You’ve invested time and resources designing an engaging app, with top-quality UX, content, and graphics. Now comes the hard part—generating a sustainable revenue stream from your app.
A mobile app developer can generate revenue in various ways. Subscription fees are a popular choice for dating apps, while gaming apps opt to sell in-game rewards and enhancements to users. Shopping apps take a different approach, selling tangible products. However, in-app advertising remains the cornerstone of revenue streams for most thriving apps.
The idea is simple. App developers create ad space or ad units, where banner ads, video ads, native ads, and other types of mobile ads are shown to the app users. The more ad impressions, clicks, or app downloads they receive, the more revenue generated.
What is revenue for in-app advertising?
Ad revenue is created when mobile apps use their “real-estate” or space in their apps to show ads to users. Brands then pay the publisher who owns the app to show their ads to users via programmatic channels, generating ad revenue.
Building an ad revenue strategy is an important part of app development, as a significant portion of mobile ad spending is directed to in-app ads, and in-app ad units offer an excellent opportunity for app developers to earn ad revenue.
What are the types of in-app ad formats?
In-app ad formats include mobile banner ads, interstitial ads, rich media ads, video ads, rewarded video ads, and native ads.
There are many ad formats that can be shown in-app to earn advertising revenue. Below are ad format types that can be shown in both iOS apps and Android apps.
Mobile banner ads
This type of static mobile ad is usually displayed at the top or at the bottom of the screen, but also includes full-screen banners that take up the entire screen of a mobile device.
Interstitial ads are full-screen ads that are shown to users between game levels and can’t be closed until the interval ends.
Rich media mobile ad
These are banner ads that include HTML, CSS, JS, and image files giving advertisers more options for their creative ideas.
Mobile video ads are ads that play either before an online video, in the middle of the video, or right after a video. Since users want to watch the video, they are often willing to watch the ad in order to do so.
Rewarded video ads
Rewarded video ads give the user the choice to watch the ad or skip it, and offer some type of reward or benefit when the user chooses to watch the ad. They are often used in gaming apps and give people who watch the rewarded video things like in-app currency, an extra life, hints, or other valuable content.
Native ads are designed to match the look and feel of the content around them and blend in with the user experience of the platform it appears on. They often perform better than traditional display ads because they are more engaging and less disruptive, which can lead to higher click-through rates and conversions and therefore, higher ad revenue.
In-app ad examples
In-app ads include banners, videos, ads designed to blend in with the other app content, and ads that give the app users rewards for watching them.
Any of these types of ads can be used by mobile marketers to promote their brands, and they can all generate ad revenue for the app owners.
What are the benefits of in-app advertising?
The benefits of an engaging in-app advertising experience include targeting, high engagement rates, ad revenue, and measurable results.
People are spending more and more of their time on their phones, and much of that time is spent using apps. Therefore, apps are increasingly seen as a critical element of any advertising campaign. The benefits of in-app advertising include:
- High engagement rates: In-app ads tend to have higher engagement rates compared to other forms of advertising, such as display ads on websites. This is because users spend more time on mobile apps and are more likely to interact with ads that are integrated into the app experience.
For example, marketers can use “rewarded ads”, usually video ads shown in mobile games to increase engagement. When users watch these video ads, they receive rewards—in-game currency in most cases. Users often need to play on consecutive days to receive the in-app rewards, which helps boost engagement using available ad space.
- Improved user experience: As a mobile app developer, you can choose to place an ad in your own app at the point you think it will be the most effective and generate the most mobile app revenue. The ability to blend the ad into the flow will create a less disruptive and overall better user experience than traditional display ads.
- Additional revenue stream: In-app advertising can provide an additional revenue stream for app developers, allowing them to monetize free apps and generate income without charging users for downloads or subscriptions, or depending on in-app purchases (IAP).
- Measurable results: In-app advertising provides advertisers with real-time data on ad performance, such as click-through rates, impressions, conversions, and average revenue. This can help them optimize their mobile advertising campaigns and improve their return on investment (ROI).
- Targeted advertising: In-app advertising allows advertisers to target their ads to specific users based on their demographics, location, interests, and behavior. This can help improve the relevance of the ads and increase the likelihood of engagement and conversion.
Overall, with effective ad quality tools in place, advertising can provide a seamless and non-disruptive user experience and additional revenue streams for app developers. At the same time, in-app ads can be an effective way for advertisers to reach their target audience, improve engagement rates, and generate revenue.
The challenges of in-app advertising
The challenges of in-app advertising include ensuring that ads are not intrusive, relevant to users’ interests and needs, and secure.
In-app advertising can be an effective way for app developers to monetize their apps, but it comes with several challenges. Some of the common challenges of in-app advertising include:
- User experience: If the wrong ad format is implemented, or timed right within the app experience, in-app ads can be intrusive and disruptive to the user experience, which can lead to user dissatisfaction and even uninstallation of the app.
