Now more than ever before, mobile game developers - from hyper-casual and match-3 to strategy and RPG - are using ads to monetize their users.
In fact, App Annie predicts that in 2019, 60% more apps will monetize their games using ads, and that by 2020, ad monetization revenue will overtake in-app purchase revenue. Today, engaging ad units can be seamlessly integrated into the core loop of many games, meaning game developers no longer have to choose between maximizing revenue and improving player experience.
After reading this eBook, you’ll have concrete tips and actionable insights on how to best implement ads within your app. We’ll explore both user-initiated and system-initiated ads, discuss the benefits of A/B testing your monetization strategy, and conclude with a brief overview on how to most effectively segment your users.
Here we go.
Start off your ad monetization strategy by implementing user-initiated ads. User-initiated ads tend to go hand-in-hand with the narrative of your game and thinking about how to implement them should be approached early in the game design process.
They’re opt-in ad units which are only displayed to users if they’ve explicitly chosen to view them, and are always accompanied by an in-app reward, such as in-app currency, premium content, second chances, and more. The two main types of user-initiated ads are rewarded video ads and offerwall.
Rewarded video ads offer users a clear value exchange - users opt-in to watch a video ad in exchange for receiving in-app rewards.
Offerwalls function like a mini-store inside of your game. They list multiple offers that users can complete in exchange for receiving an in-app reward.
Positives and negatives of user initiated ads
User initiated ads drive incremental revenue, often commanding high eCPMs because of the high quality of the ad experience. But the real magic of these ads is that they can actually improve user experience, increase both retention and session length, and even at times convert your non-paying users into paying users. In fact, users love them so much that we often hear that our partners receive complaints when they remove user-initiated ad units.
As you can see in the graphs, user initiated ads increase ARPDAU and retention, two of many factors that make up LTV. That’s because you’re driving incremental revenue with each impression, while your users have an easy, inexpensive way to progress in the game. Essentially, by offering a free alternative to in-app purchases, user-initiated ads let non-paying users continue playing without needing to pay, ultimately boosting retention.
The only downside is that, if not implemented correctly, user-initiated ads may cannibalize IAPs. More on that later.
Some game devs are afraid that placing offerwall in their games will decrease retention as the offers require a larger time commitment in a different game. However, this is unlikely, as the reward that your users receive for completing these offers is so significant to their game experience that they have high motivation to come back to claim (and take advantage of) their prize. In the A/B tests we’ve conducted, we haven’t seen a drop in retention due to the implementation of offerwall - in fact, in most cases we’ve seen an increase.
Read on for tips on user-initiated ad placements, how to select the right reward for your users, benchmarks, and best practices for the overall ad experience.
Where and when to place any ad unit is crucial to balancing a positive user experience for your players and an effective monetization strategy for your business. Having said this, because user-initiated ads are opt-in, the focus should be less about not harming user experience and more about making sure that you are implementing these ads so they function like an integral part of your in-app economy. In many ways, rewarded videos are more of a product feature than an ad, and in order to maximise their potential you need to treat them as such. For example, user-initiated ad placement is important for making sure that in-app purchases aren’t cannibalized and that users are being offered in-app content or rewards when they are most likely to need them.
When it comes to offerwall, the traffic driver is a key component to success, which is usually displayed as a call-to-action button within your game. We recommend placing the traffic driver in two different locations within your game and that they’re visible to 100% of your users, such as home screen and your in-app store.
In order to boost your ad revenue with offerwall, consider running a double-credit promotion which gives your users double the offerwall rewards for a limited time. You can run pop-ups for the time that your promotion is going on to educate users on the offerwall, remind them about the campaign, and encourage them to complete as many offers as possible, further increasing your ad revenue.
Rewarded video ads can (and should) be placed in many locations within your game. Why? Two reasons. First, rewarded video requires far less of a time commitment from users than an offer available through the offerwall. Second, each user is different, and your placements should reflect that diversity. While some users may prefer watching a video on their home screen to get more coins, others are more likely to engage with an ad after a level fail in order to continue playing.
Like the offerwall, make sure that your rewarded videos are both visible and easily accessible. Your whole placement strategy should center around your game loop. For example, consider placing a rewarded video after a level fail, in which you can prompt your users to watch an ad in exchange for a second try at a level in your game. When you give your players more opportunities to progress within the game, you’re improving retention since they’ve received another shot at completing the level.
There are no disadvantages to being aggressive with rewarded video ads, so go forth and add as many placements as you’d like.
