Learning how to best approach monetisation for your mobile title is an essential part of the development process. There are numerous ways in which developers can choose to tackle monetisation, but finding the perfect fit for your mobile game can be a challenge.

In this guest post, AppLovin VP, Global BD, Daniel Tchernahovsky, shares his insight on ad monetisation, in-app purchases and how to balance both to drive revenue and growth for your game.

App developers often grapple with the choice between in-app purchases and in-app advertising for their app’s monetisation strategy. Many fear that the use of ads may be detrimental to their IAP revenue, so they continually wrestle with the perceived tension between the two options.

However, this dilemma doesn’t need to be a deadlock for developers. Instead, it's an opportunity to drive strategic growth by embracing a more holistic approach to their ad monetisation strategy. It is absolutely possible to optimally set up both IAPs and IAA in a way that boosts revenue for your app.

Here’s how:

Finding the right ad type

First, the implementation of ads depends significantly on the nature of the game and the user experience. So, when deciding which ad types to introduce to an IAP-focused game, developers should consider each type of mobile ad, along with their unique set of advantages and challenges.

For example, although banner ads are the least intrusive, as they sit at the bottom of the screen, they are harder to implement in an existing game if User Interface elements exist at the bottom or top of the screen. Interstitial ads, on the other hand, find their sweet spot during natural breaks in the gameplay, so while they can be more intrusive as they take over the screen, they can happen during natural breaks in the game so as not to annoy users.

Integrating rewarded ads is a fantastic way to complement your IAP strategy. There are several types of rewarded ads that work well, such as “spin the wheel” or prompting for a rewarded ad when exiting the store page. Rewarded ads have the potential to really engage users and keep them coming back for more, which can improve retention in a game and increase their future purchasing potential. However, they have the possibility of eating into your IAP revenue if not done correctly, so remember to cap the number of rewarded ads a user can watch in a day to prevent this.

Aligning with user expectations

For any of these ad types, it is always easier to launch a game with ads than it is to add ads later on. Having said that, it is by no means too late. By integrating ads into games in a way that prioritises user satisfaction, developers can preserve the loyalty of long-time users and strategically enhance the experience for new ones, even in IAP-focused games.

The key here is to align ad types with the game's nature and user expectations. By doing this, developers can prevent potential disruption.

A great way to understand your users’ expectations is by segmenting your user base. Identify users who are unlikely to make in-app purchases and show them ads. You may even want to avoid certain ad types for purchasers altogether. Pay close attention to how adding these ad types affects retention and IAP usage for each user group.

Metrics that matter

When looking at the performance of ads, app developers should take a holistic view of their ad performance and consider the different metrics for each ad type and how they work together to drive overall revenue. For instance, banner ads might have a lower cost per mile (CPM) – the cost per 1,000 impressions – but as they regularly refresh with new ads, they provide a consistent source of revenue.

When it comes to evaluating ad performance, the all-encompassing metric is ARPDAU - average revenue per daily active user. Unlike a singular focus on CPM, ARPDAU factors in various dynamics, from user session lengths to product decisions, delivering a panoramic view of revenue generation. This comprehensive insight allows developers to make informed decisions, spot potential pitfalls and channel efforts where they matter most.

User retention is another key metric to focus on, as some ads can often negatively impact this. While adding the ads is still beneficial, developers need to keep an eye on this to ensure the trade-off between ARPDAU and retention is worthwhile.

The Art of Symbiosis

Balancing in-app advertising and in-app purchases isn’t a zero-sum game. A holistic approach that merges strategic ad planning and impactful measurement and prioritises user experience is the key. This blend of ads and IAPs enriches revenue channels and creates a user-centric environment that fosters sustainable growth. It's time to embrace the best of both worlds.

Edited by Paige Cook