In the previous parts we’ve covered reasons to monetize with ads, things you need to understand in the process and ways to improve the returns on you investment into implementing ads into your apps and games.

In this final part we will address some real and imaginary reasons against ads.

“Religion”, allergy, etc.

While the heading doesn’t look serious, it is, in fact, the most difficult objection to overcome. If you hate ads with a passion, not much can change your mind. I still encourage you to re-read the first part of the series and consider the pros and cons of using ads versus forgoing the revenue they could potentially generate for you. After all you are in the app business and you should consider what is best for it.

You may still conclude that ads is not the right way to monetize your app or game, but you should come to this conclusion logically, without any prejudice.

Rarely/short running apps

Ad based monetization is volume based. Even if you have a decent number of active users of your app, but if they launch it once a week and spend a few seconds there (by design), then you should most definitely look at other monetization models. Ads won’t do much for you in this case.

Negative effect on user experience

Obviously it’s hard to claim that ads improve user experience or don’t affect it at all. Having said that, the same could be said about any attempt to monetize. Paid apps put a barrier to entry and free-to-play games alter the whole gameplay to improve monetization. So, unless you are making apps as a hobby, you will have to choose your “poison” at some point. The bottom line is that you evaluate your user base and decide which method is the best compromise between revenue for you and experience for them.

Extra permission requirements and privacy concerns

When you serve ads from an ad network the data goes to that ad network and sometimes it is more data than you are comfortable with. However, the same amount of data (usually more) is also transferred to your analytics service, crash reporting service, etc. Unless you don’t use any of those, it is not very likely that you will add some extra permission requirements for your app by using ads. And as for privacy concerns, you should obviously do some research on the firm whose SDK you plan to integrate into your apps.

High revenue unpredictability

With paid apps or in-app purchases your revenues are pretty stable relative to your user acquisition efforts. This is not the case with ads. Your ad network may have a very good month with a huge advertiser spending a lot of money. But the month ends and that advertiser’s budget goes with it and the same provider generates pennies on the dollar compared to the previous month.

When you monetize with ads it is very important to maintain discipline and hold off on leasing that Ferrari when you have a good month. You may need that money to amortize low revenues in the forthcoming months. The best way to mitigate this is to implement the “waterfall” mechanism we’ve covered in the earlier part. This way you can dynamically control your ad configuration and choose the best performing provider at any point in time.

Optimizing ad revenue takes time and effort

Starting to monetize with ads is really easy. Making the most of it is not. But with some reasonable effort you can get to a place where you are able to react to changes in the market and then you can decide on how proactive you want to be with it. You don’t have to prioritize revenue optimization when you have more important things to do.

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As you can see, you can find a reason to quickly dismiss ad monetization, but none of these reasons are a silver bullet and applicable in every situation. More often than not, ads can improve your monetization, in turn allowing you to afford spending more time working on your apps and in the end improving experience for your users.

I strongly encourage you to include ads into your monetization strategy and I’m pretty sure that you won’t regret it.

In the previous parts we’ve learned how to evaluate and optimize our ad monetization efforts. We will cover several gotchas and things you should pay attention to while setting up and managing your ad monetization strategy.

Does your ad provider disregard the fill rate while calculating eCPM?

We’ve already discussed that different ad providers may deliver different fill rates for different types of apps and audiences. The question is how do they report it to you?

Let’s say you login to your ad provider’s client area and see a report that looks like this:

Impressions	Clicks	CPC	eCPM
1,000	10	$0.1	$1

This looks fine on the surface, but what does “Impressions” mean in this case? If you only have this one measure in your report and don’t have fill rate or the number of ad requests to compliment it, mostly likely it means that the ad network calculated the eCPM based only on the ads they actually delivered and disregarded all requests that returned empty-handed.

On the other hand your report may look like this:

Requests	Impressions	Clicks	CPC	eCPM
2,000	1,000	10	$0.1	$0.5

As you can see the ad network honestly reports that it was able to fulfill only 50% of your ad requests and calculates your eCPM based on that.

Obviously, if you compare two ad providers and don’t pay attention to the method they use to calculate eCPM, you will choose the first network because the eCPM looks 2 times better. In reality, though, it’s quite possible that the second one actually delivers better results. For all we know the first one may have a fill rate of 10% or even less.

It is incorrect to directly compare eCPM for different ad types

Ad networks like to display impressive eCPM numbers on their websites to lure publishers. But if you blindly compare these numbers (even if they are absolutely honest) you are probably not getting the whole picture.

