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Mobile ads versus IAPs: It doesn’t have to be an either/or

Mobile Marketing - Member Content

Kim Grewal, senior publisher growth manager at AdColony, looks at why monetising your mobile games doesn't always mean you have to choose between advertising and in-app purchases

Kim Grewal AdColony

For casual mobile games, the kind you see people playing whilst they are in the dentist’s waiting room, advertising is not an afterthought – it is front and centre.

You would never go to your CEO or board to ‘make an argument’ to incorporate ads into your monetisation strategy because it is the strategy. You make a game, offer it for free, update it frequently, and work with an ad partner to run ads in it. No freemium model and no in-app purchases (IAPs). You might create a ‘no ads’ paid option, but that’s pretty much it.

In other cases, IAP is the entire strategy. You expect your app to monetise through those payments - therefore anything else is a distraction from that focus. For instance, one publisher we know recently removed ads for all new users because it represented such a small percentage (less than five per cent) of revenue that it was no longer worth it. To me, that’s simply a testament of that game’s ability to monetise solely through IAPs and not a problem with ads in general.

Some genres lend themselves to certain forms of monetisation.

For all mobile app makers, the decision of whether or not to employ advertising is strategic. One must go back to the basics: genre, core loop, and have an honest conversation about what makes sense for the game itself. Think about how you want to implement different strategies, then work tactically. How can you drive meaningful business without letting it overwhelm your company? Here is what I’ve learned from the last few years in this industry working with multiple mobile publishers:

If you execute well, you have nothing to worry about. Until a few years ago, there were far more concerns about incorporating mobile ads into apps. Many developers thought users would react negatively. However, today’s consumers are not only accustomed to ads, but they have also come to expect them in free apps, just as they accept ads during free video content.

Before, there were concerns over technology. Will ads cause crashes? Today, with the sophistication, stability, and improved processes to advertising SDKs, that problem is extremely rare.

Additionally, if you are using rewarded video, users are encouraged to stay in-app after watching ads and earn their rewards to continue playing - instead of a monetary transaction, you exchange a user’s time in return for something of value in the game.

Your mobile advertising program will pay for itself. Publishers also need to consider the number of resources advertising requires. If you’re a small company, the thought of dedicating a full head to your mobile ad monetisation program can be daunting. It takes away from other areas you could be focusing on. However, done correctly, your ad approach will pay for itself. Moreover, you can divert that revenue to pay for innovation and creative development. Funnel ad revenue into your business to create more content. If you can sell that content through IAPs, you have removed the risk altogether.

Recent studies also demonstrate that ads actually improve player retention and instead of seeing a negative impact on user experience, you see a positive influence on user retention.

It doesn’t have to be complicated. There is a trend these days to ‘KonMari’ our lives and make things less complicated. That’s why new industry-led projects such as advanced bidding are so appealing; you don’t have to manually manage waterfall positions or direct deals – beneficially reducing the operational aspect.  

It’s proven. Younger and casual users are less likely to pay for IAPs in casual titles compared to users in strategy apps for example, who frequently compete in in-game events. Mobile advertising is fully ensconced within the mobile app industry, so much so that many apps rely on it completely for all revenue. Mobile ads are completely appropriate for the vast majority of apps today.

You get out what you put in. You do have to pay attention and continually invest in the space – the money isn’t going to just pour in. Creative formats and strategies are changing frequently. Regularly check for SDK updates, report bug issues and communicate with the partners you work with to offer the best and seamless user experience. Allow yourself some flexibility and work with networks who dive deep into your mobile ad strategy to maximise your revenue.

Completely relying on IAPs isn’t diverse enough to truly work for most apps. They can be hard to scale and you can be reliant on whales. Instead, a hybrid approach is almost always more successful and each method can complement the other. There are also options available so ads don’t have to be served to every user. Don’t be afraid to gather data through A/B testing and determine which users prefer IAPs and those that are more receptive to ads. Furthermore, ads can give you valuable insight into engagement and targeting what your users find valuable and popular. That data can then be analysed and fed into retention models to optimise player commitments. Non-paying users monetise with ads and you gain more data. It’s a win-win for you and your users.

Find what’s right for your app, be diligent and your investment will pay off.