Some say it’s a necessary evil. Others call it vital to the mobile game economy.
Most game developers agree → it’s an important monetization opportunity.
Of course, I’m talking about in-app ads.
Over the last few years, we witnessed the rise of in-app advertising.
And mobile gamers are fine with it, as long as their favorite games remain free to play.
As a publisher, you want to display as many ads as possible and keep the players happy at the same time. This is a process that consists of many steps.
Let’s learn all about in-app advertising. We cover ad formats, advantages and disadvantages, up-to-date statistics, examples, and even some practical tips.
Here’s everything you need for successful game monetization.
What Are In-App Ads?
In-app advertising is a monetization model that drives revenue for millions of free-to-play mobile games and other apps.
In-app ads are displayed within a mobile game and are served through a mobile ad network.
Simply put, while players enjoy a free gameplay experience, developers earn money from displaying ads. The third-party in the process are advertisers trying to acquire new consumers for apps, products, or services.
The process of including in-app ads into your game starts with choosing two important things:
- Ad network
- Ad formats
Mobile advertising is based on the law of supply and demand. As a developer/publisher, you’re on the supply side. And it’s a great side to be on: there are more ad demand sources competing for inventory than ever before.
The ad network’s role is to connect game developers and advertisers. They come with various targeting options, platforms supported, campaign types, ad formats, etc.
After an advertiser requests ad space from an ad network, it uses its mechanisms to adjust ads so they are set up in a way that’s most likely to generate profit.
There are different mobile game advertising strategies and ad formats that can be integrated into a mobile game, from static to dynamic ones.
How are in-app ads integrated into mobile games? Typically, ads appear where the game naturally pauses.
Level completed? Expect an ad. Ran out of lives? An ad is probably coming.
What this means for players is they will have to pause their gameplay experience to watch an ad for up to 30 seconds. After that, the gameplay continues.
How to Calculate Ad Revenue
You might be wondering which metrics show you how successful your ad monetization model is.
Here’s the formula.
To explain, eCPM stands for “effective cost per 1000 impressions”. In other words, the amount of revenue generated per one thousand ad impressions.
In terms of monetization, high eCPMs mean that the ads displayed within the game are converting users. And the higher the eCPMs are, the more money you make.
Additionally, you can measure ad revenue by tracking these metrics as well: ARPU, ARPDAU, and ARPPU.
In-App Ads: Key Statistics
It’s no secret that in-app advertising is on the rise – it is said to boost retention by 4x, according to Mobile Marketing Magazine.
Furthermore, according to AppAnnie, in-app advertising got to $201 billion in 2021. We can expect that number will increase by the end of 2022 and some predict it will reach $340 billion by 2023.
Haters can say whatever they want about them, but the data is clear: players don’t mind in-app ads. In fact, 79% of active mobile gamers said they are happy with the ad-supported monetization model.
Moreover, 82% of mobile gamers say they are more into free mobile games that contain ads than paid games with no ads. (eMarketer)
With that being said, with this rising trend, users are seeing ads more frequently than ever before. An average of 26.4% of mobile gamers views at least one ad per day. Among regular ad watchers, that average climbs to 3-4 a day, regardless of the game genre. (Unity)
Mobile Game Ad Formats
In most cases, mobile games use one of these five main ad formats. Most of these formats are supported by all the major ad networks.
Each of these comes with its own unique features, pros, and cons.
1. Rewarded Video Ads
This ad format is equally beloved by players, developers, and advertisers.
After players watch rewarded video ads – they get a reward in return. At the same time, the developer gets ad revenue, while the advertisers get viewability and high CTRs.
It’s a win-win-win situation.
These rewards can be any kind of in-game feature: currency, lives, points, gems, etc. All of these are the things they would normally have to earn or purchase. With rewarded video ads, the only currency they have to use is their time and attention.
Not only that but they are opt-in, which means the users get to decide whether they will watch them or not. Once they start watching, they have to watch the whole one in order to claim the prize.
This is an acceptable value exchange for players. In fact, 68% of users said they actually like this ad format (Techcrunch).
Why do game developers like them?
First of all, since the players like them, they know they don’t ruin the gameplay experience. Consequently, rewarded video ads come with high completion rates and eCPMs. The eCPM range for this ad format is from $10 to $50, which tops all other ad formats.
