Ad-based Monetization

In 2013, 9 out of 10 iOS apps were free; currently, the vast majority are still free. Because of consumer’s clear demand for apps to stay free, developers need an income stream and choose some form of advertising. In-app purchasing has become the norm, yet only a mere few can earn substantial revenue, even if they do it right. Ad-based monetization strategies will typically bring in the most revenue, yet there is a long-standing concern that in-app ads ruin user experience, alienating users. To prevent this, developers need to understand the best way to combine placement, unit, offer relevance and performance by eCPM. This way, you can track how effective your ad-based strategy is as a revenue stream. Below is a discussion of the different ad-based formats for monetization, along with a 1 to 10 “Intrusiveness score” to compare:

Video Ads

The beauty of video ads is that the user actually understands what the app is all about, in contrast with static creatives. This clarity saves a lot of time on the part of both the developer and the user. Furthermore, the actual install can happen later and because of the attribution window — the length of time between click and conversion an advertiser must take into account when calculating the profit made from a click — the developer will still get credit for the install. Video ads have grown exponentially, due to the rapid advances in smartphone and mobile device technology. Mobile devices’ constant connection to Wi-Fi or data paired with HD video quality led to the popularity in video ads as of late. They provide a far better UX, and are perceived as in-app entertainment. The ideal placement of video ads is full-screen at natural breaks in the app or the game, such as the app launch or in between levels in a game, or in-feed. Piano Tiles by Cheetah Games is a popular mobile game that uses in-app video ads in between challenges or levels. Zombie Catchers by Two Men and a Dog also uses in-app videos, seen below.

Intrusiveness score: 2

Rewarded video ads

Rewarded video ads have reinvented ad-based monetization for games, as for the first time ads become integral part of game content and scenarios. They allow for monetization by inviting users to opt-in and watch a video ad. By getting rewards for watching a video ad, such as new lives and hints at beating the current level, users feel that they gain something tangible from ads. Hence, this enhances the experience rather than disrupting it. eMarketer reports that rewarded videos are free-to-play mobile gamers’ favorite type of ad.

Tesla Tubes is a good example. The entire concept of the game is built around getting “next step” hints in return for watching a video ad. Thus the ads are actually a part of the game and bring immediate in-game value while allowing the users to discover cool new apps.

Intrusiveness score: 2

According to research, 66% of mobile users prefer to decide whether or not they want to view an ad. Giving users the luxury of choice is a great way to enhance user experience and engagement.

This concept of providing in-app rewards in exchange for watching an ad can also be adopted by non-game apps in certain categories as well. For example, you can reward users who watched a video ad by unlocking workouts in fitness apps, giving users access to new emojis or stickers in messenger apps, or temporarily unlocking limited functionalities in various other types of apps.

The ideal placement of the rewarded format is making it a natural extension of the app or the game content and experience.

Interstitial’s

Interstitial ads are full-screen ads that cover the app interface, typically displayed at app launch, or during transitions in the app or the game. The ideal placement is at app launch in order to immediately grab the user’s attention before they even begin the app. The user clicks on the ad or closes to continue to the app. Either way, the ad grabs the user’s attention and prompts them to respond. Research from late last year shows interstitial’s as the most popular form of in-app advertising.

An app that displays interstitial ads is PixWords, a word puzzle game that shows interstitial’s in between levels on the Android version of the game.

Intrusiveness score: 3

Banners

Banner or display ads are small ads that are usually placed at the top or bottom of the user’s screen. Banner ads have been around for some time now, and the classic 300×250, medium rectangle that typically appears on the right side of the screen, has caused love, outrage and everything in between. Some think they are a thing of the past and others have posited that they are essential for an overall monetization strategy. The former believes they are outdated and intrusive. The latter argue that despite their notoriously low engagement rates, they are easy to implement, while not disrupting the user’s ability to interact with the app.

The “banner blindness” phenomenon has been spoken about since the early 2000’s, whereby users can’t recall which banner ads they have been exposed to. It might not be as cut and dry as some think, but the debate about banner ads will most likely continue. The ideal placement of a banner ad is in-feed and static on a page.

*Solitaire* by CS54 INC is a top performing game in the App Store that uses banner ads. The banner ads are very small and thin positioned at the bottom of the screen — for banner ads, they’re very non-intrusive and don’t disrupt game play at all. That being said, user complaint’s on larger banner sizes prove their invasive nature.

Below is an example of some banner ads in two different games.

     Intrusiveness score: 7

Native ads

Native ads are ads that mimic the look and format of the ads context. In mobile apps, native advertising replicates other content within the app. This type of ad has exploded in popularity and revenue, especially in mobile. A report from last year’ compared the difference in visual attention received between native and banner ads in news feeds. They found that native ads received 25% more attention on desktop, and more than double the attention on tablets. Needless to say, native ads take advantage of our human psychological tendencies in order to gain views.

Native ads are so common these days, just look to Instagram and Facebook for proof. Even established news publications like The Huffington Post use native ads. Utility apps are also embracing native ads and are now accountable for the revenue generation of some of the world’s top grossing apps. By blending seamlessly with the app’s content, these ads don’t ruin the experience or alienate users ”

A good example is Battery Saver: Power Doctor. This true-to-its-name Android app enhances and extends the life of the phone battery, while showing less-intrusive native ads that blend into the app’s content.

The ideal placement for native ads are in-feed, within the content of the app.

Intrusiveness score: 1

Contextual ads

Contextual ads are targeted ads based on user data, which can range from location, search terms, and profile (such as gender and age). The most well-known contextual ads are static offers closely related to the app’s content. For example, a travel itinerary app may want to include a static offer for an Uber ride when a user is searching for a location.

The limitation with these ad offerings is the dependency on the one sole offer. There are other types of contextual ads that are simply advertisements (not offers) that run on a CPC, CPI or CPM basis using the same type of user information to drive the ads. The ideal placement is being content relevant in relation to the app that the user is in.

Waze, the popular navigation app, utilizes a user’s location to display location-based ads that appear directly on the map, such as ads for restaurants, stores, etc. They sometimes even offer deals from the ad (see screenshot below).

Intrusiveness Score: 2

 Let’s recap: