In-app advertisement: how effective is it
truly?
Laura Begieneman Student number: 10782281 Email: laurabegieneman@gmail.com University of Amsterdam Faculty of Science
Thesis Master Information Studies: Business Information Systems Final version: 20-8-2018
Supervisor: Prof. T van Engers Examiner: Prof. D. Heinhuis
Abstract. Organizations and their marketeers should carefully reconsider which in-app advertisement strategy they will pursue and setting clear objectives is a must. Video advertisement is appearing to be more impactful but at the same time can also be perceived as more intrusive and create tension or even irritation in the usability of the application. Since marketeers and organizations want to preserver and attract new consumers linking the usability to marketing objective as well as formulating a good non-intrusive in-app advertisement strategy is key to monetize marketing spending’s.
Table of contents Table of contents...2 1. Introduction...3 1.1. Background...3 1.1.1. In-app advertisement...3 2. Literature review...4
2.1. Disruption in the mobile market place...4
2.2. The Appstore as a marketplace...5
2.3. Money making from in-app advertisement...5
2.4. Usability and in-app advertisement: an important relationship...6
3. Research Design...6
3.1. The intent for the research...6
3.2. The scientific relevance of the subject...7
3.3. Research questions...8
3.4. The research methods...8
3.4.1. TripTrip mobile application...9
3.4.2. Questionnaire data collection...9
3.4.3. The participants...10
4. Results...10
5. Conclusion...13
6. Future research and limitations...14
References...15
Appendix 1: Routing wireframes...19
Appendix 2: High-fidelity mockup A and B...20
Appendix 3: SUS and Survey...25
Appendix 4: Scatterplot...27
1. Introduction
Marketing is an essential aspect of an organization’s business strategy as it contributes to their success. Advertisement does not only create competitive advantages by promoting product and services it also helps to get known by consumers. However, the ability for consumer to be in control of which advertisement they want to see or click on makes it very difficult for organizations to make an impact with digital marketing. Banners, pop-ups and video advertisements can easily be avoided and forcing these types of digital marketing advertisements on target groups, is challenging. When looking at digital marketing trends and developments mobile and in-app advertisement have seen the most grow and innovative advancement over the last years (Dogtiev, 2018). This is also possible due to the advancement and adoption of mobile technology by consumers. “People with access to a mobile device spend an average of three hours per day. 84 percent of all smartphone time is spent in-app, in-app engagement is increasingly critical for brands, advertisers, marketers, and agencies” (Chen, 2016).
The advantage of in-app advertisement is that organizations can better target and encourage interaction in the moment when using the specific apps. However, there is still a big gap between the amount of time that people are spending on their mobile and the actual advertisement spending on this medium by organizations (Chen, 2016). It will be of great value to marketeers and their organization to get a more in-depth understanding of how consumers use mobile application, how they are affected by advertisements and what type of advertisement is the most valuable for them.
The goal of this thesis is to contribute with a comprehensive research into the effectiveness of in-app advertising primarily investigating if the form in which the content of the advertisement is presented such a static display of dynamic videos have different impact on consumers. A mobile application to attest this, is develop for the purpose of this research. Searching the literature will provide a thoroughly understanding about marketing, digital marketing, mobile application and in-app advertisement.
1.1. Background
1.1.1. In-app advertisement
Since no scientific definition could be found for describing in-app advertisement this research builds up on the definition from the digital marketing glossary: “An in-app advertisement is an advertisement displayed within a mobile phone in-application” ("Definition of in-app advertising", 2012).
In-app advertisement take place in different forms where banners are seen as the most traditional one. Banners are large rectangle projected on the upper of lower case of the screen. The idea is that the message or graphics attracts as many consumers to click on which will then be redirected to the website of the advertiser.
In contradiction of banners, the idea behind native advertisements is that it does not seems like advertisement at all. It mimics the look and feel but also the size of the content and just as the name indicates, natively integrate with the application. Barbieri et al (2016) argue in their paper that the content should be friendly and offer an engaging user experience due to it characteristics.
