Ad Revenue in Mobile Games

Ad revenue is important for many free-to-play (F2P) mobile games. Unlike in-app purchases (IAPs), which rely on a small percentage of players spending money, ad revenue can come from a broader player base. This makes it a more inclusive way to earn money, providing a steady income while keeping the game accessible to everyone. Also, ad revenue is adequate for monetizing non-payers, ensuring every player contributes to the game's success.

Ad revenue is the lifeline for free-to-play games, turning every player into a valuable contributor without costing them a dime.

Ad Monetization Strategies

Ad monetization strategies can vary depending on the type of game and its target audience. For games with low ARPDAU (average revenue per daily user) and broad appeal, such as board games, word games, and hyper-casual games, ad revenue works exceptionally well. Since these genres typically have one of the lowest CPIs (cost per install), they can afford to use even more intrusive ads, such as interstitial ads, on non-paying users. The cost of losing a potential payer is also the lowest in these genres.

On the other hand, games with niche appeal and high ARPDAU, such as social casinos and slots, should avoid intrusive ads and stick to non-intrusive ads, like rewarded videos. This approach helps maintain a premium user experience, which is crucial for retaining high-value players.

Examples of Success: Wordscapes and Candy Crush

Wordscapes is a good example of a game with low ARPDAU and wide appeal. It uses banners, interstitials, and rewarded video ads effectively. It also gives players the option to remove ads by paying. This strategy helps Wordscapes maximize ad revenue without ruining the player experience.

Candy Crush is another example of effective ad monetization. The game uses rewarded videos, letting players earn extra lives and boosters by watching short ads. This increases engagement and provides steady revenue from both payers and non-payers. The use of non-intrusive ads keeps the user experience positive, helping the game's long-term success.

Understanding Ad Revenue

Ad revenue is the money apps generate from in-app advertising. App ad revenue is calculated by multiplying ad impressions by eCPM (effective cost per mille).

Ad revenue = impressions * eCPM

What is an Impression?

An impression is counted each time an ad is fetched and displayed to a user. It is a metric used to quantify the number of times an ad is shown, regardless of whether the user interacts with it.

What is eCPM?

eCPM stands for "effective cost per mille," where "mille" is Latin for "thousand." eCPM is a metric used to determine the revenue generated per thousand ad impressions. It is calculated by dividing the total earnings from the ads by the number of impressions (in thousands).

eCPM = (Total Earnings / Number of Impressions) * 1000

Metrics to Track for Ad Revenue

To effectively manage and optimize ad revenue, it’s essential to track key metrics:

1. Impressions: The total number of times ads are displayed to users.

2. eCPM: The effective cost per thousand impressions, a key measure of ad revenue efficiency.

3. Fill Rate: The percentage of ad requests that are successfully filled with ads. Higher fill rates indicate better ad network performance.

4. Click-Through Rate (CTR): The ratio of users who click on an ad to the number of total users who view the ad. Higher CTRs often lead to better eCPM.

Average Revenue Per Daily Active User (ARPDAU): The average amount of revenue generated per daily active user. This metric helps evaluate the effectiveness of ad monetization.

Types of Ads in Mobile Games

1. Banner Ads: Static or animated images at the top or bottom of the screen. They generate lower revenue but are less intrusive and can be displayed continuously during gameplay.

2. Interstitial Ads: Full-screen ads that appear at natural breaks in gameplay, such as between levels. They are more engaging and can generate higher revenue but can also be more intrusive if not used sparingly.

3. Rewarded Ads: Ads that offer players in-game rewards, such as extra lives, in-game currency, or power-ups, in exchange for watching a short video. Rewarded ads are highly effective as they provide value to the player while generating significant revenue.

4. Native Ads: Ads that blend seamlessly with the game's content and design, offering a less intrusive experience. They can be highly effective if implemented thoughtfully, ensuring they do not disrupt gameplay.

5. Offerwall Ads: Offerwall ads present users with a list of offers they can complete in exchange for in-game rewards. These offers can include watching videos, completing surveys, or installing other apps. Offerwall ads can be highly engaging and provide a significant revenue stream.

Comparatively, rewarded ads generally have the highest eCPM, often ranging from $10 to $30, especially in Tier 1 countries like the United States and Canada. Interstitial ads follow with eCPMs typically between $3 and $10. Native ads have moderate eCPMs, usually in the range of $3 to $10, while offerwall ads can vary widely, from $5 to $15. Banner ads usually have the lowest eCPMs, often between $0.10 and $1. It's important to consider the geographic location of your users, as eCPM rates can vary significantly; for instance, users in Tier 3 countries like India and Indonesia generally generate lower eCPM rates, ranging from $1 to $3.

Rewarded Videos: The Best Ad Type

Rewarded videos are the best ad type for mobile games due to their unique advantages:

1. Engagement and Monetization: Rewarded videos tie ad monetization with engagement. Players get free coins or other in-game rewards for watching the ad, allowing them to continue their journey and enhancing their overall experience.

2. Non-Intrusive: Unlike other ad formats, rewarded videos are non-intrusive. Players choose to watch these ads voluntarily, ensuring their gameplay experience is not interrupted.

3. High CPM: Rewarded videos typically have the highest CPM (cost per thousand impressions), meaning they generate more revenue per thousand impressions compared to other ad types. This makes them a highly lucrative option for developers.

