Ad revenue is key to mobile monetization (but there’s a catch)

Intro

Is ad revenue 30% of your mobile income? Perhaps 50%? Or even 100%? Whichever the case, advertising revenue is increasingly important to mobile publishers — at least those that like money.

It’s definitely not just about in-app purchases anymore.

But accounting for it — and understanding where your ad whales come from — that’s one of the core challenges for growth-focused developers, publishers, and all who focus on mobile marketing. Ad revenue isn’t like in-app purchases, after all, which are explicitly tied to an individual. Advertisements are generally calculated in bulk.

So it’s much harder to know how much a particular user is worth, for instance. Or, whether you’re ROI-positive on a recent cohort of acquired users. Especially when you’re acquiring users from multiple sources, and collecting mobile ad revenue from multiple partners.

In other words, it’s not as simple as multiplying ad impressions by eCPM (effective cost per thousand).

Here’s an overview of the state of mobile app advertising revenue, in context of the other revenue most publishers are also generating. In this summary, we’ll talk about:

  • Why ad revenue is growing so fast
  • What kinds of mobile monetization are working best
  • How to calculate ad revenue (there’s a trick)
  • You need a complete picture of your ad revenue
  • Total revenue: You also need to combine ad revenue with in-app purchase revenue
  • Profitability per user: Getting a complete picture of your ROI and ROAS
  • Oh, and you save a ton of time
  • Next steps: making it happen

Why ad revenue is growing so fast

Anyone playing mobile games knows instinctively: ad-based app monetization is up significantly over the past year or two. An App Annie study confirmed it: 60% more apps are doing ad-based monetization in 2019 over 2019.

The dollar figure? $120 billion by next year.

The market is growing, fast. There’s a big reason for all those billions of ad dollars, and it goes back to a Mary Meeker report in 2016 about a gap in mobile ad spending:

ad revenue gap
Screenshot from Mary Meeker’s report: the ad revenue gap.

Very simply, there was a gap between people’s media consumption time and brands’ ad spend … a $22 billion gap. Ad buyers, essentially, were lagging the shift in user time and attention and over-allocating to traditional media channels like TV, and under-allocating to the mobile platform. Over the past few years, however, brands and adtech vendors have been rushing to fill that gap. That’s been challenging, of course, because mobile consumption patterns have only increased since then.

But mobile accounted for 62% of digital ad spend in 2018, up from 50% in 2017, even as ad blocking grew.

So the gap is closing fast, thanks in part to the massive growth of ad tech, and the closing of the gap is putting additional dollars in mobile app publisher’s pockets.

And while few are huge fans of using an over-monetized app with too many advertisements, consumers are fans too. They’d much rather pay with their attention than with their money, even if they complain on social media. All of this is driving ad impressions up, fueling the creation of more ad inventory, and boosting total revenue for mobile publishers. It’s also fueling innovation in ad formats and ad tech

What kinds of mobile monetization are working best?

Mobile monetization has come a long way since Flappy Bird.

Remember Flappy Bird? The super-simple hyper-casual game that asked users to do just one thing: tap the screen. If you tapped it just right, Flappy Bird didn’t hit the pipes on top, or the pipes on the bottom of the screen, and you stayed alive.

Crazy simple, but maddeningly hard.

Flappy bird
You can play Flappy Bird on the web now too …

Flappy Bird didn’t have any in-app purchases. Instead, it was monetized by a simple banner ad at the top or bottom of the screen. Most of the taps on it were probably mistaken clicks, and while it didn’t monetize well, it was so virally successful with so many active users that the solo developer, Dong Nguyen, was earning $50,000 a day at one point.

There are much better options for generating app ad revenue now, and a multiplicity of ad formats.

Of course there are still banner ads, offer walls, and interstitial ads. But publishers are generating more and more revenue now from rewarded ads and playable ads. In fact, 75% of mobile publishers rated rewarded video ads as the most effective monetization method for mobile apps, according to an AdColony survey cited by eMarketer. Almost 90% of them think that rewarded ads are the best user experience too, since they are entirely voluntary.

Content matters: Native ads work well in feed-based apps, like social media or networking apps. Playable ads are big, and can be used in rewarded scenarios. And video is critical. Video ads like interstitials, pre-roll videos provide good monetization. And yes, even the old-fashioned banner ad are all still examples of advertisements that definitely have their places and uses.

