Why brands must adjust their mobile ad strategy to survive the ... - The Drum

In this article, we look at how market instability is impacting the mobile advertising industry. We also discuss why brands are better off reallocating their mobile ad budgets instead of cutting them completely.

How businesses and marketers are adapting to the recession

As the economic downturn continues, mass layoffs have been an unfortunate, yet unavoidable reality for many brands – and app-based businesses have been particularly affected. Customers who turned to digital products and services during the pandemic are now back to spending in physical stores – and in a more cost-conscious way. As a result, app businesses are grappling with slowed growth prospects and dwindling revenue forecasts, with many companies downscaling their operations and workforce to cope with the pressure.

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As budgets get tighter than ever, businesses begin to scrutinize their outgoing costs. One of which will often be marketing spend – and this can be notoriously difficult to assess. When done well, marketing campaigns play an important role in driving revenue and profit. When done poorly however, (or indeed not at all), it can actually prove costly for your business. It's for this reason that brands need to carefully consider how and where to spend their marketing budgets. This could mean being more selective of which advertising channels are being used, or it could mean being more strategic about how each channel is actually leveraged.

Given the increasing use of smartphones in daily life, and the undeniable preference of mobile apps over mobile browsers, in-app advertising across smartphone devices remains one of the best and most efficient ways to directly reach your customers. If you already see good returns from this channel then continuing to invest here is a no brainer. However, even if your in-app ad campaigns are driving little to no return on ad spend (ROAS), and you want to save money during the recession, cutting your investment altogether may actually cost you more in the long term. Below we'll examine why mobile advertising should still be part of your marketing budget, and we'll also look at some simple strategies you can use to turn negative ROAS into positive ROAS.

Why in-app advertising is still worth the investment when budgets are tighter than ever

In times of recession, the natural response for many businesses is to cut their ad spend. However, there are plenty of advantages in continuing to advertise when others aren't. First and foremost, it's easier to be seen and heard when your competitors are quiet. Driving brand awareness and keeping existing customers engaged is key, even if the benefits aren't immediate. Maria Lannon, VP of account management at Remerge explains: "Building and maintaining a strong brand presence is the best way to minimize risk, even during a time when consumers aren't spending at previous levels. Remaining top of mind will only position brands to win in the long run."

This isn't to say that your tried and tested marketing strategies will work the same during the recession, nor does it mean that you should ramp up your spend, but as long as you continue to invest tactically in mobile and make the necessary adjustments to avoid a negative ROAS, then you'll reap the rewards later on. According to Global Recession: The Insights You Need from Harvard Business Review 2021: "firms that maintain their marketing spending while re-allocating it to suit the new context typically fare better than firms that cut their marketing investment."

Maintaining brand awareness within a quieter marketplace isn't the only advantage of mobile marketing in the midst of a downturn. In-app advertising is based on the buying of impressions via an auction-like bidding system, so if your competitors are scaling back on their mobile ad spend, the cost per thousand impressions (CPM) will also go down. In fact, when looking at Remerge data from the US, CPMs have been declining since Q3, 2022, and were 43% lower overall when looking at July 2022 to November 2022 – so it's a unique opportunity for brands to maintain the reach and awareness they had before the recession, only at a much lower cost.

Cost-effective adjustments to improve your mobile marketing strategy

If you're not seeing ROAS on your mobile campaigns during the downturn, or your annual budget for 2023 is simply smaller than it was in previous years, don't worry. There are a few other, more cost-effective and efficient approaches you can explore to help maintain your brand's presence on mobile. Maria Lannon explains: "There's no need to make drastic changes. Minor tweaks in investment and overall strategy can have a large impact. This is especially important when thinking about how to continue building momentum coming out of an economic downturn."

1. Pay less for your mobile ads by using contextual targeting

One of the cheaper ways to reach customers through in-app advertising is to target app users based on contextual user insights rather than behavioral ones. Smartphone owners who have opted out of being tracked by the apps they use (aka no-ID users), are now no longer targetable via behavioral data points, such as their personal information or in-app purchasing habits. This is because the opt out process prevents their unique device ID from being shared with the advertisers who want to target them.

When personal and behavioral data is no longer available, the science behind delivering ads to users becomes a lot less precise. On the plus side however, because no-ID users can only be targeted using contextual data points such as device type, timezone and location etc, the CPM for reaching them can be significantly cheaper than ID-enabled users. This dashboard from Remerge shows that as of February 2023, the CPM for no-ID users on iOS devices is 53% cheaper than ID-enabled users. With this in mind, it's worth considering if some of your mobile advertising goals can still be achieved by reallocating some of your budget to targeting cheaper, no-ID users instead.

2. Shift your mobile budget from UA to retargeting for long term success

Another way of adjusting your mobile marketing strategy to alleviate economic pressures is to focus on achieving long term success. For brands who largely direct their ad budgets towards finding new customers, it's a good idea to evaluate what percentage of newly acquired customers are actually being retained and making repeat purchases. For app-based businesses in particular who sell digital products or subscription services, reports show that around 90% of their daily active users will churn in the seven days after the app is installed. This means that investing in user acquisition (UA) campaigns likely has minimal impact on actual sales revenue – and perhaps even less so during a recession when consumer purchasing power is at an all-time low.

One way to cost-effectively drive up your sales revenue and improve retention is to complement your UA efforts with mobile retargeting campaigns. For app-based businesses, moving some of your UA budget towards retargeting your existing, ID-enabled customers (and biggest spenders), can actually drive sales revenue and improve retention. After all, your existing customers are more familiar with your brand than new or prospective customers, so they're even more likely to be compelled by your ads to make purchases. Many studies show that app users who are retargeted make on average 37% more purchases from a brand in their first 30 days as a customer, than those who don't see retargeting ads at all during the same time period.

In this sense, small but strategic budget adjustments to better incorporate retargeting into your mobile marketing campaigns can actually deliver great results and improved ROAS. Speaking on the topic, Maria Lannon explains: "Historically, many brands have focused primarily on growing their user base and less on the quality of these users. Now, more than ever, it's important for brands to be more discerning of the type of users they are acquiring. It may be worth doubling down on loyal customers with strong lifetime values (LTV), to ensure they keep coming back."

Summary

As the downturn leads to slowed growth forecasts and increasingly limited budgets, marketers have been forced to adapt quickly. Despite economic pressures, mobile advertising remains an essential and effective channel to invest in – and cost-conscious advertisers can do so by tweaking their marketing strategies and reallocating their budgets. As many brands unwisely rush to cut back on their mobile ad spend, new opportunities arise. CPMs are lower than usual and it's easier than ever to be heard above your competitors. In the short term, experimenting with cheaper mobile ads through contextual targeting (instead of behavioral targeting) can help to get more for your money. In the longer term, shifting budget from customer acquisition campaigns to retargeting campaigns is a good way to drive sales and retention by maximizing your existing customer base. With guidance from a reliable mobile marketing partner, a few small strategic changes can go a long way to helping your business achieve solid ROAS in spite of the economic uncertainties.