Passion is without doubt the main driver of a developer’s motivation to build great and beautiful apps. This passion will keep you awake at night and fuel the creativity and hard work necessary to the completion and perfection of a beautiful product.However, passion is not enough.
And although you may not be in the game for this reason in the first place, the bottom line is what it is: successful mobile monetization is paramount in order to keep shipping further creative projects.
In HitFox Group CEO Jan Beckers’s words, “Monetization is survival.”
To be honest, since the launch of the various app stores a few years ago, the media and industry spotlight has been cast mostly upon the first and maybe sexiest part of the app lifecycle, namely user acquisition.
Indeed, the app promotion space has certainly been the most heavily commented in the last couple of years, as everyone kept looking at its rising stars and fallen angels.
There are several reasons for that. Distribution, promotion and discovery are the first and main elements to tackle when launching an app, and they are still extremely hard to crack. App store search and rank algorithms remain grey or blackish boxes in which everyone likes to put their two cents, with more or less skill and success. In this context, monetization seems to be user acquisition’s poor cousin (ironically).
In this article, I’ll try and give insights on monetization strategies in general, and in this context highlight the performance on various ad formats. You’ll see which elements to take into account in order to monetize your traffic, with a focus on maximizing retention and optimizing the user lifecycle.
Indeed, whenever discussing either user acquisition or monetization strategies, it’s essential to always place them in the more holistic context of the app (or user) lifecycle, so that’s where I’ll start.
The User Lifecycle: it’s all about the right balance
The general success of an app lies less in its publisher’s ability to maximize or optimize one of the elements of the user lifecycle (see Figure 1) than in its capacity to get the right balance and the right momentum between these elements. There are important and inherent tradeoffs between them, and understanding how these relationships work is key to mastering the global success of your app.
Figure 1 shows the typical relationships between the various elements of the user lifecycle, as well as a few typical metrics for each of them. The hardest part is to manage to handle the balance between retention and engagement on the one side, and monetization on the other. Maximizing retention (what length of time users keep on using your app) and engagement (how long users stay per session and how often users come back to it) will have a direct positive impact on monetization, as the revenue you get out of each user will tend to increase. On the other hand, increasing the pressure to monetize, such as showing ads more often and more insistently, will have a negative impact on retention, and the resulting revenue will decrease as users drop out. Hence the trade-off.
What the Figure 1 doesn’t show is the direct relationship between monetization and user acquisition, as achieving a healthy revenue stream will obviously enable you to spend more in order to acquire new users. The loop is then complete.
Now, back to business. Let’s take a look at the various mobile monetization strategies, and why going for in-app advertising makes sense. You’ll then see how the high-engagement ad format in particular can help you ace your monetization strategy while optimizing the user lifecycle of your app.
Monetization strategies; why consider ads?
When it comes to monetizing mobile apps, there are several business models which developers and publishers can adopt or even combine.
Paid apps: Monetizing through the upfront price was the early revenue model on the app stores, but has since then been overtaken by other models in top grossing charts (with a few exceptions to confirm the rule). On top of this they are much harder to promote, let alone cross-promote.
Free apps with in-app purchase: In-app purchase items (IAP) are without doubt the most profitable model on the app stores at the moment, due to the success of the free-to-play (F2P) model for games. IAP now make for over 50% of mobile game revenues, and could go as high as 70% within two years. The issue with the IAP revenue model is that, in order to be successful, it relies on clever in-app monetization mechanisms that are both hard to master and seldom successful.
Ad offers (advertising): Ad offers, which represent less than 10% of all app revenue, are an interesting and underrated option for a viable user monetization strategy because they allow you to monetize high volumes of users without the risk linked to an in-app purchase strategy. However, they also come with risks: in order to be effective, they need to be integrated in a smart and non-intrusive way in order not to degrade the retention rate by alienating your users or disrupting their in-app experience. Indeed the risk is for your users to be lured out of your app. Also, ads are likely spur a higher churn rate if too aggressively placed into your app.
Ad content: why games?
The purpose of this argument is obviously not to say that you should absolutely restrain the offers you show in your app to mobile games. It can also be a viable option to monetize your traffic with offers from brands and other categories of apps.
However, as a specialized mobile games marketing platform, I know that games tend to perform very well on many of the factors you’ll want to look at when choosing an advertising solution to monetize your traffic. These include the following.
(1) Games are usually available in a majority of countries and app stores; therefore you can almost always be sure to monetize your traffic wherever it comes from.