Moreover, they can boost in-app purchases, increase user engagement and retention, and even motivate players to return.
In the end, all of this results in the ultimate goal → more revenue from in-game advertising. According to IronSource, rewarded video ads can increase ad revenue by 20% to 40%.
Most developers are well aware of this. Only 15% of mobile game developers that offer in-app ads don’t use rewarded video ads (eMarketer).
If you’re one of them, what are you waiting for?
Rewarded Ad Example
To further illustrate why you should incorporate this ad format into your monetization strategy, here’s a great example from Subway Surfers, a popular arcade game.
After completing a level, players get the opportunity to earn extra coins by watching an ad. Firstly, this ad placement is perfect as it doesn’t disrupt gameplay and appears at a natural endpoint. Secondly, the benefit of watching an ad is clearly defined – players get extra 500 coins on top of what they earned. Having such a clear incentive increases the chances of players opting in to watch an ad.
2. Playable Ads
Playable ads are also one of the user’s favorites.
As the name suggests, this ad type allows the users to play. Playable ads are mini-games that appear during a game session.
They allow the user to engage with and try out another game without installing it. After the users complete the micro-game, they see a call to action (e.g. install now).
This ad format results in a positive user experience and high eCPMs. Players perceive them as the most enjoyable out of all ad types. In fact, they perform up to 8 times better than interstitial ads (SmartyAds). This benefits the developer because they don’t disrupt the user gameplay experience.
Here is some more good news for publishers.
These ads have a significantly higher CPI than rewarded and banner ads. Therefore, delivering these ads can be a great way to increase ad revenue.
From the advertisers’ perspective, this means high risk.
However, they generally pay off because they acquire high-quality users for their game. Since the players already get a sense of the game, they are less likely to churn after installing the advertised game.
Playable Ad Example
Here’s a playable ad example from the popular game Tiles Hop: EDM Rush. According to AppMagic, this was among the top 10 top-performing playable ads in Q1 2022.
In the ad, the goal is to hold and move the ball to make it jump on tiles to the rhythm of the music. This is also the main game mechanic in Tiles Hop. Because this game is so addictive, it’s enough to try it once to get hooked.
This is great news for both advertisers and publishers.
3. Interstitial Ads
Interstitial ads are a full-screen ad format that can be skipped after users watch them for a while.
Taking over users’ screens, interstitial ads can be either static or dynamic (interstitial video ads). For better engagement rates, it is recommended to utilize interactive content.
When it comes to eCPMs in interstitial ads, they average at $4 to $6 but can climb to as high as $20.
The players don’t enjoy this ad format as much as the first two.
However, there are several factors that play a role in how much revenue these ads will generate. The game genre, platform, location, and most importantly – how and when you display the ads.
The thing is, interstitial ads can be disruptive and annoying for players.
The golden rule to prevent this from happening is placing interstitial ads in natural gameplay pauses.
Here are some additional tips for making interstitial ads unobtrusive and effective:
- use predictable placements
- keep an eye on frequency
- pay attention to other ad formats
4. Native Banner Ads
This ad format is an improved version of a well-known classic – banner ads. Native banner ads are blended into gameplay so they feel like a part of it.
If this ad is well-made and strategically placed, it shouldn’t even seem like an ad. They should be discrete and never interrupt gameplay. Banners are a good option for games that come in a portrait format, as there is a smaller chance they will interfere with the gameplay.
Advertisers use them mainly because they are cheaper and simpler to produce than other ad formats. As for developers, in terms of advertising revenue, they are far behind rewarded ads, playable ads, and interstitials.
However, used in a combination with other ad formats, they can make an effective monetization strategy.
This ad format is facing a popularity decrease. The main reason for that is that players got so used to seeing them, they rarely engage with them, resulting in low CTRs.
This ad format works on a similar principle as rewarded video ads.
When users stumble upon an offerwall, they have to complete some kind of action to receive a reward.
An offerwall looks like a mini shop inside the game, listing the actions for the users to take part in.
Here are examples of possible actions that can appear on an offerwall:
- completing a survey
- reaching level 10 in a game
- making an in-app purchase
- playing a mini-game
- downloading a game
The biggest benefits developers can gain from this ad type are longer play sessions and high eCMPs.
Offerwall eCMPs are much higher than for other ad formats. Especially in certain genres.
