In-app advertising, or Mobile app advertising, no matter what you call it, is obviously the most trending and effective app monetization strategy to date. It’s a universal truth that people tend to prefer free stuff over the one that demands money and that holds true in the mobile app market. That’s why over 97% of apps on Google Play Store are free to download. In such a situation, it is obvious to have questions like how do the owners of these apps earn money? Well! There are many ways, but the majority of their income comes from in-app advertising. So, incorporating it into your mobile app development process will help you reap long-term profits not just from your products but from your mobile app itself. 

Not too far, but in the last few years, In-app advertising has emerged as an effective tool to monetize mobile applications, enhance user engagement, and generate significant revenue for app developers. It has also provided businesses with a platform to reach a wider audience and promote their products or services in a more interactive and personalized manner.

As we see today, ‘Marketing Wars’ are competitive; a business that fails to embrace the trend stands a higher chance of fading away. With that in mind, companies are keen to invest significantly in advertising efforts. According to the latest stats, app stores see over $1.5 billion daily spending on in-app purchases and in-app advertising. While advertisers are ready with their ads, the biggest challenge for app owners remains their lack of knowledge in implementing in-app advertising effectively. 

If you’re ready with your app and want to earn money from in-app advertising, this handy guide will help you a lot with the process of implementing in-app advertising. 

Astonishing In-App Advertising Stats to Know in 2024

• In-app ads can increase user engagement by 4X. (Source: Mobile Marketing Magazine)
• The global click-through rate for in-app advertising is 0.56%, which is more than double the 0.23% rate for ads on mobile websites. (Source: Siteefy)
• Mobile apps are 3X more effective at converting viewers into customers compared to mobile web ads. (Source: Siteefy)
• The revenue from in-app advertising hit an impressive $201 billion in 2023. (Source: App Annie)
• In 2019, nearly half (49%) of the ad impressions from monetized mobile apps were from Android devices, a significant decrease from 67% in 2018. (Source: Semrush)

What Is In-App Advertising?

In-app advertising is part of the app marketing strategy that allows app owners to earn revenue by displaying third-party ads within their apps. This strategy not only allows businesses to offer their apps for free, increasing downloads but also provides a scalable income source.

As we know, apps are not just driving mobile usage; they're also a major contributor to global media consumption. This makes in-app advertising an essential marketing avenue for brands and agencies. 

The mobile app advertising ecosystem consists of several key players, each with a distinct role. Here's a simple breakdown:

On the buying side, we have:

• Advertisers: These are the app owners, agencies, or brands that purchase ad space.
• Ad exchanges: These platforms function like a stock exchange, allowing advertisers to select their preferred audiences and place bids.
• Demand-side platforms (DSPs): These platforms enable advertisers to access the inventory of multiple ad exchanges.

On the selling side, we have:

• Publishers: These are the apps that sell ad space.
• Supply-side platforms (SSPs): These platforms enable publishers to display ads to their chosen audience.

In the middle, we have ad networks. They act as brokers, selling ad space (known as in-app inventory) from publishers to advertisers.

Popular In-App Advertising Formats in 2024

As said in our previous blogs on mobile app monetization, in-app advertising remains the most popular and effective strategy among all. While most people think in-app advertising involves showing ads on your app and earning money but its much more than that. 

In fact, mobile app advertising has several formats that decide how the ads will display on your app. The popular In-app advertising formats include: 

Banner Ads

It is one of the most common In-app advertising formats among businesses and app marketers alike. You often see these ads at the top or bottom of your screen while using an app. They usually have a picture, some text, and a button that encourages you to take action within the app.

Video Ads

These are short video clips that play before, during, or after another video (like the ads you see on YouTube before your video starts). They're very engaging and often get a lot of clicks.

Rewarded Video Ads

These are common in gaming apps and offer a clear trade-off. If you watch an ad, you'll get a reward. These ads can help keep users engaged, especially if the rewards get better when you watch them day after day.

Interstitial Ads

Also known as full-screen ads, these usually pop up during a transition in the app, like between game levels. They're rich in content and can be either static or video ads.

Native Ads

These ads blend in with the regular content flow, like in a social network's news feed or as sponsored content from a content recommendation engine. Users often find them more trustworthy because they fit in with the app's look and feel.

Playable Ads

These ads let users "try before they buy" by playing a mini version of the game before deciding to install it. They're interactive and engaging, which is why they command some of the highest rates for gaming apps.

Offerwall Ads

Like rewarded video ads, Offerwall ads usually show a list of incentives on a page. The user can choose an offer, like extra lives or in-app coins. These ads have high engagement rates because the user initiates them and can help extend the time they spend in the app.

Top 5 In-App Advertising Pricing Models

As an app marketer, you have a variety of pricing models to choose from, each with its own advantages and disadvantages. It's crucial to pick the right monetization strategy for your app and campaign.