If one ad network promises $5 eCPM but only runs interstitial ads and another network claims $1 eCPM on banners, which one do you choose? From a purely commercial point of view the answer comes down to your ability to show more than 5 banners (say during game play) in a timespan when you would display 1 interstitial (say after each level). If you can do this the “banner network” will actually deliver higher revenues.

Obviously in this particular scenario there’s nothing preventing you from using both of them, but when you start comparing interstitials to video ads, etc., you often have to choose one or the other as your primary network.

Can you control minimum bid?

Some ad providers let you set a minimum accepted bid, meaning that if an advertiser bids less than $X on your user you refuse to show their ads. When an ad network doesn’t allow you to control this you may end up in a situation where an advertiser bids 1 cent for a click and you end up showing their ads, even though you don’t make any meaningful money from such ads. In cases like this you would rather switch to a different ad provider or display your own house ad.

In the previous part we’ve introduced a concept of fill rate – percentage of ad requests fulfilled with actual ads.

The harsh reality is that it’s almost never 100% for any particular commercial ad network – there’s just more ad space on the web and in apps (supply) than there’s advertising dollars to spend on that space (demand). Your ad network is basically doing the sales for you and as all the sales-based operations they may have better or worse months, stronger or weaker areas like countries and regions or industries.

Therefore while implementing an SDK from just one network into your app is very easy, as most of the money related things, it’s not that easy to get the maximum result out of those ads.

Ad mediation, waterfall, etc.

Some ad providers are doing what is often called server-side mediation. You integrate one SDK into your app and the ad server offers your users to multiple ad networks who bid on that ad request based on the desires of the advertisers they have. The whole auction happens in real-time hence the term you’ve probably heard before – real-time bidding or RTB.

This is all good, but it’s still limited to the number, quality and relevance of the ad networks integrated into your provider’s backend. It also ads additional uncertainty on the type of advertising you’ll get delivered to your users since it’s coming from any of the multiple sources that you don’t necessarily have any control of.

So instead of, or in addition to, using an ad mediation network you can do your own client-side mediation or what some call a waterfall algorithm.

What it means is that you integrate multiple ad provider SDKs into your app and switch between them based on your own criteria. In the simplest form you request an ad from your most preferred ad network and, if it can’t provide one, you switch to your number 2, etc. A more sophisticated solution would allow you to have different setup for each region and update your configuration without having to update your app.

You can build a simple system like this yourself or you can use a solution that someone else made. On the Windows side there’s an open-source project called AdRotator and then there’s Microsoft’s own Ad Mediation.

The last step

In a setup like this you have the most control of what’s going on in your app and with some experimentation you can get pretty close to that coveted 100% fill rate. There’s only one thing separating you from true 100% – something that, even if you can’t get paid for the impression, will provide an ad no matter what.

This could be an ad for your other apps or games, or an ad for your friend’s app, or an ad for your favorite charity. You can also swap ads with some other friendly publishers or join a cross-promotion network to promote your app for free and without sacrificing any potential revenue – remember that at this step you are using your unsold inventory which would go to waste otherwise.

Not only for fill rate

While these techniques would definitely help you improve the ad fill rate in your apps, you can take it one step further. Once you’ve achieved virtually 100% fill rate you can start optimizing the order of ad networks in your waterfall in different countries and different types of apps and games. This way you’ll be able to configure your setup in a way that yields you the best returns.

Whether this exercise is worth the trouble is for your to decide, but know that there’s always a room for improving your ad monetization. It won’t make a difference between starving and royal riches, but once you get to a certain level, even a few percent improvement could be pretty substantial in absolute numbers.

In the previous part we took a look at what metrics advertisers use to measure effectiveness of their campaigns in your apps. Let’s turn to a topic that is more important to you as an app and game publisher – namely, what performance indicators you should care about when monetizing apps with ads.

You can go into a lot of detail on this topic, but on the surface there are only 2 KPIs you should care about.

 

Effective CPM (eCPM)

You are providing advertisers with a limited resource – ad space in your app. The amount of the available ad space doesn’t change based on the quality of the ads you run in your app (discounting the cases of really bad user repelling ads). Therefore you shouldn’t be responsible for the fact that one advertiser made a less attractive ad and/or product than the other. Your space is worth something to you and that’s what you would like to get from any of the ad providers and advertisers occupying that space in your app. Unfortunately in the buyer’s market it doesn’t always work that way.

As we’ve seen in the earlier chapter mobile ads are not always sold on the CPM basis. And unless you are a really important fish you will have to deal with this. But you don’t have to guess which of the advertisers or ad providers is better for you. That’s what eCPM is for.

eCPM is any ad sales model (CPC, CPI, CPA, etc.) converted to CPM.

Let’s illustrate this with a couple of examples.

