Mid Week Mouthful: Rise of the mobile ad dark pools

Dark Pools and Black Holes

Mobile advertising is a serious and seriously successful industry by pretty much any measure. Despite existing as a viable industry for a little over five years, an article in TechCrunch predicted that an enormous $18bn is likely to pass through the market in the course of 2014.

Yet despite the growth of the sector, it’s tough to think of it as something that is either much loved or thought of with any real warmth. Beyond the walls of samey branding and jargon that guards the hundreds of ad networks in the sector, there is real confusion amongst the app developers who utilise such advertising about whether they’re really seeing any value for their money.

This feeling crystallised for me at the App Promotion Summit in London on the 10th July. While many of the delegates were there on behalf of ad networks and a lot of conversations centred around their beneficial role in the industry, I would say that I heard on a number of instances from a number of sources a discontented murmur that went well beyond an isolated case.

So what was that murmur? The answer is a simple one: ad networks, exchanges, aggregators and all the rest of the sector are too opaque for the average developer to trust. In short, all of them may promise the earth in terms of user quality, global reach and hundreds of valuable clients but few of them provide the actual information to succeed in the market.

The murmurs manifested themselves in particular on two instances. The first was Adrienne Gauldie’s talk about the future of Real Time Bidding (RTB) in the sector. Describing RTB as source of massive growth in the sector and an area of real promise, Gauldie, who has worked for MagicSolver, TradeMob and App Annie, also added a significant caveat to that point that criticised the lack of openness and transparency from companies offering that service.

The second example of the murmur came from a developer at the conference. Looking into the promotion of a niche app and seeking advice for its promotion outside of Facebook, an executive at one company had tried to convince him to part with thousands of dollars of his cash (practically all his budget) on his first campaign on a general network. It was only when I mentioned that he could achieve the same results with a couple of hundred dollars that he realised that the network might not have been acting in his interest.

And it is that which is causing me particular concern at the moment. The lack of transparency as a whole in the space, the lack of in depth reporting and the fact that services like third party tracking have arisen to defend parties from fraud show to me that concerns over the opacity of the industry are beginning to come home to roost amongst companies running it.

Why this concern is manifesting itself on a broader basis is difficult to answer. The continued assaults of Apple on the advertising industry as a whole has played a part, lending credence to the belief the industry is corrupt. Stories abound still about the effects of bot farms, incentivised installs and other shady practices that have happened in the industry. And the general sense of unfairness that followed the success of bursting in the app charts, channelling the richest apps to the top of the charts, remains a sore point.

But ultimately for me, my concern is the similarity that these ad companies have with the dark pools spotted in the world of investment banking. Essentially stock exchanges run in house by the major banks off the public indexes, dark pools allowed people to buy and sell stocks without the trades being recorded or with their information off the record.

Intended as a mechanism to support the rise of dark liquidity, in itself a shady concept associated with off the book trading, an investigation by noted journalist, writer and ex banker Michael Lewis in his title Flash Boys showed that the majority of dark pools are rigged against small time players.

Without clearly published rules in 44 out of 45 dark pools in the U.S. financial sector, smaller investors who attempted to buy shares in the market were often gazumped to the deal they wanted by the bank who owned the dark pool or by high frequency traders who would beat them to the buy by a matter of milliseconds to sell the shares on at an inflated price.

In short, under the protection of the branding of the banks and businesses that run such exchanges, dark pools end up serving the masters rather than the customers using it. By hiding behind privacy and allowing high frequency traders to utilise a micro second advantage caused by their internet speed, they have, according to Lewis, largely conspired against the consumers who use them.

And that is where I see a potential parallel in mobile advertising to this dark pool model. Because, lets be honest, once you set your copy up, put your virtual coins into the machine and set up what targeting you can you’re really in the hands of the gods. You could end up with great quality traffic and superb users. Or you could end up with your app being advertised on some random network while the network you bought with runs off with the pay cheque. What you’re putting your money into is something as transparent as one of these dark pools then, something that is likely to be a cause for concern.

So what’s to be done about it? In short, the good news is we probably won’t have to do that much. The success of Facebook in offering hugely granular targeted advertising and the ludicrously large number of mobile advertisers operating in the sector mean consolidation is firmly on the way. MoPub, one of the biggest, was bought last year, while MobClix took a firm dive into irrelevance and out of business.

But there are a number of things I’d like to see happen in the industry. The first is for people to wise up a bit and take more responsibility for their ad spend. When the monetary taps are turned on and everyone is having a great time swigging from tankards, it is hard to get annoyed about the accidental spillage but it is something that should at least be noted and looked out for. Developers shouldn’t be putting their money into these dark pools without the proper checks, without treating them with a certain sense of suspicion and without being wary – it’s in fact an essential way to protect your money.

And as for companies operating in the sector and who might be identifying themselves as the target for my ire, the only real thought I’ve got for you is to get transparent and start being honest with your consumer base while you have a chance. As Facebook hoovers up your revenue, it makes little sense to hide behind the “global player with big pockets” rhetoric when plenty can be made by specialising in the promotion of certain apps, in certain markets or by targeting certain audiences. The global game is looking lost in light of the big players like Twitter and Google coming on the scene, so why retain the pretence it isn’t and simply hide in your own dark pool in the hope you’ll survive?

The answer would, of course, be that it is commercially acceptable to do so. But the thing is, it isn’t anymore. The dark pools of mobile advertising are going to have the light shone on them soon. If they don’t stand up to scrutiny, then don’t expect to see them survive much longer in the increasingly maturing and critical mobile advertising landscape.

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