In-app interstitials are advertisements that covers the whole screen of users when interacting with mobile application (Mouawi et al, 2015). This type of advertisement is oftentimes showing highly interactive content but can also take place in static form. It is intrusive hence very effective as users are forced towards a break and more responsive to recall the advertisement they have seen (Bhave et al, 2013).
Video advertisement is on the rise and this is also true for the in-app variant. Very effective and engaging, when done in the right way. Remarkable is the fact that consumer find technical low-quality video and content coming from “noble amateurs” more trustworthy then content coming from professional (Hautz et al, 2014).
2. Literature review
2.1. Disruption in the mobile market place
The first mobile application back in the days known as feature is introduced in 1994 by IBM who brought the first smartphone named Simon to the market (Islam & Wantl, 2014). The phone came with 10 preloaded applications on it such as a mail, calendar, calculator, address book etc. However, the real disruption came many years later when the first iPhone was introduced in 2007 by Apple and with the opening of the Apple Appstore in 2008 things got wild. Launching a software application development kit for third-parties based on the Safari engine was a golden move. The success was unlimited and provided the ability for competitors to introduce similar Android and Windows-oriented devices. The technological advancement went fast and soon the smartphones turned into high tech minicomputers, which also allowed to make phone calls (Godwin-Jones, 2011).
These developments could take place because the hardware advancements such as quicker processors, faster mobile internet (with 5g on the rise), steady WIFI connection at every corner of the street and larger, smaller and cheaper memory capabilities. Also, the design of the smart phone changed drastically with full keyboard functionality, GPS chips, bigger touchscreen, high resolution camera’s and sensors. (Godwin-Jones, 2011). Having such a powerful device at hand all time provides big opportunities for mobile product and services offering however none of it can exist without the advancement on the software side.
2.2. The Appstore as a marketplace
First searching on mobile devices was mostly done via the web browsers but with the new capabilities of the smartphones new opportunities arose on the software side (Godwin-Jones, 2015). Applications can supply faster and more accurate information and better user experience then the web browsers. For example, when on holiday looking for a great restaurant the geolocation of the devices and the possibility to rate restaurant the application can quickly take different metrics into account to offer you the best option. Due to the intelligence of the application it becomes more favorable then web browsers.
Within the first quarter of 2018, more than 3.8 million Android and 2 million Apple application one could argue that there is an application for almost everything (Statista, 2018). Interesting to see is that 10% of the most popular application account for 70-90% of the total downloads (Petsas et al, 2013). Application are offer to the consumer via the Appstore who facilitates the possibilities for updating, downloading and advancing mobile applications (Petsas et al, 2013).
But how can organization make money out of applications? Developers provide applications to the public as a free or paid edition. Perhaps the first thought is to offer it as a paid version but is this also the smartest and the most lucrative business model? When looking at the research from Petsas et all (2013) they found out that free applications are the most popular among users but purchased applications are selected more carefully. Moreover, when carrying out their research they discovered that almost 70% of the free applications has an integrated library with a direct connection to one or more of the 20 most popular advertising network. To monetize a free application comparison to a paid version it needs to make at least 0.21$ via advertisement offering. Remarkable is the fact that this price drops significant for popular applications as they have to make on average only 0.033$ per advertisement. Thus, offering free applications can be more advantageous. (Petsas et al, 2013).
2.3. Money making from in-app advertisement
But how does it exactly work making money from in-app advertisement? In general terms speaking it’s a party of three:
1. Consumer who download and use the services delivery via the App;
2. Developer of the app who gets a compensation for the delivery of the infrastructure and the services;
3. Advertisement agency or network compensate the developer when he successful collect and gather metrics.
These metrics are often social media networks preferences, online behavior, demographics and geolocation from consumer. The advertisement agency or network sell these metrics to organizations who are interested in advertising to certain target groups. The actual price depends on the demand to advertise on a particular slot.
(Leontiadis et at, 2012.) In-app advertisement comes in different forms such as: banners, native adds, interstitials and video advertisement. These types of advertisements are more in-dept discussed in the introduction chapter.