CPC to eCPM

If advertisers are paying for clicks and you know the click-through rate you can easily calculate your eCPM:

eCPM = CPC * CTR * 1,000

Or, for example: if you sell clicks for $0.10 (CPC) and CTR on those ads is 1% (or 0.01) then eCPM = $0.10 * 0.01 * 1,000 = $1.

CPI to eCPM

When advertiser is paying for installs, you will need to know the CTR and install rate (IR) to calculate your eCPM.

eCPM = CPI * CTR * IR * 1,000

Or, for example: if you get paid $1 per install (CPI), CTR is 1%, as in previous example, and install rate (IR) is 10% (or 0.1) then your eCPM = $1 * 0.01 * 0.1 * 1,000 = $1.

Fill Rate

The second important KPI for app developers, and the one that not everyone is familiar with, is called fill rate.

Fill rate represents a percentage of the ad inventory filled with actual ads.

Every time your app requests an ad from an ad network, contrary to what you may think, there’s no guarantee that you will get an ad back. In reality you may get a decent fill rate from a network in one region and zero ads in another. All-in-all it’s hard to expect to fill anywhere close to 100% of your ad space, if you don’t proactively attack the issue.

In the next part we will discuss just that – maximizing your fill rate and returns on your ad space. Stay tuned.

In the first part of the series I’ve outlined several reasons to consider advertising as a monetization option for your mobile apps and games. Today I wanted to cover some of the basic terms used in the mobile advertising industry. Let’s start with ad types.

Ad types

There is quite a variety of ad formats that you can place into your apps and games, but here are the most common ones:

Banner ads

 

The most widespread and “old school” type of ad is a banner ad. They probably don’t need an explanation, but if you don’t know what they are, you can see one on the right.

Pros:

• widest choice of ad providers
• don’t interfere with natural app’s/game’s flow
• can be easily used as an incentive for an in-app purchase to remove them (break the IAP ice)

Cons:

• take up real estate on the screen
• annoy “allergic” users

Interstitial ads

Ads occupying most (all) of the screen and usually displayed during natural pauses in app’s flow, thus mostly applicable to games. For the purpose of this discussion I will group video ads and playable ads (mini demos) into the same category.

Pros:

• Good user engagement (high click-through rates)
• Don’t take up screen real estate during gameplay
• Usually pay better than banners

Cons:

• require a natural pause in game or app’s flow, thus not universally applicable
• can’t show too often (for the same reason)
• can be “heavy” in terms of file size/network traffic

Offer walls

Offer walls usually display a number of ads on the same screen and occupy the whole area(hence the name).

Pros:

• often displayed in response to voluntary user action (click on a special button, etc.)
• show multiple ads – more choice for the user (potentially higher click-through rate)

Cons:

• multiple ads displayed simultaneously dilute the value and attractiveness for best advertisers

Native ads

Native ads are almost indistinguishable from app’s content. Think promoted tweets or court-side ads in a sports game.

Pros:

• non-intrusive in the context of the app

Cons:

• hardly accessible to indie developers
• can cause frustration on the user’s side when “nativity” goes too far

Ad providers

You can obviously spin out your own ad sales and serving operations, but for most indie developers and publishers this would be a huge overkill. So most of the time your ads will come from some 3rd party ad provider or a set of them. Ad provider market is a busy place, so almost every ad company tries to invent a new term for who they actually are. You will work with ad networks, ad exchanges, ad mediators, DSPs, SSPs, direct deal marketplaces, and a combination of those words in various order with a word “performance” mixed in.

As far as publishers are concerned you mostly care about the returns they can provide you, quality of their SDK (you don’t want your game to crash because of the ad SDK), and the quality of ads they deliver (you don’t want your users to be disgusted by what they see).

We will talk about getting the best returns in a future part of the series. And in case you care about all of these provider types, check out this presentation or this blog post.

Basic terms

We will cover more terms in the future parts, but here are few very basic ones:

• Impression – every time an ad is displayed to a user is called “ad impression”.
• Click – every time user clicks (or rather taps in case of mobile) on an ad
• CTR (click-through rate) – percentage of ad impressions resulting in clicks on the ad. CTR=Clicks/Impressions. For example, if an ad was displayed 1,000 times and was clicked 20 times you have a CTR of 2%.
• IR (install rate) – this is app specific and means a percentage of clicks resulting in app installation. For example, if 20 clicks from the previous example result in 2 app installations, you have an IR of 10%.

Ad pricing models

When advertisers order advertising campaigns there are various way they will be charged for it. As an advertiser pricing model may influence the type of creatives you use. As a publisher quite often you are not directly exposed to the way actual advertiser pays for their campaign, but, if you are, this may affect your ad placement strategy.