(2) Only 15% of apps on the app stores are games; however they make over 40% of the time spent in apps and over 80% of overall app revenues. Game publishers who can afford to advertise monetize well, which is why game offers tend to yield higher payouts (often over $2 Cost-Per-Install, sometimes up to $6). In turn, this will allow you to maximize your eCPM’s.v (3) Games are most often available on all major mobile platforms.
(4) Games are easy to integrate in any ad format or integration type (interstitial, video, high-engagement...).
Climbing the ladder of user engagement
Let’s take a look at the various ad formats as well as the pros and cons they present. The main ad integration types are listed in Figures 2 and 3, in increasing level of user engagement.
Classic banners: they are typically placed at the bottom of the screen and are displayed during the app experience (content consumption, gameplay...). They offer the lowest click-through rates (CTR’s usually below 0.5%, with eCPM’s seldom higher than $1), are the most detrimental to retention and most subject to accidental clicks.
Static interstitials: they are usually triggered by a specific event in the app (on launch, a given button pressed, level completion...). They offer better CTR’s as well as eCPM’s but do not engage the user in any way.
Video ads: same as static interstitials, but with video. The payout is usually on a view-completion basis.
High-Engagement ads: ads that offer real interaction with the user, more on them later in the article.
Native ads: ads which are completely blended with the app experience itself.
The issue with mobile advertising
The first reflex when creating ad formats for mobile apps was to copy the web norms and integrate display banners. Even today, most ad formats on mobile are still borrowed from online display advertising. The problem is that mobile apps offer a more intimate user experience to which advertising must adapt in order not to disrupt the user experience and hurt retention. As stated earlier, mobile ads which are too intrusive and hurt the app’s experience will cause a drop in the user retention rate.
On top of that, studies show that up to 30% of mobile clicks result from accidental clicks, otherwise known as the “fat-fingers problem.”
In-app advertising needs to go beyond this.
As always, success comes down to optimizing the user lifecycle, which in this case means maximizing in-app monetization while least hurting the retention of your users.
Addressing the in-app advertising issues
In order to maximize the effectiveness of in-app advertising, you’ll need to take into account two main factors: (1) their placement as well as (2) their level of engagement with the users. After that I’ll introduce high engagement ad offers.
Placement is key: how to integrate ads into content
One of the main issues with in-app ads is that they are forced upon the users without their consent and therefore often perceived as intrusive. One way to go around this is to have the users trigger the ad themselves. This can, for instance, be achieved by placing a “more apps” or “more games” button on the homepage or navigation bar. The important point is that the ad is displayed as the result of a voluntary action from the user. On iOS, it is also advised to use the in-app controller in order to allow users to download the advertised app without having to leave the original one.
Leveraging your potential with high-engagement ads
So, what are high-engagement ads?
Generally, high-engagement ads can be included in the broader category of rich media. People generally think of rich media as being mostly video ads, but there is a difference between a mere video clip and an ad which offers real engagement for the user, meaning actual interaction with the ad.
Engagement can typically be achieved by the user having to perform a certain action to access the ad offer. The user perceives the ad as the result of performing that action rather than something which was forced upon them. The ad can even be assimilated to offer a present, a gift or a reward. For instance, engagement can be created by the user having to open a present, scratch the screen, take a picture of herself or blow into the device’s microphone in order to see the offer. Here again, the main point is that the trigger to see the offer is a voluntary action (the offer can’t be seen before the user completes the action).
To sum it up, the power of high-engagement ads is that they are perceived by the user as being pulled rather than pushed.
Therefore the user sees them as a part of the app experience and not as spamming, which overall considerably improves retention.
And it can pay out! According to our data, at AppLift we see eCPM’s with an average of $30 and up to $80, depending on the integration (ad placement and trigger).
One level up on the scale of engagement you’ll find native ads, which is advertising completely integrated within the experience of the app itself. Although native ads offer indeed the most engaging experience, as they need to be extremely customized they are hard and costly to produce. Most of them can be found within games.
High-engagement ads are a good trade-off between classic interstitials and native ads: they are by far more engaging than traditional static interstitials, but just as easy to set up (quick SDK integration). And, although being somewhat less engaging than native ads, they are far less cumbersome to integrate.
A new light
Hopefully this article will have brought you some insightful tips on in-app monetization strategies.
Game ad offers, if well integrated, can be a great way to cash in your app’s potential and monetize your traffic.
I also hope that I managed to shed light on a rather unknown and underrated ad format. Easy to integrate, built for user lifecycle optimization, high-engagement ads tick a lot of boxes and should definitely be considered as a great alternative to the more classic ad formats.
If you have questions, would like further information on the topic of retention-maximizing monetization strategies, or even if you have original ideas for new high-engagement formats, do not hesitate to drop me an email at firstname.lastname@example.org