Monetisation’s bright future: What app developers need to know now

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Just a few years ago, if you’d asked the average app developer to share their thoughts on ad monetisation, chances are they would have had a number of reservations. The concern that ads would negatively impact the user experience – and along with it, adversely affect retention and user ratings – was commonplace among freemium app developers.

Fast forward to today, and you’ll see that the mobile ad tech landscape has significantly evolved. Supply side technologies have become much more sophisticated, while aggressive UA spending and the influx of brand dollars to mobile are swelling the ecosystem with demand. In fact, a recent report by eMarketer suggests that advertising has unequivocally become the monetisation model of choice, with a resounding 82% of developers reporting to use in-app ads in 2014. This puts it vastly ahead of in-app purchasing (IAP), which is employed by just 40%.

Despite this shift, some concerns still remain. There are technical concerns, such as the fear that multiple ad network SDKs will severely “bloat” or increase the weight of the app, or that the ongoing maintenance of several ad networks will be too time and resource intensive.

Fortunately, mediation platforms are fast evolving to address these issues. By offering advanced features, such as the selective pre-caching of ads from only top-performing networks or the ongoing maintenance of ad network adapters, mediation providers strive to take the technical headaches out of ad monetisation, so that developers can shift their focus towards their strategy.

In fact, we repeatedly advise our clients that strategy is crucial when it comes to building a successful and sustainable ad monetisation model. The biggest mistake a developer can make is to only integrate a few ad network SDKs and expect they will naturally see significant returns. Or alternatively, to “tack on” ads as an afterthought once the game has already been developed.

Many developers also hold the concern that ad monetisation could cannibalise in-app purchasing (IAP) or that ads may interrupt, or otherwise negatively impact, the user experience. This is where rewarded ads – particularly in the form of video – address the freemium app model so well.

Contrary to developer concerns, we’ve seen from multiple test cases that the integration of rewarded ads can actually increase IAP across all levels of spending. One of our clients, leading international publisher of mobile and social games, found that players who engage with ads are two times more likely to make an IAP and spend 40-100% more than players who do not. Another client, also a top-ranking mobile developer, found that even their highest-paying group of players would regularly max out the daily number of rewarded ads available to them, without demonstrating a dip in spending.

This suggests that even the most lucrative users find value in the content provided by incentivised ads, while having no detrimental effect on their willingness to spend. One hypothesis for the uptick in spending after introducing a rewarded ad is that it allows the users to get a “taste” of what a purchase could earn them. They also become familiar with the app’s virtual currency, if applicable, and understand the specific benefit that the reward can provide them.

The most successful apps we see are those that take their ad strategy into account from the very beginning. When the approach to ad monetisation is developed hand-in-hand with the app itself, ads can become part of the core loop of the game. A successful “deep” integration should match the overall look and feel of the app and offer an experience that is designed to complement the gameplay. If this sort of thoughtful approach is successfully executed, ad monetisation can be highly lucrative for freemium app developers, offering a far more stable source of revenue than IAP.

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