So how to choose which format of advertisement and strategy is the best? Grewel et al (2016) have found out that the industry in which you are operating, types of devices, partnership and as well as government and industry regulations need to be considered. Also, the intrusiveness of the type of advertisement is important as you don’t want to force it into your target group as this can create negative tension. So what type of strategy is the best? It depends.
2.4. Usability and in-app advertisement: an important relationship
The definition of usability is described in the ISO 9241-11 as: “the extent to which a product can be used by specified users to achieve specified goals with effectiveness, efficiency and satisfaction in a specified context of use” (ISO,2008). This method is used to find out how consumers interact with mobile applications and what their attitude is. Positive experiences foster positive user experience hence creating a reliable foundation for engagement, which is critical for success in marketing initiatives (Baek and Yoo, 2018). Not many scholars have been focusing on the applications usability from the perspective of the consumer and marketing abilities. Most of them focused on the technical capabilities of the application, researched the time it takes to finish a specific task, looked at the error rates and tested the performance on different operation platforms and devices (Ryan and Gonzalves, 2005; Bastien,2015).
However, Baek and Yoo (2018) underline with their research that usability studies in the context of the user is a strong attribute to predict marketing outcomes such as how long and often is the consumer using the app? How loyal is it towards specific brands? And how likely is the consumer to refer the app? Since marketeers and organizations want to preserver and attract new consumers linking the usability to marketing objective can disclose how good in-app advertisement strategy is working (Kim et al, 2013).
3. Research Design
3.1. The intent for the research
Via my personal interest in online marketing I noticed that I self was often confronted with advertisements while using my favorite mobile applications. This phenome is known in the digital marketing world as in-app advertisement. Empirical findings underline that mobile usages significant rise among users as well as the time spend in-app (Fritschle, 2017). Online marketeers estimated that the total spending on digital advertisement was around $101 billion in 2017 exceeding five times more the
spending’s in 2012 (Knotto, 2017). The top 2018 digital marketing trend predictions indicate that in-app advertisement is the future of digital marketing as it allows for less intrusive experiences but better targeting audiences at the right time (Chen, 2016).
Many organizations already started to adopt in-app advertisement strategies which allows them to display advertisements to users when using mobile applications. In order for advertisements to succeed, understanding the customer but also innovation and research must stand at the basis.
However, with these developments, questions arise about how effective is in-app advertisements and does it influence me personally and those around me with the intended effect? Also, the willingness of acceptance of the consumer is key but how do you trigger actionable behavior? This have led me with the thought if the form in which these in-app initiatives are presented such as static display or dynamic video advertisement, pursue the consumer in different ways.
3.2. The scientific relevance of the subject
Academic research on marketing started years ago however, Wroe Alderson’s, who is seen as the Father of Modern marketing, with his early published article in 1936 in the American Marketing Journal, forerunner of the Journal of Marketing (Shaw et al, 2008). From this moment more, theoretical grounded theory started to be developed and different perspectives on marketing and media to express marketing activities are researched. Leckenby (2004) argues in his paper that the development of media types can be classified into “traditional media” and “new media”. Traditional media includes posters and outdoor media, followed by newspaper, magazines, radio and television. New Media that started to rise from mid 1990’s with the introduction of The Internet includes digital marketing activities such as display advertising, content marketing, social media advertisement etc.
When looking at the marketing evolution, theoretical foundations coming from traditional media initiatives, stand at the core but need to be reconsidered in new context with the rapid development and adaptation in technology. For organizations depending on new media marketing strategies, understanding technology and the potential which mobile platforms offers becomes a critical aspect to attract and influence consumers but also to develop new product and services offering.