Setting the right reward amount
Next it’s time to choose the right rewards to give your users in exchange for interacting with user-initiated ads.
Make your rewards different than IAPs but still valuable
We mentioned earlier that if not implemented correctly, rewarded ads can cannibalize IAPs. To get around this, make sure the reward users receive after viewing a rewarded video is different than the rewards listed in your IAP store, but still worth watching a video for. This way, your paying users will continue to pay for IAPs, and your non-paying users will have a reason to engage with reward video ads.
Note that in some cases it’s alright that user-initiated ads cannibalize your IAPs, as long as your LTV is greater than the cannibalization of your IAPs. Remember that the value of your first rewarded video impression is significantly higher than, say, the fifth impression. Capping the number of impressions can help ensure that high-value impressions actually justify the cannibalization.
Base your rewards on segments or game progress
Each user is different, shouldn’t their rewards reflect their diversity?
Personalize your rewards by utilizing user segmentation. For example, you can give your most loyal users rewards that are less valuable because they’re already hooked, but for users who play less frequently consider giving them bigger rewards to tease them into playing longer.
You can also use segments to nudge non-paying users to make IAPs. By exposing non-payers to exclusive in-app experiences in exchange for opting into a user-initiated ad, you increase the likelihood of eventually being able to convince those users that in-game content is worth purchasing. One such way to do this is to give non-paying users limited IAP currency every few weeks when they engage with your rewarded video ads. However, make sure that you cap the reward in order for them to be pushed into making IAPs down the line.
Skip to section 4 to learn more about utilizing segmentation.
Not Doppler almost doubled their engagement rate by implementing rewarded video. Read more on how they did it.
Adapt rewards to in-game progress
Your rewards should correspond with the position your players have reached within the game. On Level 1 they could, for example, get 2 coins for watching a video. However, once they’ve reached Level 20, they should get 40 coins. In other words, the reward should reflect their progress within the game. After all, by Level 20, 40 coins aren’t worth much.
Balance the exchange rate
When setting up your offerwall, be sure to pay special attention to the exchange rate, or in other words, how many virtual items your users receive for one dollar of revenue you generate. As a rule, the higher your exchange rate, the higher your UR, ER, and completion rate will be.
Our recommendation is to offer at least the same exchange rate you offer in your store. For example, if a user pays $1 for 3 gems in your store, make it the same on your offerwall. You can even offer more gems for $1 on your offerwall, as unlike the app stores, the offerwall doesn’t take a 30% cut - leaving you with more revenue.
The secret here is to find the balance between maximizing your offerwall revenue and minimizing your IAP cannibalization in order to improve your LTV. And how do you do this? A/B testing, of course.
Crafting a better ad experience
Having a countdown timer by your rewarded video traffic driver can help generate more impressions. Naturally, more impressions will lead to more clicks, which in turn leads to more revenue. Users who want to engage with rewarded video will do so either way, so your goal should be to try and convince those users who are on the fence. Putting a timer that makes it clear that there is a limited period to engage with a rewarded video can push hesitant users to make a quick decision about engaging with rewarded video.
Additionally, you can improve the ad experience by creating an explanation page that outlines exactly what your users will receive in exchange for completing an offer or watching a rewarded video. If users understand in plain words what’s in it for them, they’ll be more likely to engage and complete offers, boosting revenue for you.
Now that you’ve integrated user-initiated ads into your game mechanics, it’s time to consider how and when you’ll place system-initiated ads.
In this section, we will cover everything you need to know about system-initiated ads - from ad placements and benchmarks, to when and how exactly you should implement them. You’ll learn how to maximize revenue without compromising user experience.
What are system-initiated ads?
System-initiated ads don’t require users to opt-in in order to view them. Rather, the developer decides when to place them and how often users engage with them. System-initiated ads are valuable for helping you monetize those users who won’t ever engage with opt-in ads, and are useful for games that don’t have an evolved in-app economy, like hyper-casual games. The two types of system-initiated ads are interstitial ads and banner ads.
Interstitials are full-screen ad units which offer users the option to exit or skip, and are designed to ensure minimal disruption to the user experience. Today, interstitial ad units can hold many ad types, such as static images, video ads, and even playable ads.
Banners are rectangular ad units that can remain in place for the duration of time that a user spends within a game. They are typically placed on the bottom or top half of the app screen. The advertisements within the banner container refresh automatically after a certain period of time. Like interstitial ads, they can be either static or animated.
