PocketGamer.biz has partnered up with US developer Pixelberry Studios to highlight its candid stories on the trials and triumphs of a startup game studio whose debut title High School Story stayed in the top grossing top 100 chart for a year.

This series of articles will provide a mix of drama, detailed learnings, and actual numbers from their experience launching and supporting a top game.

The mobile game industry's worst-kept secret is that a small percentage of our users account for the vast majority of revenues.

In fact, somewhere between 95 and 99 percent of most free-to-play games' users will never spend a dime on in-app purchases.

Looking at this statistic led our company to a simple conclusion: we needed to find a way to make money from the overwhelming majority of users who never pay.

Enter ad monetization

Like many gaming companies, we eventually decided that in-game advertisements would be the best way to monetize non-paying users in our games.

The next step was to figure out what kind of ads to put in the game.

The exact implementation of ads varies by game type, and how much a given company cares about the user's experience. Common ad integrations include the following:

1. Interstitial

These ads can pop up either at timed intervals or at a particular place in your game's flow. They can be a static image, or a full-length video.

Pro: Maximum engagement/exposure
Con: Potentially annoying user experience

2. Incentivized

This type of ad depends on the user to opt-in to viewing it. The user is typically rewarded with a power up, bonus, or currency for engaging with the ad. (Note that the practice of rewarding a user to actually install another app is frowned upon and may lead to your game being pulled from the app store.)

Pro: Better user experience
Con: Limited engagement

3. Banner

A banner ad appears on a small section of the screen. I have seldom seen these used for game in the Top 100 Grossing list, but they frequently appear in indies like Flappy Bird (my cynical assumption is that this type of ad is counting on accidental clicks).

Pro: Uninterrupted user experience
Con: Potentially annoying misclicks. Low payouts. Cheapens the look and feel of the game.

4. Native Ads

A somewhat loosely-defined category of ad, but basically one that's been deeply-integrated into your game's UI. Examples include an ad appearing in a scrollable list in a game menu (similar to an ad in your Facebook feed) or an in-game billboard that links to an external site or the app store.

Pro: Better user interface
Con: Potential misclicks/bad user experience

5. Offer Walls

These ads, usually buried in a game's currency store, offer massive in-game incentives for users who are willing to take extraordinary actions (like signing up for a Netflix account, answers a detailed survey, or making a large purchase at a given store.)

Pro: Massive payouts
Con: Potentially poor user experience

At Pixelberry, user experience is king.

As such, we avoided several potentially lucrative ad integrations that may have temporarily boosted revenue but may have ultimately hurt us in terms of retention, branding, and overall user experience.

Ultimately, we decided that incentivized video ads provided the right balance between monetization and user experience.

What to look for in a partner

Our next step was to pick a video ad network to be our partner. In doing so, we weighed several factors:

1. eCPM (effective cost per thousand impressions)

This is the amount a given network will pay out. For example, if a network is offering $10 eCPMs, they'll be paying you that amount for every thousand ad views (about a penny a view.)

2. Fill Rate

This number indicates a given networks inventory. At a fill rate of 100%, they'd be able to serve an ad every time your game attempts to serve an ad to a player. At 50%, half of the time your players would not see an ad.

3. Ease of integration

Most reliable networks will have pretty easy plug-and-play SDKs that can be integrated and tested with a few hours of dev work. Of course, every network says that integration is easy. It's worth calling a couple of their existing clients to make sure this is really the case.

4. Incentives/bonuses

Depending on your traffic, many networks will be willing to provide an upfront payment or a minimum eCPM guarantee for the first couple of months. A word of warning on these: while it's easy to be seduced by upfront guarantees, it's really better to prioritize a long-term, profitable relationship. That said, if this is merely sweetening the deal, it can be a nice short-term financial boost.

5. Brand vs. Game Ads

Most networks serve ads for games, a practice which poses the risk that your players will leave for a competitor. Brand ads (for soft drinks, fast food, cars, etc.) don't pose that risk, but tend to have less reliable inventory.

After weighing all of these factors and talking to many networks, we eventually decided that no one network would accommodate our needs.

First, getting 100% fill would be impossible with a single source. Furthermore, with one source, we could never be sure we were maximizing eCPMs/revenue.

A mediated solution

Our solution was to partner with Fyber, a mediation platform that allowed us to integrate multiple ad networks into our game.

Fyber's mediation runs a complex algorithm that prioritizes the top-paying network for a given ad view, thus maximizing our revenue. Fyber also does a great job of supporting dozens of ad networks, including the ones we decided to partner with: Vungle, Unity, AppLovin and HyprMX.

While we've generally been happy with mediation, there are several downsides.

• There's a heightened engineering and QA cost to integrating so many SDKs. This is compounded by the need for SDK updates, which happen every few months.
• Ad network SDKs, while each fairly small, accumulate to bloat the app's size.
• It can be a time sink to manage relationships, debugging, and billing with several external companies.
• When users find problems with a given ad, either on the technical or the content side, it can be difficult to find which network is serving it. (For example, if a user complains that she saw an ad featuring a scantily-clad woman in High School Story, I often have no idea which of the five networks I need to contact to get the ad pulled. This can result in a great deal of unnecessary emails.)

Overall, we feel that the increased monetization is worth these drawbacks, but it's certainly something each studio should weigh for itself.

Expected returns and seasonality

After we integrated ads, we saw a significant bump in revenue, with ads accounting for approximately 8 to 15% of our total income, depending on the day.

Note that this percentage is for High School Story, a simulation game. In other genres, it may be substantially higher: for example Crossy Road seems to make about 30 percent of its revenues from ads.

It's also worth noting that eCPMs can fluctuate wildly based on the time of year. Ad revenues tend to be especially high during November and December, when paid installs are at a premium and brand dollars flood the market.

For example, in December, many networks pay eCPMs over $20, while in February, that number may fall to $8 or $10.

Closing thoughts

Overall, we've found that ads provide an excellent way for us to monetize non-paying users in our games.

While each game's individual makeup should determine which ad strategy works best, incentivized video ads through Fyber's mediation have worked well for us.

Max Doty leads UA and Monetization at Pixelberry Studios.

Through partnerships with non-profits, Pixelberry's hit game High School Story has taught millions of players about tough teen issues, like cyberbullying and eating disorders.

Pixelberry recently released its second game, Hollywood U.

You can find out more at pixelberrystudios.com