For Android users in the U.S., eCPMs for mid-core games average at $980. They are the highest in the RPG genre where the average eCMPs are $1,670 (ironSource).
On the other hand, the eCPMs in the casual category average at $300.
Let me remind you – the second-best are rewarded video ads. Their eCPMs “only” go as high as $50.
If you decide to include offerwall ads into your game, make sure they are compatible with the players’ interests. Also, note that they work better in games that have a currency as an in-game feature.
These ads are generally not as attractive among mobile game players. They have recently been banned from iOS due to policy conflicts. Today, there are only a few ad networks that support this ad format.
Ad Format Usage
Since each ad format has its own advantages and disadvantages, they have to be picked strategically.
According to DeltaDNA’s survey among developers/publishers, rewarded video ads are by far the most popular ad format. They are followed by interstitials and traditional banner ads.
Most commonly, they mix it up. In 68% of cases, they use more than 1 ad format. Interestingly, 33% of them use 3 or more formats. This number is increasing year by year, with more developers learning about the benefits of combining ad formats.
Additionally, some ad formats simply work better for some genres. Rewarded video ads are the ultimate winner. Not only are they most commonly used, but they work great across different categories: casual, hyper-casual, mid, and hardcore.
Interstitials are also quite common, making it 63% in the casual/hyper-casual category and reaching nearly 50% among the hardcore/midcore genres.
In-App Ads vs. In-App Purchases
I’m just going to say it right away: there doesn’t have to be a versus in this relationship.
When it comes to games with in-app ads as a primary monetization model, they mostly come with in-app purchases of some kind. We’ve noticed this among many games in the hyper-casual category.
On the other hand, in mid-core and hard-core games, where in-app purchases are the main monetization model, you will most commonly stumble upon one ad format – rewarded video ads. The only games that can afford to base their games exclusively on IAP are those with a strong progression system and highly competitive players.
The combination of IAP and IAA is called a hybrid monetization model.
And according to Unity, adding ads into what was previously an IAP model can boost retention rates and IAP revenue. Games that did this increased their day 7 retention rates by 2.3%. Not only that but they experienced a 1.1% increase in users that made at least one in-app purchase.
10 Benefits of Monetizing a Mobile Game With In-App Ads
Many developers still believe that putting ads into their games will result in players churning, loss of IAP revenue, reduced store ratings, etc.
Here are some in-app advertising benefits to help you chase these concerns away. We’ve supported them with data from Facebook Audience Network’s report.
Utilizing the Non-Paying Audience
Monetizing a price-sensitive audience is a challenge. Prioritizing in-game ads is the most straightforward solution, especially for games with casual audiences.
What we’ve seen a lot of successful games do is combine the IAA and IAP monetization model. The majority of the audience might be non-paying, but if they catch some payers, it might result in two effective revenue streams.
Boosting User Engagement and Retention
If everything is done right: the chosen ad formats, the right placements, and frequency, ad monetization can positively affect user retention, engagement, and player LTV.
Opt-In Nature and Motivation
Most of the main ad formats are of opt-in nature such as rewarded video ads and offerwalls. And despite the available x button, the users often voluntarily choose to watch the ads.
As much as 71% of players would like to be able to choose whether or not to view an ad.
Their motivation to watch ads lies in three key things:
- The fact they don’t have to pay for anything
- Getting rewards and other bonuses
- Learning about new games
Increasing In-App Purchases
Even though most users won’t make in-app purchases, in-app ads can seriously encourage those that will. If you have a hybrid monetization model, ads can drive the IAPs as well. According to IronSource, users that interact with rewarded ads are 6x more likely to complete an in-app purchase.
Longer Play Sessions
According to Facebook Audience Network’s data, including ads into gameplay directly prolonged play sessions among 51% of mobile gamers.
Players Get Rewards
Rewarded video ads are the ad format that completely stands out from the competition. The players simply love them – 53% of them stated that receiving rewards made them play longer.
Help Unlock Levels
If the players know that watching through an ad will help them progress in-game, they don’t mind them. In fact, 38% of them listed this as the reason why they like in-game ads.
As long as ads don’t interfere with their gameplay, gamers don’t have a problem with them. For this reason, it’s extremely important to strategically place the ads between game stages.
