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 — especially if you’re publishing hyper-casual games.

Mobile monetization is definitely not just about in-app purchases anymore.

Ad revenue is increasingly important for mobile app publishers, thanks in part of video ads, the growth of in-app bidding, and the massive increase in e-commerce spend thanks to the pandemic. But accounting for ad revenue — and understanding where your ad whales come from — is 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.

IAPs are explicitly tied to an individual. Advertisements are generally calculated in bulk. Plus, for in-app purchases, you as an app publisher are the ultimate source of truth: you know what’s been bought. With ads, publishers and developers have to rely on networks and medication platforms. 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.

Unfortunately, it’s not as simple as multiplying ad impressions by eCPM (effective cost per thousand). What mobile publishers need is a way to automate the collection, normalization, and aggregation of ad revenue data across all your monetization partners.

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 overview, 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

We’ll also touch on why ad monetization will face additional challenges in Apple’s iOS 14.

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 starting doing ad-based monetization in 2019 versus 2018. Mobile users spent more in apps in 2020, so in-app purchases are growing too, but mobile ad spend jumped too.

The dollar figure? $240 billion in 2020.

This year in 2021, that’s projected to hit almost $300 billion.

The market is growing, fast. There’s a big reason for all those billions of ad dollars, and it all 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.

Mobile first accounted for a majority of digital ad spend in 2018 — crossing the 50% mark from 2017. And digital ad spend keeps growing. It’s projected to be up 18% in 2021, and most of that is on mobile.

So the gap that Mary Meeker saw five years ago is closing fast, thanks in part to the massive growth of ad tech. (If it’s not closed already!)

And that closing of the gap is putting additional dollars in mobile app publisher’s pockets.

Look: while few publishers are huge fans of building an over-monetized app with too many advertisements, consumers are fans too. And the fact is, 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.

(I still regret deleting Flappy Bird, although you can play for free online now.)

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, and — perhaps the most important of all now — video 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. In other words: if you don’t want to see an ad as a user, you don’t. If you want the gem or power-up or coins, you do.

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. (Apple’s relatively new App Clips is a good example of a non-reward scenario.)

And, of course, video is critical. Video ads like interstitials, pre-roll videos provide good monetization. Even the old-fashioned banner ad is still an example of a advertisement type that definitely has its place and use.

But rewarded video ads generate the most engagement — and revenue — especially in gaming.

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

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

If only it were that simple.

As Singular product manager Lisi Gardiner says, ad monetization isn’t easy.

“Which ads do you want to show? Which networks do you want to work with? What mediation platforms do you want to work with? When do you show an ad? What is the value you expect to get for showing that ad? Which countries are you optimizing?”

And then, once you’ve answered all those questions, you need to calculate ad revenue from multiple sources. You also want to get as granular as possible.

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.

(Note: all this gets even more complicated in iOS 14.)

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, among others like ApplovinMAX, Soomla, Facebook, and Admob. 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.

With iOS 14, of course, you’ll have less information. If you don’t ask for IDFA — or if you ask for it and don’t get it — you won’t have user-level trackability on where each of your users came from and behavioral targeting will get harder. Ad networks will have a harder time valuing your inventory, and you might see a decrease in fill rates. The result might be lower eCPMs.

However, Singular will still help you collect and calculate all your ad monetization revenue on an aggregate basis, even if you don’t have permission to get more granular.

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.

In iOS 14, per-user data changes, of course. However, Singular will still be able to help you understand overall ROI and ROAS based on cohort and campaign performance. You’ll still be able to know where your ad whales came from, and get insights on how to target more.

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.