Sunny With Showers for India Mobile Ads

(Bloomberg Gadfly) -- India's mobile advertising market is on a tear. After doubling last year, spending is set to climb another 85 percent in 2017, according to eMarketer.

A further 75 percent increase that's forecast for 2018 will take the market to $810 million, the research firm estimates. Significantly, that continued growth means mobile will account for more than half of all digital ad spend in the country, it said.

All this is great news for the advertising industry and the app ecosystem that's both a big spender on ads and a beneficiary of much of the revenue.

But two problems threaten to take the sheen off: fraud, and uninstalls.

Advertising fraud has been a serious issue in the digital realm for some time. With so much mobile marketing going toward luring new users to download and open an app, there's a lot of incentive for advertising networks to game the system. Since agencies and their networks get paid per install, they often fake it and pretend that a real human downloaded and installed an app, when it was often just a bot.

India has the highest rate of such fraud in the Asia-Pacific region, at 17 percent, well ahead of No. 2, South Korea, at 12 percent, according to marketing consultancy Tune. Then there's non-install fraud, such as fake clicks, dummy users or ads delivered to non-targeted audiences. The fraud click rate in India is almost 32 percent, Tune estimates.

Assuming a developer, which has spent millions of dollars on marketing, actually manages to entice a user to download and open its app, then it also faces a high uninstall rate.

Mobile commerce is hot right now in India, which means there's a lot of money being spent trying to get consumers to download an app from which transactions are made. But a large proportion of low-end devices with limited memory or processing power means many users delete the app to save space, according to Himanshu Kulkarni, India sales director at analytics provider AppsFlyertold

None of this is to say that India's ad market doesn't have a bright future, but rain clouds are never far away from ruining the party.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

To contact the author of this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net.