Fitting User Interests
Displaying ads is a discovery experience. The ads should have the same effect as when you’re scrolling through social media and see “suggested for you” posts. This is what good targeting and ad choice can do.
Ad networks offer the option to serve location-relevant ads. As with all other factors of personalization and relevancy, this can contribute to the overall user ad experience.
Downsides of Monetizing With In-App Ads
Most of the disadvantages of this monetization model are practical mistakes you can avoid.
Ads That Are Too Frequent
Even if you manage to do everything else right, but get greedy with the frequency of your ads – the players will feel an ad overload. How much is too much? According to Facebook Audience Network, anything over 26 per session.
With all the targeting options the ad networks provide, some game developers still don’t realize they can’t put just any kind of ads into their game and hope for the best.
Slow and Low-Quality Ads
Other than ad relevance, this is also something to pay attention to. If you display poor-quality ads that don’t match your game’s integrity, it might turn users off.
Accidental Ad Clicks
Sometimes, users click on ads they weren’t intending to and it leads them away from the game. If this happens a lot, it can result in a frustrating experience that might make them churn.
Are In-App Ads the Right Monetization Model for Your Game?
Let me tell you something about the history of mobile game monetization. In the beginning, it was mainly IAP. Today, even the pioneers of IAP adopted occasional ads.
The boom of in-app advertising started with the rise of hyper-casual games. They first started gaining traction in 2017, and have been dominating the top game charts ever since. If your game fits into this genre, in-app ads are the way to go.
The same goes for arcade games, word games, card games, and sports games. These genres traditionally attract casual gamers and low-paying audiences.
Analysis of Mobile Games That Earn Millions in Ad Revenue
Theory is important, but practice is everything. For this reason, I tried playing several games that monetize with in-app ads.
Here’s what I learned.
Fun Race 3D
Fun Race 3D is brought to us by Good Job Games and it made the top charts in 2019/2020.
Since hyper-casual games still don’t exist as a category in the Google Play store, the game is categorized under racing and action genres.
In this game, you will find both ads and in-app purchases.
Now let’s talk about the ad/gameplay experience.
I just started playing and quickly finished level one, and there was an ad right away. More precisely, an interstitial video ad for a puzzle game.
Sent back to the start menu, something caught my eye right away – an IAP option that offers an ad-free gameplay experience. Also, there was a small banner ad at the bottom of the screen. It was there every time I completed a level, only each time a different ad – four in total.
Getting back to gameplay, after completing level two, there was one more interstitial video ad, this time, for a sports game. When level three ended, there were no ads. Finally, after completing level four, they’ve offered an option to watch a rewarded video ad.
To sum it up, in a 10-minute gameplay experience, there were a total of seven ads, one of which was optional to watch. Perhaps it would be better if there were no ads right after level one, but, generally, it wasn’t too aggressive.
This relaxing hyper-casual game/puzzle game became an instant hit right after its release. Its publisher is SayGames, and they also use hybrid monetization, with ads as the primary revenue stream.
Unlike the first example, in Sand Balls, there were no full-screen ads after level one. There was only one small banner at the bottom the whole time during gameplay. I hardly even noticed it.
Banner blindness really is a thing.
They first introduced one full-screen ad after level two. It was a banner ad you could close right away.
On level three I was offered a skip level option – if I watch through a rewarded video ad, so I did.
Finally, after finishing level four, there were three separate offers speaking to different user groups:
- Watching a rewarded video ad to get a free gift
- A VIP subscription for an ad-free gameplay
- Continue with the game
To sum up, what this game does well is ad distribution. They are aware of the fact that the level gameplay is short, and they’ve adjusted the ad frequency and duration accordingly.
It would be a disaster if this game had mandatory 30-second video ads after every level. Even though the game features banner ads that are not as effective themselves, it actually makes sense. After such short gameplay, constantly having to watch long video ads might result in miserable users who just want to continue playing the game.
Also, they’ve done a great job in introducing IAPs, not too early, not too late. This way, after just one six-minute session, the users are aware of all the options the game has to offer.
Hunter Assassin is a popular hyper-casual game published by Ruby Game Studio. This game also has action and action-adventure genre features.
Here’s what happened during 10-minute gameplay.
There were no ads after completing the first level.