While more organization adopt mobile marketing as a strategic pillar research in this area is slowly progressing. For example, Ghose et al (2013) analyzed the interdependence between web and mobile advertisement. Other scholars focused more on examining the user behavioral differences in relationship from the traditional versus new media usages (Shankar and Balasubramanian, 2009), the usability’s and the interface of mobile application (Brasel and Gips, 2014) and the potential of promotion and mobile advertisement offering (Dubé et al, 2017). Organization on their turn become more creative in their marketing expression developing a wide variety of
mobile applications and advertisements. Their goal is to offer the most outstanding customer experience and more engagement with consumers. Hence, consumers on their turn embrace mobile technology more and prefer smartphones for their online interaction. This development fosters a positive impact on the future of in-app advertisement which remains very promising.
However, an underexposed research topic remains the possibilities that in-app advertisement is offering for organization. This thesis aims to contribute with a comprehensive research into the effectiveness of In-app advertisement primarily investigating if the form in which the content of the advertisement is presented such a static display of dynamic videos have different impact on consumers. By focusing on whether the consumer will allow and accept this innovation and discovering the how, the basis of examination its future success should be exposed.
3.3. Research questions
To thoroughly comprehend the concerns above it’s important to deeper investigate how in-app advertisement affect consumers and discover it potential to success. Thus, the following research questions are formulated:
Is in-app dynamic video advertisement more effective then static display advertisement to consumers?
Are consumers willing to pay for a “free mobile app” if it will remove the advertisement?
In addition to the above questions, this research will also consider the usability of the mobile application. Even though the focus is primarily on the impact of in-app advertisement. Previous research indicates that there is a direct relationship towards the usability of the application, the user’s acceptance and the overall success of in-app advertisement (Liang et al, 2011; Hussain and Katar, 2009). Thus, to paint the full picture it is also in the interest of this thesis to take this into account:
Does in-app dynamic video advertisement or static display advertisement impact the usability and the success of the mobile application?
3.4. The research methods
The first part of the research is carried out through literature review, investigating different kind of authors mainly focusing on books, scientific and empirical articles and research papers. A literature review is an objective, thorough summary and critical analysis of the relevant available research and non-research literature on the topic being
studied (Hart, 2018). Creating a steady foundation for advancing knowledge is necessary in order to understand what have been written and researched by previous scholars on the topic in-app advertisement. The literature will find more context to the topic of in-app advertisement which is an advancement of digital advertisement. Literature review facilitates theory development, closes areas where research already exists (Webster and Watston, 2002). Uncovering areas where research is still lacking, validating and balancing statements with individual judgements and interpretations will serve at the design for the analysis (Webster and Watston, 2002). The literature review will, addresses the research focus of In-app advertisement, provides critical review of the existing literature on the subject and illustrate the current facets of the subject. The challenge many marketeers and organizations face in acceptance of advertisement by consumers is imperative to examine the consumer’s drivers in relations to their willingness to accept in-app advertisement. The second part of the research will consist of a real-life practical mobile usability testing and questionnaire. 3.4.1. TripTrip mobile application
TripTrip is a fictive clickable travel application specific developed for this research. Since the intend of this research is to investigate the impact and the motivation of accepting in-app advertisement the choice is made to develop an application that is prototypical for apps and that is highly accessible for participants. The assumption is made that most people like to travel and have some experience in booking trips or activities via mobile applications.
TripTrip provides consumers the ability to the find relevant information nearby based on geolocation. It allows users to find recommendations from fellow travelers on hotspots nearby, discover things to do nearby, book restaurant, excursions etc. but also provide feedback on their own findings and experiences. The high-fidelity wireframes can be found in appendix 1 and outlines all the possible routing and navigation elements of the application. As the intent is to test the difference between dynamic video advertisement and static display advertisement two high-fidelity mockups are created. The only difference between these two mockups’ is the marketing expression used. The wireframes and content are identical and visualized in appendix 2.
The questionnaire (appendix 3) is directly carried out after the participants have accomplished their usability task which is further described in discussion chapter. The questionnaire covers the areas which the usability test is not addressing. Understanding the implications and the attitude of the advertisement from the participants is a must in order to fully comprehend the research questions.