#1. Cost per mille (CPM)

CPM is the cost an advertiser pays to a publisher for every 1,000 times the ad is shown. The formula for calculating the CPM is

CPM = (total campaign cost/number of impressions) x 1000

Although the CPM model is relatively inexpensive compared to other models, displaying the ad does not guarantee clicks or conversions.

#2. Cost per Click (CPC)

In the CPC pricing model, the advertiser only pays the publisher when the ad is clicked. The formula for CPC is:

CPC = total campaign spend/number of clicks

As an advertiser, you only pay for a genuine click. However, some clicks may be unintentional, resulting in you paying for something without receiving anything in return.

#3. Cost per Action (CPA)

In the CPA pricing model, the advertiser pays the publisher when a click results in a specific, predefined action within an app (like a registration or purchase). The formula for CPA is:

CPA = total campaign spend/number of times the specified action was completed

CPA provides a low-risk, performance-based option when you have a specific action in mind. However, it can be challenging to scale, and while performance is crucial, you should pay attention to other factors like brand awareness.

#4. Cost-per-Install (CPI)

In CPI, the advertiser compensates the publisher only when the app gets installed by a user. The PPI is calculated as:

CPI = total campaign spend/number of app installs

This method is beneficial if your target audience is specific, as you only pay for the users who actually install your app. However, PPI doesn't provide information about user engagement or app usage. Also, cheaper installs may attract less valuable users and fake installs.

#5. Cost-per-View (CPV)

CPV is typically used for video ads. Here, the advertiser pays the publisher only when a user watches their video for a specific duration. The CPV is calculated as:

CPV = total campaign cost/number of video views

CPV is cost-effective as you pay only when a user shows interest in your video, not for accidental or quick views. However, the costs can vary across platforms, and targeting a specific audience can be more expensive. This could lead to uninterested users letting your ads play without paying attention, resulting in wasted ad spend.

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How Do App Owners Make Money Through In-App Advertising?

Suppose you have a bakery located in the middle of a busy market. Seeing the potential to generate extra income, you decide to rent out advertising space in your window and on your walls—this space is known as inventory. Soon, local businesses are paying you to display their advertisements. As a mobile app developer, your app is akin to this busy bakery: it's visited daily by users, has the capacity to showcase ads, and is an attractive platform for businesses wanting to reach your user base.

By permitting businesses to place their ads within your app, you can generate revenue based on the pricing models agreed upon between you and the advertiser. The digital nature of in-app ads provides several advantages, such as tracking ad views, quickly adapting to different markets, and utilizing a range of ad formats to ensure the best user experience.

Benefits of In-App Advertising for App Owners

In 2022, studies revealed that mobile users spend 3 to 4 hours on mobile apps daily. This presents a significant opportunity for advertisers. But is it as promising as it seems? Here are some benefits of In-app advertising for businesses. 

IAA can be beneficial in the following ways:

1. Generating Revenue

More than 90% of apps in all major app stores are free to download. As a result, app owners are turning to either in-app advertising or its counterpart, in-app purchasing (IAP), for revenue. IAP can be profitable with a subscription model. 

However, in games, purchases are usually of low value, and most users prefer to play for free. In such apps, placing ads between stages or during transitions can be effective. It can generate engagement, impressions, and revenue without affecting the user experience.

2. Enhancing User Engagement

Unlike the intrusive mobile ads of the past, you now have numerous options to engage users, thereby increasing both awareness and retention genuinely. For instance, you can strategically place the ad at a point where the user is focused but not in the middle of a crucial action. 

You can use precise targeting to ensure your ads are perfectly relevant. You can even experiment with gamification techniques, such as offering rewards (like in-game currency) for watching a video or playing on consecutive days.

3. Boosting Revenue from In-App Purchases

In-app advertising (IAA) and in-app purchases (IAP) are like family members. If they can work together effectively, it's a winning situation. It's known that users who interact with in-app ads are more likely to buy something. Moreover, studies from the gaming industry reveal that a combined approach of IAA and IAP results in increased earnings and user value.

4. Connecting with Your Target Users

Individuals who have made the effort to download an app are already interested and involved. You'll likely see better outcomes by matching ads with the user demographics and interests. In fact, in-app ads have a click-through rate that's over double that of mobile web ads (0.54% vs 0.23%).

5. Enhancing User Experience

You have the choice of when to show the ad and in what format. Crucially, in-app ads are designed for mobile, ensuring a perfect display for users — something web ads don't consistently achieve. For publishers, it's easier to track the performance of in-app ads than those on mobile sites, as they're part of your platform. This allows you to adjust your campaigns for optimal results quickly.