Here are the most common pricing models:

• CPM (cost per mille or 1 thousand impressions) – advertiser pays for a number of ad impressions. This is the most fair model for publishers. After all you sell space in your app and you don’t want to be responsible for whatever advertiser decides to advertise. Unfortunately for you in a buyer driven market it’s not always that advertisers would want to pay for impressions. This was especially true in the last couple of years, but recently I’ve started hearing savvy advertisers admitting that pricing model doesn’t really matter as long as they can assess key performance indicators on their end.
• CPC (cost per click) – this is probably the most popular pricing model, popularized by Google on the web and expanded to mobile later on. While it is wide spread, I think it is one of the most unfair models on mobile to both parties. It’s no secret that the number of accidental clicks on mobile is quite high and someone is paying for them with the CPC model.
• CPI (cost per install) – this is one of the most popular models with app advertisers. While advertisers pay for some sort of desired outcome (app install) the methods to track these conversions rely on quite a lot of “magic” and, as a publisher, you bear the penalty for the quality of advertised product.
• CPA, CPL, etc. (cost per action, cost per lead) – while install is some sort of outcome, more often than not it’s not the final goal of the advertiser. In an ideal case for the advertiser they would only like to pay a share of the money they make from users you bring them. Luckily for you these models are not as widespread in the in-app advertising. However, if your app is highly targeted at some lucrative niche, this could be a good way to get referral fees from the companies working in the same space.

That is it for this part. In the next part we will talk about the KPIs advertisers care about and what it means for you as a developer/publisher.

Everybody loves ads. Right? Right!? Well, it’s not that easy to find a person who would agree with this statement. But nevertheless rational people learned to accept ads as necessary “evil”. The number of people who “love” ads is more or less equal to the number of people willing to pay for the content on the internet.

Most of the web content is monetized with ads these days. In-app ads is the first or second (depending on a platform) monetization method for app developers. Yet, most of the indie app and game developers are easily lost in the sea of terms and 3-letter acronyms used in the advertising industry.

I was in the same shoes when I entered advertising industry almost by accident. I had to learn most of these things as I went. So I decided to make it a little easier for my fellow devs by collecting most of the basics in a series of several blog posts. This is the first post in the series and what I’m trying to do here is answer the question why, despite the fact most people dislike ads, you should definitely consider advertising as a monetization model for your mobile app or game.

Why would I monetize my mobile app or game with ads?

 

According to Developer Economics Q1 2015 report 36% of app developers use in-app advertising as their revenue model (or one of them). Clearly this number is much higher than the number of people wholeheartedly liking ads in general. So why do they do it?

No one buys apps anymore

In the early days of app stores users were buying paid apps quite actively. Then pricing quickly converged on $0.99. Then people collectively decided that even that is to much and you can’t blame them. With millions of apps in the app stores, for almost every mass-market paid app there’s a good-enough free alternative.

So developers had to turn to alternative means of monetization: in-app purchases and/or advertising.

Minimal impact on game and app design

In-app purchases work great in games and apps specifically designed with this model in mind. But what if this is not how you want to structure your app? What if you want to turn your paid game into a free game?

Advertising can be used to monetize your apps without changing what that app actually is. You may need to find a place for the ad in the UI (in the case of banner ads), but you won’t have to artificially slice your app into pieces or invent other tricks to make it work with IAPs.

Monetize the long tail

And even if you design your game as a free-to-play title from the get go, it’s a well know truth that only a few percent of your users will ever pay for anything in your game. You may decide to accept that the remaining ~95% of your users won’t bring you any direct revenue or you may use ads to make money from 100% of your user base.

Gateway drug to IAPs

Additionally, if you offer ad-free experience to all of your paying customers, this could very well be that small extra push for them to make a purchase. And, as everyone knows, the first sale is the hardest.

Not only for monetization

While in-app advertising is primarily considered as a revenue generating tool, it could very well serve you on the other side of the spectrum – app marketing and user acquisition.

Jumpstart your new titles

Successful publishers use the collective power of their previous apps and games to jumpstart their new titles. This is much easier to do when you already have dedicated ad space inside your apps.

Cross-promote with other publishers

Even if you don’t have previous hits or if you want to widen your target audience you can swap ads with other friendly publishers or use a cross-promotion network to automate the process. You can always switch back to partial or pure monetization once you achieve your marketing goals.

Hopefully I’ve convinced you that there’s a totally legit place for advertising in your app monetization strategy. In the next part I will cover the basic terminology used in the in-app advertising industry. Stay tuned.