When level two ended, there was an interstitial video ad for another puzzle game. Upon level completion, players receive in-game currency (gems). To get the double amount all you need to do is watch a rewarded video ad.
Level three completion brought the first in-app purchase offer: a VIP subscription that gets you no-ad gameplay. Finally, after completing level four, a playable ad for another game from the same genre appeared.
Overall, the gameplay/advertising experience in this game was well thought out and undisruptive.
This game is coming to us from the number #1 hyper-casual publisher, VOODOO. According to the Google Play Store, the game contains both ads and in-app purchases.
And this is how they do it.
Before you even get to the playing part, there is a subtle “no ads” IAP offer in the start menu. After finishing the first race, I got back to the menu, where two small banner ads appeared.
There was no mandatory ad to watch after the first match. The second time, things were different. After losing a life – there is an option to watch a rewarded video ad and get an extra life. I didn’t click to open it, and then a playable ad appeared.
After that, I was back in the start menu. Now, another option was added to the existing setup – you can watch a rewarded video for a 5x boost. This way, if you like rewards, you can always come back here to find them.
And again, third game – extra life option and an interstitial. The same happened after the fourth match.
To sum it up, between every level there was an optional and a mandatory ad, which didn’t feel disrupting. My only complaint is about the frequency of rewarded video ad offers.
In-App Ads Across Different Genres
When it comes to in-app advertising, no matter the genre, every game has the same goal: maximizing revenue.
Some genres mainly rely on ad revenue, while others use it as an additional revenue stream.
There is no universal formula that works for all genres. So let’s see how it’s done across several different genres.
This free to play, simple, and minimalistic genre climbed the top charts over the past few years. Hyper-casual games are what made in-app advertising so popular in the first place.
Hyper-casual games are made and designed to integrate in-app ads. These games typically offer in-app purchases as well, but their main revenue stream lies in in-app ads that make 95% of their earnings (Adjust).
The gamers in this genre are a unique audience that has to be approached strategically and in accordance with their motivation to play. In most cases, they play while commuting, to pass time, or relieve stress.
Yes, these players expect ads – however, they would prefer to see them less frequently.
Of course, introducing one ad in 10 minutes isn’t a good strategy in this genre since the sessions are typically short. According to Adjust, the average session length for hyper-casual games is 2 minutes and 39 seconds.
During a play session, you should introduce as many ads as possible, but you should do it wisely. According to Adjust, the optimal number of ads in hyper-casual games is 2-3 in a minute’s time.
When it comes to ad formats, the most commonly used are rewarded video ads and interstitials. The crucial thing when integrating these ads is optimizing their frequency and formats.
In most cases, strategy games monetize with in-app purchases. However, it’s not ideal to rely on them only.
Going overboard with the IAP model might result in players churning. For this reason, it is a better idea to feature a hybrid monetization strategy that includes IAP as a primary and IAA as a secondary monetization source.
According to Facebook’s Gaming report, 76% of strategy players across four markets are open to in-app ads. In fact, more than 60% of users say they are interested in installing a new game if the ad makes it appealing.
RPG is another genre that is primarily based on in-app purchases. Only about 12% of its revenue comes from ads (Unity).
According to Facebook’s Gaming Report, 77% of RPG players are open to in-app ads, so not including them might mean missing out.
Generally, RPG players prefer longer and less frequent ads rather than short and frequent ones. Another thing they respond well to are rewarded video ads.
In this genre, you are most likely to stumble upon opt-in rewarded video ads. And it does not happen often. Why is that?
As this genre is quite competitive, players should be prevented from gaining too many resources. For this reason, RPG games often introduce long cooldowns and frequency capping.
The majority of puzzle games profit comes from ad revenue – 56% (Unity). To get the most of it, there are several things you should know.
There is one atypical thing that affects this category – ad restrictions. Since this category includes a lot of games that are intellectual property, it comes with restrictions on ads that can be displayed.
That being said, let’s talk about puzzle gamers’ ad preferences. According to Facebook’s Gaming Report, they would also rather have one long ad appear in 10 minutes of gameplay than short and frequent ads. Wishes are one thing, but, in order for publishers to make money, ads have to appear much more often.
In-app ads have an impressive effect on session length and number of sessions in puzzle games. App Annie’s data shows that introducing ad SDKs into Puzzle games increased play sessions by 133% and the number of installs by 109% after three months.