Developers are often afraid that system initiated ads may negatively impact user experience, retention, and session length. Fortunately there are many ways to mitigate these concerns. Consider sticking to natural pauses in gameplay, capping the frequency of when you serve ads, segmenting your users, and A/B testing your placements. Unfamiliar with these terms? Don’t worry, we will discuss all of these topics in length throughout the eBook.
The biggest advantage system-initiated ads have for game developers is their ability to drive incremental revenue from all or most of their users. That’s because insterstials and banner ads ensure that you’re monetizing all of your users - not just those who opt-into a rewarded video or offerwall.
Not to mention, the more system-initiated placements you’ve integrated into your game, the higher your engagement rate and usage rate will be. (Not sure what these terms are? Skip to the benchmarks section for a definition.) Why? You’re addressing the maximum amount of user segments possible.
However, it’s important to keep in mind although your engagement rate and usage rate will rise, eventually your retention may drop due to user frustration. That’s why, as you can see from the ARPU graph, it is crucial that you A/B test your interstitial placements in order to find the sweet spot between revenue and number of impressions. Once you’ve found this sweet spot, you’ll be able to maximize LTV without harming user experience.
Placing system-initiated ads
Breaks - or natural stopping points - are a great time for serving interstitials, as users aren’t immersed in game play, therefore they won’t get frustrated with an ad interrupting their game. It’s best to show interstitial ads at the end of a timed segment or level, at the completion of each single game, or with each level increase.
Banner placement should not be next to interactive buttons in order to ensure that users don’t accidentally click on the ads. Fat finger syndrome is a real thing, so avoid placing banners in areas where there is a lot of user interaction.
Pacing and capping system-initiated ads
With interstitials, pacing and capping ensure that your users don’t experience ad fatigue. More importantly, you want to make sure that you don’t end up disturbing your users with too many ads that detract from the overall app experience. Showing multiple interstitial ads in a short period of time will create a poor user experience that will result in lower retention, fewer impressions, and the possibility of bad reviews in the app store.
Finding the sweet spot of how many ads to show your users and the interval of time between those ads will ensure you preserve a good user experience, as well as increased receptiveness to the ads you’re serving.
When it comes to interstitial ads, there is no definitive number of how many you should show to your users. In order to find the ideal number, ensure that you A/B test various intervals and number of impressions in order to determine the perfect strategy.
Crafting the best ad experience
There are many factors that can contribute to a positive system-initiated ad experience. For interstitial ads, game developers have the option of choosing the amount of seconds before the X-button appears. Sometimes, system-initiated ads could result in a drop in retention due to the fact that the user doesn’t choose whether or not they want to engage with them. However, giving your users the option to skip through the ad this will ensure that your retention isn’t lowered.
Additionally, you can choose whether your interstitial ads should display static images, video, or even interactive formats. While some people assume that video ads are far more engaging than static ads, this might not always be the case. It is crucial to A/B test each format to determine which one leads to higher engagement.
Now that your system-initiated and user-initiated ads are in place, the time has come to discuss the best practices for optimizing your monetization strategy. The best way to discover which strategy works best is to A/B test everything.
Why A/B testing monetization strategies is key
A/B testing monetization strategies is crucial, since it allows you to discover the sought after “sweet spot” we’ve been talking about throughout this eBook - the perfect balance between user experience and maximum revenue.
When game devs and monetization managers A/B test their monetization strategies, they’re able to see how users are reacting to different ad implementations. Therefore, conducting these tests will help you iterate and optimize your ad monetization based on comparative data.
The A/B testing tools on today’s market
There are three primary methods by which app developers can A/B test their monetization strategy.
The first method is to release a change to all of your users in one go and see if internal metrics were impacted. However, the inability to test the change against a true control group means that more often than not the results are unreliable and speculative.
The second option is to run a test through two different builds, essentially creating two updates to upload to the app stores, then segmenting which users would receive which update, waiting for each user to install the update, and then finally wait for the results of their tests to come back. This whole process is time consuming, requires extensive developer resources, and isn’t realistic for most game developers.
The third option is to utilize a third-party tool, which automatically allocates specific traffic to each group in real-time, letting developers experiment without exposing their whole audience to the change.
For example, with the LevelPlay A/B testing tool, which is available on the LevelPlay mediation platform, you can test just about everything - from rolling out new ad units and making adjustments to placement level rewards, to changing capping and pacing settings. You’ll save precious developer resources, be able to test with far less risk, and be given the right metrics to make data-driven decisions that will increase revenue and retention. Learn more about the LevelPlay A/B testing tool here.