Appeals to Both Payers and Non-Payers: Contrary to popular belief, rewarded videos are used by both non-payers and payers. In fact, payers often engage with rewarded videos more frequently, as they see value in the additional in-game resources they receive.

Rewarded Videos: Understanding CPM and Geographic Variations

CPM, or cost per thousand impressions, is a critical metric in ad monetization, representing the revenue earned from ads per one thousand impressions. However, CPM can vary significantly based on the geographic location of the users:

1. Tier 1 Countries: Countries like the United States, Canada, the United Kingdom, and Western Europe generally offer higher CPM rates. Users from these regions are more valuable to advertisers, leading to higher ad revenues. For example, CPM rates in Tier 1 countries can range from $10 to $15.

2. Tier 2 Countries: Countries such as Brazil, Mexico, and Eastern European nations fall into this category. They typically have moderate CPM rates, reflecting a mid-range value to advertisers. CPM rates in Tier 2 countries can range from $5 to $8.

3. Tier 3 Countries: Countries including India, Indonesia, and many African nations generally have the lowest CPM rates. Advertisers pay less for impressions in these regions, resulting in lower ad revenues. CPM rates in Tier 3 countries can range from $1 to $3.

Not all ads are the same, and the value generated from them can differ significantly based on the user's location. Therefore, understanding the geographic distribution of your user base is crucial for optimizing ad revenue. Users from Tier 1 countries generate more money compared to those from Tier 3 countries.

Rewarded Videos: How to Decide the Reward Amount for Rewarded Ads

Determining the right reward amount for rewarded ads involves understanding your game's economy and balancing it with ad revenue. Here's a sample calculation to guide you:

1. Determine the average number of coins you give in exchange for $1. For example, if $1 equals 1000 coins.

2. Identify your CPM. Let's say your CPM is $10, meaning 1000 impressions generate $10.

3. Calculate the coins to be given per ad view: Coins per ad: (Coins per $1 / CPM) x 1000 = (1000 coins / $10) x 1000 = 100 coins

So, you would give 100 coins per ad view. This calculation ensures that the rewards offered to players align with the ad revenue generated, maintaining a balanced in-game economy.

Experiments with Rewarded Videos

To optimize the effectiveness of rewarded videos, developers can conduct various experiments:

1. A/B Testing with Reward Amounts: Experiment with different reward amounts to determine the best rewards that encourage players to watch ads without devaluing in-game currency.

2. Different Placements: Test placing rewarded videos in various locations, such as the lobby, game-over screen, daily missions, and more. Identifying the most effective placements can significantly boost ad engagement.

3. Daily Limits: Implement a maximum limit on the number of rewarded videos a user can watch per day. Some users might watch hundreds of videos, which can reduce the effectiveness of the ads and lower the CPM. Setting a limit helps maintain ad value.

Time Gaps Between Videos: Introduce a time gap between consecutive rewarded videos to prevent exploitation and ensure that ads remain effective and valuable for advertisers.

Optimizing Ad Revenue

To maximize ad revenue, developers need to strike a balance between monetization and user experience. Here are some strategies to consider:

1. Find the Right Time and Place: Consider where a rewarded video ad may make the most sense in your app. When do users need a resource in your game to continue advancing successfully? Apply economic principles of scarcity and rarity. Make sure you’re not giving away too large of a reward, but enough to entice the user. Avoid a persistent reward that the user can always access, as users are more likely to interact with more rare rewards.

2. Placement and Frequency: Carefully consider where and how often ads are shown. Too many ads can frustrate players and lead to churn, while too few can result in missed revenue opportunities. Testing different placements and frequencies can help find the optimal balance.

3. Segmentation: Not all players are the same. By segmenting your player base, you can tailor ad experiences to different groups. For example, showing more ads to non-spending players while limiting ads for paying players can help maintain a positive experience for both groups.

4. Ad Mediation: Using an ad mediation platform can help optimize revenue by allowing multiple ad networks to compete for ad placements in your game. This can increase fill rates and CPMs, leading to higher overall revenue.

5. Work with Multiple Partners: By choosing to work with multiple ad networks, developers can increase fill rate, see greater ad diversity, and ultimately increase revenue through competition between sources.

6. Ad Filters: Ensure that your app users want to watch the in-app video ads by knowing who your users are and what kinds of content they would be interested in. For example, if you have an app for food lovers, adjust your ad filter settings to show video ads of interest to food lovers.

7. A/B Testing: Continuously testing different ad formats, placements, and reward structures can help identify the most effective strategies. A/B testing allows developers to make data-driven decisions and optimize ad performance over time.

8. User Feedback: Regularly gathering and analyzing user feedback can provide valuable insights into how players feel about the ads in your game. This can help you make informed decisions about ad implementation and adjustments.

9. Removing Ads (Counterintuitive Strategy): Ads can be annoying for users, and developers know this. A simple yet innovative idea is to remove ads. However, users have to pay to get the ads removed. If they want an uninterrupted experience while playing or using the free game, they can pay to remove the ads. So, users who have complaints about the ads can remove them, and other users can continue to use the game with the ads.

Ad revenue is key for free-to-play mobile games. It ensures all players help the game's success. Using different ad types wisely can balance money-making and player happiness. Many successful games show this approach works well. Ad revenue keeps games free and fun for everyone.

Do you want to improve onboarding, engagement, retention, or monetization for your free-to-play game? Reach out to us at: coreloopsconsulting@gmail.com.