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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.
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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.
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:
On the selling side, we have:
In the middle, we have ad networks. They act as brokers, selling ad space (known as in-app inventory) from publishers to advertisers.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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%).
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.
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.
When you're ready to start with in-app advertising, there are three key steps to follow:
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.
Wondering how to integrate ads into an Android app using AdMob? Here's how:
If you're not using Google Firebase:
If you're using Google Firebase:
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:
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.
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.
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.
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.
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.
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