Potential Challenges in Implementing In-App Advertising 

As said earlier, a majority of mobile app users are unwilling to pay for apps, which has led developers to devise innovative monetization strategies. One such strategy is offering subscriptions for app purchases. Another popular method is the use of "gated levels." This involves providing a free version of the app with limited functionality (often referred to as "freemium") and encouraging users to upgrade to a paid version for full access. This usually involves removing ads from the paid version.

Ad tracking presents its own set of challenges. It can be difficult for advertisers to track conversions that occur after a user has viewed an ad and correlate this with in-app conversions. A common fallback has been the use of the click-through rate (CTR) as a measure of success. 

However, this model has its flaws as it doesn't account for unintentional clicks, a frequent occurrence with smartphone use. The introduction of the latest software updates has added another layer of complexity, potentially resulting in the loss of post-click action data for advertisers.

How to Integrate Ads Into Your Mobile App?

When you're ready to start with in-app advertising, there are three key steps to follow:

• Pick an ad network, like Google AdMob.
• Try out different ad formats and choose the best one.
• Decide on an ad pricing model.

Before you dive into in-app advertising, it's essential to strike a balance between several factors. The ad network you select should best fit your app, your target users, and the type of ads you plan to run.

Moreover, you'll need to decide on the ad formats you want to offer advertisers, which might require trial and error. 

How to Integrate Ads into your Android App?

Wondering how to integrate ads into an Android app using AdMob? Here's how:

If you're not using Google Firebase:

• Create a Google AdMob account and register your app.
• Import the Mobile Ads SDK into your Android project to enable ad serving.
• Update your AndroidManifest.xml file with your specific AdMob App ID.
• Initialize the Mobile Ads SDK in your app to start displaying ads.
• Choose and implement the ad formats you want, like interstitial, banner, or native ads. You can refer to Google AdMob's Mobile Ads SDK Android guide for detailed steps.

If you're using Google Firebase:

• Sign up with Google AdMob and link your app.
• Connect your app to a Firebase project. This involves setting it up with Firebase, adding Google's Maven repository, and downloading the Firebase SDK for Android.
• The next steps are similar to the non-Firebase method: import the Mobile Ads SDK, update the AndroidManifest.xml with your AdMob App ID, initialize the SDK, and select ad formats.

How to Integrate Ads into Your iOS App?

Just like Android, there are two ways to incorporate ads into your iOS app using AdMob. You can use Google Firebase or another mobile backend as a service (MBaaS) platform.

If you're using Google Firebase, follow these steps:

• Install the Firebase SDK: This connects your iOS app with Firebase services.
• Set up an AdMob account: If you haven't done this already, create an account on AdMob and register your app.
• Link your app with Firebase: Register your app with Firebase and connect it to a Firebase project. This allows for easier management.
• Import the Mobile Ads iOS SDK: This enables your app to display ads.
• Update your Info.plist file: Add your AdMob App ID to this file to set up your app with AdMob.
• Initialize the Mobile Ads SDK: This starts the ad-loading process in your app.
• Choose an ad format: Decide on the type of ad you want to display (like banner or native) and implement it. 

Best Practices for Implementing In-App Advertising Effectively

If you're still figuring out how to implement in-app advertising effectively, following best practices can ensure a great user experience and optimize your marketing return on investment.

Select the Right Ad Formats

This rule applies to all advertising types but is specifically essential for in-app advertising. If you're advertising an app, think about creating an interactive ad. Banners are a good choice for campaigns aimed at raising awareness, and if your goal is to get more clicks, a rewind format might be the best option. The secret to success is to match the ad format with your specific goals—the format should ideally support your objectives.

Invest in High-Quality Creatives

In-app advertising is one of the most demanding fields for creative work. To effectively engage your audience, you must grab their attention with powerful messages and impressive visuals. Therefore, your ads should balance being vibrant and clear, ensuring they are visually appealing and easy to understand. Including a clear and enticing call to action is crucial for encouraging user engagement and prompting them to click on the ad.

Align Your Ads with Your App’s Content

When advertising your app through in-app ads, the most effective strategy is to take advantage of in-game events and promotions. These events provide an excellent opportunity to draw many users to your app, exposing them to new content or exciting campaigns, thereby maximizing your reach and engagement.

Remember, a successful mobile ads strategy requires you to work on various aspects, such as the target audience, the right format and size, and the perfect ad placement. 

Conclusion

After reading this guide, we are sure you understand how effective and lucrative in-app advertising is as your preferred mobile app monetization strategy. By carefully using in-app advertising methods, like native ads, personalized ads, and well-placed ads, app creators can increase their earnings while keeping the user experience enjoyable. 

Moreover, using methods such as A/B testing, ad mediation, and reward-based ads can boost the success of in-app advertising campaigns. In summary, in-app advertising is a strong way for app developers to make money, offering a steady income source and promoting the growth and success of the app.

Before you go, we’d like to share a bit about us as well. We at Mtoag Technologies can assist you with mobile app development, marketing, monetization, and more.