Brief:

• The app advertising market is forecast to surge 136% from $27.1 billion last year to $64.1 billion in 2020, according to a study by mobile attribution platform AppsFlyer shared with Mobile Marketer. The growth translates into an average yearly rate of 34%, reflecting a gradual deceleration as the market matures in the next few years.
• App developers will boost their ad spending to drive non-organic installs in a crowded market. Ad spending to drive app installs on mobile devices will double to $12.9 billion by 2020 in North America, where non-organic installs will increase by 73%, AppsFlyer estimated.
• The rise in media costs will outpace the growth of app installs that are driven by marketing activities. Global non-organic app installs will grow by 110% by 2020, AppsFlyer estimated.

Insight:

While software developers can expect to spend heavily to create apps, they also need to be prepared for rising marketing and media costs to stand out amid the millions of apps that now crowd Apple's App Store and Google Play. That means marketers will have to find greater efficiencies in their marketing plans while also avoiding fraudulent activity that saps their ad budgets, AppsFlyer said.

App developers are most likely to dedicate their ad spending to mobile platforms to reach consumers as they use their smartphones and tablets. Marketing is a key part of establishing an app with 35% of companies saying they dedicate 31% to 50% of their total app development budget to promotional activities, according to a survey from The Manifest. Mobile advertising in the U.S. is expected to surpass TV ad spending by more than $6 billion this year, eMarketer estimated. The gap will widen by 2022 as mobile spending reaches $141 billion, compared with $68 billion on TV. 

Meanwhile, Juniper Research estimated digital ad fraud will cost at least $19 billion this year, but others said the figure could be three times that, according to a report by BuzzFeed.  The Interactive Advertising Bureau Tech Lab is working to tackle ad fraud, recently releasing a beta version of its Authorized Sellers for Apps (app-ads.txt) specification for marketers and app developers to test, which could help fight fraud throughout the industry.