3.4.2. Questionnaire data collection
The primary data in this thesis is collected via a questionnaire which can be found in appendix 3. Check and Schutt (2012) describe it as the collection of data from a set of
individuals via their responses to questions. A quantitively method is used in order to be able to explore the human behavior towards the in-app advertisement topic and the usability test. The questionnaire is multi choice and ticket box based and designed in a simple and clear format, which is understandable for everyone. This format facilitates a quick, accurate and easy way for data entry and processing.
The participant will first finish their task in the usability test and directly afterwards fill in the paper-based questionnaire answering 10 statements about the usability on a Likert scale, followed by two Likert scale questions about the exposed advertisements and finally answers a yes or no question about the willingness to pay for a free app if it removes the advertisements.
After collecting the questionnaires from the participants, the data is coded and analyzed in excel and SPSS in order to get a good understanding of the responses, tested for differences and/ or similarities with the aim to answer the research questions. 3.4.3. The participants
Nonproportional quota sampling is used for the purpose of this research as the objective is to have 60 participants divided in two groups of 30. Having enough participants is important to assure that result can be discussed in small group population (Segdwick,2012). Criticism exist of this type of sampling as the results are not generalizable for a large population. However, it is still a good method for this research as the idea is to get specific research questions answered and contribute to new theory and hypotheses formulation of the topic studied (Gobo,2004).
4. Results
To conclude the research, it is necessary to analyze the data collected in order to answer the research questions. This chapter encompass the analysis, presentation and interpretation of the result coming from the questionnaire and the SUS test.
Is in-app dynamic video advertisement more effective then static display advertisement to consumers?
So which type of advertisement to use? To be as less intrusive as possible and really be able to test if consumers noticed the advertisement when carrying out usability task (describe below) the choice is made to use native integrated in-app advertisement. Test group A is exposed to native integrated static display advertisement from hotels.com and test group B to native integrated dynamic video advertisement from booking.com. A nonparametric test is carried out because a ratio is used to collect the answers. Since
the distribution does not follow a normal distribution a Chi test is carried out to answer the research question.
The Chi square indicated that group A and group B are significantly differently. In group. An only 10% of the participant noticed the advertisement and while in group B 56.7% of the participants noticed the advertisement. We may conclude that dynamic advertisements are significantly better noticed.
One may think that familiarity with the brand influences recognition and recall. In order to test this hypothesis, we tested if the degree of familiarity with booking.com relates to the number of correct scores. The variable expressing familiarity with the brand is an ordinal variable using Likert scale. The scatterplot (appendix 4) shows a nonlinear relationship. We used Spearman’s rank correlation to find the answer to this question. The calculation shows that the significance level .128 is above the 0.05 significance level that we decided to use, so no relationship between brand recognition and recall may be assumed.
Are you willing to pay for a “free mobile app” if it will remove the advertisement?
The Chi square indicated that group A and group B is not significant and therefor are the same. The difference between group A where only 56.7% are not willing to pay for removing the advertisement in a “free app” and group B where 66.7% of the participants are not willing to pay is not significant. We should conclude that in both cases these groups are equally unwilling to pay for removing ads.
Does in-app dynamic video advertisement or static display advertisement impact the usability and the success of the mobile application?
Normally, a complete usability study will research the effectives, efficiency and the satisfaction levels of users. However, for this research finding the user’s subjective rating of the TripTrip application is sufficient to identify if there is any relationship toward dynamic video advertisement and/or static display advertisement. Bangor et all (2008) have researched that System Usability Scale method (SUS) is perfect in acquiring the necessary data and with N = 16 a reliability of 95% it met meaning you need little respondents to be reliable. Thus, the SUS method exists of 10 statements which can be ranked by users on a Likert scale on a range from 1 to 5, is selected. The test is easy to understand by all participant and nonproprietary which results in low cost and time efficient (Bangor et all ,2008).
The main objective of the research is to find out whether dynamic of static content is more visible to users when using the application and finding out if it impacts the overall usability of the application. In order to support the main purpose, the following usability test objectives are formulated:
Do participants understand how the application works? Do participants notice the advertisements in the application?