7 Tips for Increasing In-App Ads Revenue
In-app advertising is often perceived as disruptive and annoying. Reading through app store reviews, there is one kind of comment you will stumble upon a lot:
Too many ads!
There are players that will always feel unhappy about any kind of ads. However, there are ways to minimize the number of similar comments and other negative consequences and still make a profit.
Let’s dive right in.
1. Timing Is #1 Priority
This was already said earlier, but it’s so important it doesn’t hurt to repeat. In-game ads should NEVER appear during gameplay. This is a costly mistake where not only will players not engage with the ad but might churn for good.
When it comes to ad formats and timing, there are some best practices on when you should introduce them. For instance, players should be aware of the rewarded ads option right from the start.
Speaking of interstitials, the most important thing is they don’t interrupt gameplay and don’t appear too often.
2. Place Them Strategically
Let’s say you’ve decided you want to show 3 ads in a minute’s time. You already know they shouldn’t interfere with the gameplay, so what are your placement options?
Most commonly, ads appear after finished levels, before starting a new one, and in other loading screens. Another good practice is incorporating rewarded ads into the start menu. This way, if the players are stuck in the game and are missing some items, they know where to find them.
Moreover, ads should never be displayed at random places such as sub-menus or game stores. Hardly anyone will find them there.
In order to stay profitable, you will need plenty of ads and placements. However, if you’re thinking about increasing the number of “natural” gameplay breaks, don’t do it. In the long run, these kinds of things negatively affect user retention.
3. Diversify Ad Networks and Ad Formats
If you want to maximize your ad revenue, you should work with several ad networks.
What you need from the ad network’s side are deep targeting options (demographics, behavior patterns, etc.), and that it supports different ad formats.
When you have this data in place, you can serve the users with ads that are actually relevant and useful. Keeping track of your eCPMs, you will find out which formats and placements work best for you.
4. Know the Users You’re Monetizing
This tip is connected to timing, placements, and available data. Study your users’ behavior and approach them in separate ways.
For example, if you use hybrid monetization, you can focus more ad impressions on non-paying and low LTV users. On the other hand, loyal and paying users should see fewer ads in a day.
5. Utilize Value Exchange
The most common ad format that offers value exchange is rewarded video ad. Players love them because they help them climb levels and advance. Another great thing about this format is its opt-in nature, making it optional for users to watch them.
There are some best practices to follow regarding the rewards you give out. They should be:
- Available with this option only
- Immediately claimable
- Visually apparent
Doing this, your ads can result in immediate impact and high returns. Speaking of value, a user impression is estimated to be worth about 2-3 cents. For rewarded video ads to pay off, the reward should be worth at least 5 cents.
Therefore, don’t be cheap with rewards. Also, make sure to offer different rewards. Instead of making it just in-game currency or consumables, it’s a better idea to combine them.
6. Show Relevant Ads
Making ads relevant and interesting for your user base is important. According to Facebook Audience Network, players want ads that are: useful (44%), interesting (40%), and relevant to them (38%).
It’s only logical that, if they are playing your game, they might be into similar games as well.
And this is where the question of competitor ads comes up. Is including them a good or a bad idea?
You don’t want to send the users away to your competitors. On the other hand, these ads might work very well. What you can do is show them – but not as frequently as other ads. Another thing you can do is show them when user sessions are ending or show them to non-paying users.
Additionally, publishers believe that ad choice can improve their game’s perception. And they might be right – 43% of players find games that display ads from big and familiar brands as more credible.
7. Use More Than One Monetization Strategy
In-app advertising itself can be highly effective, especially for hyper-casual games. But if you take a look at what successful games do, besides ads, the majority of them include some type of IAP as well.
If you look at the examples of hyper-casual games you might notice something they have in common – all of them featured a purchasable option for an ad-free experience.
Offering IAPs is a great addition to in-app advertising. Even though they are a minority, there will always be players who would rather pay than watch ads.
In-App Ads Wrap Up
Unfortunately, there is no universally applicable formula to maximize in-game ad revenue.
Remember, monetizing a mobile game with in-app ads means finding a balance between several important factors.
That includes core gameplay, ad formats/frequency, as well as player preferences.
We hope this article helped you in finding your unique formula for successful ad monetization. If you feel like you need some more guidance, feel free to contact us!