A new study released by IHS and Facebook’s Audience Network found that by 2020 in app native advertising revenue will generate almost two thirds (63.2 percent) of mobile display advertising revenue and will amount to $53.4 billion.

Mobile advertising has grown faster than any other medium in the last four years and is now a significant proportion of online advertising revenue.

“Initially, we saw mobile advertising struggling to match the success of mobile app usage and consumer spending,” said Eleni Marouli, Principal Analyst at IHS Technology and co-author of the study.

“Now, native advertising is booming and today’s most successful mobile marketers have already made the switch. The future of mobile advertising is native.”

The IHS study is the first to provide market sizing and future projections of the in-app native advertising market across regions. Since native advertising is becoming a buzzword used inconsistently across the industry, IHS is using the following definition throughout the report: ‘native advertising’ – a format of advertising that takes advantage of the form and function of the surrounding user experiences, all of which are indigenous to the wide variety of mobile devices.

Five Billion Smartphones by 2018
Since Apple launched its App Store in mid-2008, global smartphone and tablet application stores have served more than 500 billion app downloads.

By the end of 2015 there were 3.3 billion smartphones in use globally, and in the most advanced markets in Western Europe, North America, and mature Asian markets there were more than 85 smartphones in use per 100 people. There is still room for growth; the global smartphone installed base will pass 5 billion in 2018.

“This growth presents opportunities for both app store revenues from in-app purchases and also in-app mobile advertising,” said Jack Kent, Director at IHS Technology.

“Many of these markets will be mobile first in consumer adoption of online services and so mobile advertising will be the dominant online advertising channel.”

Mobile is key Driver
Third party in-app native advertising (native advertising that is operated and served by a third party onto a publisher’s inventory) will be the fastest growing format and a key driver of mobile advertising. IHS research shows that it will increase an average of 70.7 percent a year in terms of revenues to reach $8.9 billion in 2020.

North America is the leading region in third party in-app advertising both in absolute and relative terms; however, Asia Pacific will record the largest increase in the next five years at 177 percent compound annual growth rate between 2015 and 2020.

Patterns
“When analysing mobile advertising revenue by company, two patterns can be observed,” Marouli said. “Companies which focus on mobile in-app advertising command the majority of the mobile advertising market, and companies which focus on native advertising as a primary revenue stream are the most successful at monetising through mobile.” This does not suggest that non-native, mobile web advertising is not growing, but rather that native in-app advertising is outpacing all other mobile advertising formats.

Champions of in-app native advertising
IHS research found that adoption of native varies by publisher type with utilities as the most advanced and games most reluctant at adopting native ad formats.