For the Task Scenario the participants are told that they are in Dubai and that they would like to book an excursion via the application. The participants are asked to perform the following task:
Task 1: Create a new user account and log-in into the TripTrip travel application.
Task 2: Find an excursion listed in the application that you like. Task 3: Book and confirm your selected excursion.
After performing the usability test the participants were asked to fill in the SUS test (appendix 5). Group A gave an average score of 76.83 and group B an average score of 64.08. When looking at the meaning of the System Usability Scale (SUS) scores by quartile, adjective ratings, and the acceptability of the overall SUS score it’s indicated that 70 is a score to pass the test (Bangor et al, 2008). Meaning that participant from group A indicated that the usability of the application was above average giving it a good. The participants from group B where less happy with the usability of the application scoring below 70 a non-pass indicated with a sufficient.
SUS score calculation (Bangor et al, 2008)
5. Conclusion
The goal of this thesis is to contribute with a comprehensive research into the effectiveness of in-app advertising primarily investigating if the form in which the content of the advertisement is presented such a static display of dynamic videos have different impact on consumers. After conducting the research it’s clear that significant more participants were able to recall the video advertisements thus indicating that this form of promotion is more favorable. Brand recognizing however had no meaningful impact and can in this context not be considered as a strong attribute. At the same time the SUS score of group B was significant lower, which could perhaps indicate that seeing the video advertisement foster a negative impact on the applications usability. Remarkable is the fact that both groups are not willing to pay for a free application to remove the advertisements.
Organizations and their marketeers should carefully reconsider which in-app advertisement strategy they will pursue and setting clear objectives is a must. Video advertisement is appearing to be more impactful but at the same time can also be perceived as more intrusive and create tension or even irritation in the usability of the
application. Since marketeers and organizations want to preserver and attract new consumers linking the usability to marketing objective as well as formulating a good non-intrusive in-app advertisement strategy is key to monetize marketing spending’s.
6. Future research and limitations
There are some limitations in this thesis that need to be considered in future research. It is clear from this research that dynamic content is more impactful then static content. However, there are also objections to use this as a stand-alone digital marketing strategy as consumer can perceive it as intrusive. Although not studied in this research it is likely to assume that a combination of static display and dynamic video advertisement might results in a higher usability acceptance. Investigating this might provide valuable insight into the consumers’ motivational drivers hence play an important role in strategic marketing planning for organizations and marketeers.
None of the participants in this research is willing to pay to remove advertisement if the app is for free. Testing if this is also true for paid application understanding and comparing the factors influencing consumers behavior towards the attitude of the free application is essential for future pricing strategies. Due to the low entry barriers in the Appstore consumers have endless amount of applications to choose from which makes it easy to discover new players and switch. It will be interesting to do simulation testing to create prediction models that are able to forecast attitude so that organization can flexible changes their digital marketing strategy and better spend their resources
In this research one brand is tested, more differentiation will most likely lead to more brand recognition and give different test results. Examine if brand recognition plays a significant role but also in-depth researching their underlying relationship within in-app advertisement in both setting, is essential.
To make the test setting more realistic it is recommended for future research to either develop a complete working application or to use an existing application from the Appstore. More realistic testing shows more accurate if the usability of the application impacts the user’s experiences. Moreover, a restrained usability test is carried out thus missing an essential part of the scope. To get a complete picture carrying out a full-blown usability test is a must for future research to matches business decisions to real world use.
The small setting makes it difficult to generalize outcome to a large group. Future research should incorporate more participants to be able to make validated assumptions. The selection of the participants should be reconsidered and look into more carefully as nonproportional sampling is often not desired. In probability sampling participants have equally the changes of being selected and reflect therefore more accurate and complete the population thus making the research more reliable.
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Appendix 2: High-fidelity mockup A and B High-fidelity mockup version A
9 41
Submit booking name
amount of people
date that activity takes place
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High-fidelity mockup version B
Appendix 5: SUS score calculations group A and B SUS score group A