1 - Introduce a new ad unit
A strong monetization strategy utilizes a healthy mix of ad units that combines, for example, user-initiated ad units like rewarded video with system-initiated ad units like interstitials. To find the perfect mix, we suggest adding a new ad unit to your current strategy to see if the addition improves KPIs.
The only way to do this is by testing one ad unit at a time and tracking results. For example, you can introduce a rewarded video ad to Group A, and leave your current strategy for Group B. What can you expect to see? In an ideal world, non-paying users will convert into paying users - and not the other way around. Those who already make IAPs will continue to do so, but when non-paying users are exposed to the benefits that paying users receive, over the long term they’ll be more inclined to make IAPs.
2 - Test different frequencies and pacing
As we covered earlier, exposing users to a high frequency of system-initiated ads ultimately leads to a drop in CTR and sometimes retention.
A/B testing frequency and pacing is important as it helps reduce ad fatigue and ensures maximum revenue without risking user churn.
The frequency capping feature allows publishers to control the number of times an individual user sees an ad within a session, while the pacing feature allows them to manage the spacing between each ad impression.
While it’s important to A/B test frequency and pacing on all ad units, it’s especially important to test them on interstitials as they’re system-initiated, and the chances of users getting frustrated is higher. Remember the system-initiated LTV graph which peaks at a certain impression? Your goal here is to find which frequency and pacing settings will give you the highest peak and no drop.
3 - Experiment with ad content
One of the biggest questions in the ad monetization space today is whether or not game developers should show their competitor’s ads.
You can test it yourself. You’ll quickly discover that showing competitor ads can have a positive impact on revenue without necessarily damaging the retention of users. Why? If your users like your game, chances are they’ll love your competitors’ games as well. And the better these competitor ads perform (the more users click to install), the higher your eCPM. Don’t worry about losing these users to your competitors, as loyal users will almost always come back to your game.
User segmentation is the process of dividing up your user base into groups based on their behavior and demographics - such as age, country, gender, paying or non-paying, app version, level reached, etc. As each and every one of your users engages with your game differently, you should tailor your ad monetization strategy accordingly.
With user segmentation, you can provide users with a customized ad experience designed to balance revenue and user experience for that particular group. Serving ads to fit a specific audience and better understand the behavior of certain groups of users will help you improve ad implementation, and improve user experience.
Paying players
Paying players are those who purchase IAPs. Be aware of the amount of ads you serve these users. As we mentioned before, you don’t want to aggravate them unnecessarily.
But rather than just taking an all or nothing approach, consider showing less ads to users who spend more. Further segment your paying users based on the amount of revenue they bring to your game. Typically, we break down paying users into whales, dolphins, and minnows (and these categories differ based on game and genre). Show each of these segments a different amount of ads based on the amount of revenue they’re already generating in your game. For example, you can show your IAP whales 0 ads, your IAP dolphins 1 ad per session, and so on.
Engaged players
Engaged users are those who are actively engaging with your ads. Be sure to offer these players more rewarded ads. Why? One of the most beneficial features of rewarded ads is their ability to convert non-paying users into paying users. Once your users are exposed to the benefits that are only available to paying users, the chances of them converting are higher. They’ll be more invested in your game, thus driving both higher retention and revenue.
Zero value players
Zero value users are those who don’t bring in any IAP revenue nor opt-in to user initiated ads. Use a prediction tool to determine early on which users are unlikely to ever engage with ads or pay for IAPs. Once you’ve segmented this group, show them system-initiated ads like interstitials and banners, as these ad units credited for monetizing 100% of users, not just those who opt-into rewarded videos.
Location, location, location
The monetization habits of users vary by country - players in the US behave differently than players in APAC. As advertisers are willing to pay more to have their ads served to tier-1 countries, eCPMs in those countries tend to be higher.
There are many ways to segment users by country. For example, you can offer users from tier-1 countries double rewards every time they complete an offer. Because they have more disposable income, they’re more likely to purchase IAPs once they’ve gotten a taste of the premium content.
If your IAP revenue is significantly low in tier-2 and tier-3 countries, try replacing your in-game store with an offerwall. There’s no chance of IAP cannibalization since there isn’t much purchasing to begin with.
Designing the optimal ad experience - maximum revenue for you and a positive experience for you users - will ensure a positive impact on all aspects of your business. Once you’ve discovered this sought after sweet spot, you’ll end up forming a virtuous cycle of growth, as an effective ad monetization strategy will lead to positive user reviews, more downloads of your game, and obviously more revenue in your pocket.
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