How can ads be implemented in a way that doesn’t harm the user experience? How much money is being left at the table without ads? These are some of the questions we constantly get from app developers about how to design your monetization strategy. This blog post explains some of the most important considerations that you need to take into account when evaluating your ad monetization strategy. Do note that different strategies apply for different types of mobile apps and audiences, there isn’t a one-size-fits-all approach.
Mobile app monetization: IAP vs. ad revenue
In-app purchases are one of the most effective revenue streams out there. It takes just one purchase to earn revenue of a player, which can be equivalent to showing hundreds or even thousands of ads to earn the same amount. Don’t get it twisted though: while IAP is the most effective, purchases are made by the smallest group of players (around 3% in the best cases), as not all mobile game players are willing to spend money and do purchases in-app. This means that by not showing ads in your mobile game, the majority of your players are not being monetized.
The biggest argument against ads is that developers feel that they can harm the flow or the quality of the mobile game. This can be true in cases where the placement isn’t right or the ad frequency is too high. However, when done properly, ads can even boost your game’s retention and lengthen game average session time. Just think of a game with lives but without ads. Once lives are depleted, there is no other option than either making a purchase or leaving the game, many players will choose the latter option, which results in shorter game sessions and lower retention.
A real-life example: Appynation
Appynation, a UK-based game developer, has integrated rewarded video ads very well in their puzzle title, Picture Cross. In the game, you buy puzzles with tokens. Tokens refill over time and you can win more tokens by completing a puzzle. Each lock represents a puzzle you have to solve. Occasionally, Appynation allows users to watch a video to unlock puzzles, as seen on the screenshot to the right, where the play video icon appears. Appynation have seamlessly integrated rewarded video ads into the flow of the user experience where it makes sense to the user to sometimes watch an ad to unlock an entire puzzle.
Another option for the user to get free tokens is to click on the token icon next to the shopping cart. Then the screenshot to the left appears and the user can decide to watch a video and receive one additional token by clicking ‘Watch and advert’. The user also has the option to purchase extra tokens.
“We’ve strategically placed both in-app purchases and rewarded video ads in the store screen. This allows us to monetize all users from that store screen. Including rewarded ads here also acts as a gateway to convert non-paying ad consumers to full IAP purchasers, so it’s a double win for us. Rewarded video ads are a significant part of our overall revenue and support the conversion of players to IAP purchasers. Balancing ads with IAPs as part of our monetization strategy is something we design for at the start of developing a game and constantly optimize as the game matures.”
– Peter Williamson, CEO, Appynation
Launching your game with monetization in mind
When to start working with ad networks can be very dependent on the type of game that is being developed and the strategy behind it. When developing an ad-dominant hyper-casual game, you want to think of ad placements and ad networks right from the start. This might be different when developing an IAP-focused strategy game, where you might want to release your game without ads. By doing so, you can tell what the true retention / IAP metrics are without the influence of ads. Then when ads are being implemented, you’ll have a baseline to be able to tell the result generated by ads versus not showing ads.
User experience will always be the key
Showing too many ads can harm the user journey, but will also negatively impact your eCPM, resulting in less revenue. In a practical explanation, your app will become known to show too many ads and advertisers will start paying less (remember that advertisers don’t value impressions as much as conversions). Showing less ads, on the other hand, means that you are missing out on potential revenue.
Designing your ad monetization strategy is a continuously iterative process. Start early and test, test, test.
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