- Ad relevance: Ads that are not relevant to the user can also be annoying and can lead to a poor user experience. App developers need to ensure that the ads that ad networks display in their app are relevant to their user’s interests and needs.
- Ad blockers: Ad blockers can prevent ads from being displayed, which can affect the revenue generated by in-app advertising.
- Ad fatigue: When users are exposed to the same ad repeatedly, they can get bored and even annoyed, which can lead to a negative perception of the app and the advertiser.
- Privacy concerns: With the growing concern over data privacy, in-app advertising can be seen as intrusive, and users may not want to share their data with advertisers.
- Ad viewability: Ensuring that ads are viewable to users is a challenge in in-app advertising, especially with different screen sizes and orientations.
App developers need to carefully consider these challenges and adopt strategies to address them to ensure a positive user experience and generate app ad revenue.
How much do apps make in ad revenue?
The revenue an app can garner per ad is influenced by multiple factors, including the app genre and the specific ad unit implemented
For example, communication apps often drive a lot of mobile traffic, but don’t typically use lot of in-app advertising. Gaming mobile apps, on the other hand, can place a video ad or rewarded ads into an app more easily, which can help them boost their app ad revenue.
In the US, rewarded video ads generate an average revenue of $0.02 per impression. Interstitial ads yield an average revenue of $0.16 per completion, while offerwall ads bring in an average revenue of $2.50 per completion.
In-app advertising revenue models
Ad revenue models in apps include CPM, CPC, CPA, and CPI. Each model has specific advantages and disadvantages.
There are many different pricing models in in-app advertising, each of which have unique advantages and disadvantages. The main ones include:
Cost Per Mille (CPM)
In a CPM model, the advertiser pays a certain amount for every thousand (mille) times the publisher shows the ad on their site. The amount paid for the ad units is usually low, and it stays the same whether or not their are conversions. CPM is often the preferred model for ad campaigns looking to improve a brand’s visibility, as it allow them to get a lot of ad impressions for a comparatively low price. However, for publishers, it isn’t the best way of generating revenue from their available ad units.
Cost Per Click (CPC)
In the CPC model, displaying ads isn’t enough—the advertiser only pays when someone actually clicks on an ad. That means that the ad could be shown many times before there is any revenue generated for the publisher. However, publishers can usually charge more per ad unit in a CPC model.
Cost Per Action (CPA)
A CPA model goes one step beyond CPC and only requires the advertiser to pay when after clicking on an ad, the user takes a specific action in the app, such as registration or a puchase. CPA costs are higher than CPC or CPM, and effective CPA requires accurate audience targeting to be effective. However, for advertisers that have a specific action they want users to perform, it’s a good way to ensure that their ad spending is effective.
Cost per Install (CPI)
CPI is similar to CPA, but focuses specifically on one action–getting the users to install an app. This type of advertising requires a lot of skill, so it isn’t for everyone. Users may also install an app, and then uninstall it right away.
How is advertising revenue calculated on mobile apps?
The way ad revenue is calculated depends on the revenue model that the ad buyers, mobile advertisers, and mobile publishers select. App developers should choose the advertising model that best suits their app and target audience in order to boost ad revenue.
It’s important to note that the actual revenue earned from an ad campaign may be lower than the calculated revenue due to factors such as ad viewability, ad fraud, and user behavior.
In-app advertising statistics
The statistics speak for themselves- consumers are on their phones more than ever before.
Experts estimate that there are close to 7 billion mobile users worldwide, and the app economy reached new heights in 2020/2021. According to Data.ai annual State of Mobile 2021 report, consumers worldwide installed 208 billion apps in 2020. They’re also spending money in apps—in 2022, the total consumer spend on mobile apps (including in-app purchase revenue) was of approximately 167 billion U.S. dollars.
The size of the market and the strong spending tren has made apps the preferred advertising platform for many brands and ad networks, and opened enormous opportunity for publishers and app developers to earn ad revenue.
Balancing In-App Ad Revenue With Ad Quality
Ad monetization is not only about preventing a bad experience in mobile advertising—it’s about creating a good one.
Even if app developers place the ad unit in the right place, it isn’t always as simple as creating an ad unit and watching the ad revenue flow in. App publishers that rely on advertising to monetize their apps often struggle to maintain a positive user experience and ensure brand suitability in the app ads they show. When brand unsafe ads—such as ads with violent or sexual content, for example—are shown to mobile users, it can have a negative impact on app usage.
For example, when unsafe or annoying ads appear repeatedly, users often decide to uninstall the app. They may leave a negative review in app stores, like Google Play, warning other users to stay away from the app. Therefore, the trick in maximizing revenue for in-app ad monetization is finding the right ad network, and hitting the perfect balance between showing enough ads to earn sufficient ad revenue, but still providing users the right app experience.
It’s not a one-time task. User preferences change, content gets old, and new competitors enter the picture. Therefore, it’s important to measure ad revenue on an ongoing basis, ad make changes when needed.