But rewarded ads generate the most engagement — and revenue — especially in gamin

How to calculate ad revenue (there’s a trick)

It seems pretty simple. If you want to calculate ad revenue, add up the checks.

Unfortunately, it’s not that simple.

As an app publisher, gross income totals from any source, including IAPs, in app advertising revenue, or any other revenue source are great, but they’re insufficient. In order to increase profitability, you don’t just want to know how much you’re making in total, you want to know how much you are making per user. And then you want to know which users are viewing the most ads.

That’s challenging, because an ad platform doesn’t typically provide a lot of transparency on who is viewing or engaging with an ad. An advertising platform typically gives you a check, and that’s it. As an app developer, then, you know you’re showing ads, and you know some people are viewing them, but you don’t know a lot about which ads they’re seeing and whether all your users saw two ads, or 10% of your users saw 100 ads.

All you have is sessions … a very blunt instrument for understanding how your apps users are engaging with ads. And that’s a problem if you’re looking to optimize for both user experience and app advertising revenue

You need a complete picture of your ad revenue

Fortunately, Singular can help.

Most likely your app ad revenue depends on multiple sources as you work to fill all your ad inventory slots. Singular can collect your average revenue per session data on a cohort-level basis so you know what’s happening for each new cohort of users you onboard. That includes fairly complicated situations where you’re doing multiple ad revenue events.

In addition, Singular connects with Ironsource’s mediation platform. That gives you accurate user-level data on all ad revenue generated per ad network, assuming you’re using IronSource. Essentially, you move from estimation to complete, accurate data.

But that’s not all.

Singular also connects with MoPub for impression-level revenue data. We get the data for MoPub revenue-generation events, and assign it to user cohorts. And finally, we also connect to Soomla, an ad monetization calculation service, for all mobile ad revenue and app ads revenue.

That’s complete coverage, no matter what ad networks or mobile monetization partners you’re using.

Total revenue: You also need to combine ad revenue with in-app purchase revenue

But it’s not enough to have all your ad revenue in one place. You need to put all your revenue in one place with Singular.

Both revenue teams and user acquisition teams need to have a full and complete view of all monetization. A single source of truth for revenue — ad revenue and IAP revenue and any other kind of revenue — is critical so that all teams know what’s going on.

If you don’t have that single source of truth, you don’t have a complete picture of your return on investment (ROI) and return on ad spend (ROAS). And that’s a problem for your user acquisition teams. UA professionals need to know how profitable the users that they are acquiring are in order to make smart decisions about future ad spend and budget allocation.

Profitability per user: Getting a complete picture of your ROI and ROAS

Typically, user acquisition teams do not have easy access to ad revenue. At a time when ad revenue is growing fast and is increasingly a major factor in overall app revenue, that’s a problem.

Without ad revenue, they don’t have a good sense of profitability per user: the cost to acquire a user or cohort of users versus the revenue that user or cohort has driven.

Just as bad, the user acquisition team doesn’t get the full picture on which ad networks are successful. Media partners that they assumed weren’t working because the IAP revenue didn’t add up might actually be really good because the ad revenue more than compensates. Those video ads and rewarded ads add up fast!

With total revenue visibility, ad campaigns that don’t look profitable based on prior data might actually be very worthwhile when you add in app advertising revenue

Oh, and you save a ton of time

Complete visibility into total app monetization is a great thing. Even better is getting it without tens of hours spent in Excel or Tableau or your favorite data analysis package.

Frankly, if you’re doing this manually in order to make smarter decisions, you’ll save easily a couple hours a day. That’s probably what you’re spending on just one network daily to do all the math. That’s two hours more to spend on creative, on campaign optimization … or, for some, on social media.

(We’re kidding. We know your single focus is monetizing users.)

With Singular’s analytics, all that manual work is automatic.

And since time is money, you’re not just getting smarter and creating a better monetization model, you’re using our tool to maximize the value of your ad impressions

Next steps: making it happen

If you’re ready to get a complete picture of your total revenue, including all sources of app advertising revenue as well as IAPs and any other revenue sources you might have, now’s the time to talk to Singular.

Not only can you get a complete picture of the revenue side, you’ll see exactly how it lines up, cohort by cohort, with your cost side … for every user acquisition partner.

Three things you can do to get started: