research of items. Travel is one of the sectors in which this is evident. In 2016, around half of smartphone users will plan a trip using their phone, but only one quarter will actually book a trip via this medium (eMarketer). Further, given issues with trust and size of screen, it is logical to assume that higher-value items will be researched on smartphones but purchased via a larger device. That said, Criteo research has found that committed app users on average make the largest purchases, as illustrated in the diagram below. We attribute this to a higher consumer trust in apps than mobile browsers.
Based on this study, we believe that cross-device behavior should be the primary focus for both advertisers and e-retailers. For those focused on mCommerce, in app purchases and user-experience in-app should be a strategic imperative. Trust, screen size and convenience in conducting research and comparison shopping are primary criteria driving the behavior of mobile shoppers.
by Blake LaFayette on October 7, 2016
VCs have for the most part retreated from investing in bitcoin and blockchain. The appetite for blockchain products however has only increased. Corporations have formed consortiums such as R3 and the Hyperledger Project to learn more about the technology. Numerous enterprises have rolled out internal pilots to test and explore the various applications of blockchain.
At Thomvest, we believe blockchain adoption is about to take off – making it a prime time for VCs to begin making early stage bets.
Take a look at our most recent research report which delves into the current state and future opportunities of blockchain.
by Nima Wedlake on September 26, 2016
Thomvest, in close partnership with our portfolio company Apsalar, recently fielded a quantitative survey to find out more about what marketers are thinking and doing as we finish out 2016 and head into the next year. The survey, conducted in July and August, asked mobile app marketers from around the world about their teams, challenges and opinions on the key issues facing our fast-growing industry. You can download the report in its entirety here, but we wanted to highlight some results around app revenue models and marketing spend.
According to the most recent data from comScore, mobile apps now comprise 58% of connected time in the US.
The figures in many other parts of the world are even higher. Given this, it’s natural that apps are increasingly viewed as a major revenue source for companies. They’ve always been important to mobile –only businesses, but now retailers, travel companies, financial services business and firms in many other verticals are placing greater emphasis on apps as a business channel.
Multiple Revenue Sources Becoming the Norm
One of the first decisions that app makers need to consider is “how will we make money?” By charging for the app? Advertising? In-app purchases? Virtual goods? According to our respondents, advertising has become the most frequently leveraged revenue channel.
Advertising is critical to the so-called “freemium” business model for many gaming apps, where non-payers are monetized through ads. But it is also increasingly common in other categories. Next most popular are real world and virtual goods transactions. Real-world goods sales are the keystone for retail apps, while virtual goods sales are most commonly leveraged in the gaming side of the business. Subscriptions are also becoming increasingly popular, with about ¼ of our respondents reporting that they are part of their revenue models. Subjectively this figure seems rather high to us, which may be driven by our respondent sample. Nevertheless, it seems apparent that subscriptions have “arrived” as an avenue for revenue in our world.
Advertising More Popular Monetization Model in the Developing World
Ours was a truly international respondent sample, and an analysis of developed versus developing world apps showed some interesting patterns. Most vividly as regards in-app advertising. Perhaps not surprisingly, advertising was leveraged more often as a revenue source in developing markets like India, China and Latin America.
Nevertheless, on the gaming side, in-app purchases of virtual goods like game gold represent the most popular type of game monetization.
So that’s some summary information on how apps MAKE money. On the investment side, there is naturally a big range of monthly marketing support levels for apps. About half our marketers said that their average monthly marketing investment per app is $25,000 or less. About a quarter reported spending between 25,000 and 100,000, and another quarter say they average more than $100,000 in monthly spending per app.
To download the complete report in PDF Form, click here.