What are strategies to maximize mobile ad revenue without cannibalizing IAPs?

Ad revenue is one of the most important sources of revenue for many app publishers. While ad monetization might not be a huge source of revenue for apps dependent on IAPs/subscriptions, it is always beneficial to get that additional revenue which comes in directly without any commission cuts.

App publishers who monetize mostly by IAPs are always worried about the counter effects of improving ad revenue. The general opinion is that rewarded videos increase the wallet balances and interstitials/banners negatively impact retention.

There are several case studies where it has been proven that ads don’t affect IAP and retention negatively if they are implemented logically. The key is to find that sweet spot without overdoing it and AB testing before rolling them out 100%.

How improving ad revenue helps in improving UA performance?

Before discussing how we can maximize the ad revenue, let's look at it in the context of user acquisition.

It's simple yet important. With the increase in ad LTV, overall LTV of the app improves. This helps in scaling UA by bidding higher and improving the ROAS. Having a robust system to measure ad LTV is a must for using them as inputs for scaling UA.

Both UA and ad monetization teams have to work together closely to ensure that the end result is positive. 

How to maximize ad revenue?

Ad revenue can be maximized by improving:

1. Engagement Rate (% of DAUs engaging with the ad)

2. Impressions Per Daily Engaged User (no.of ads seen by the engaged user per day).

Following are some ways to achieve these :

Improving the visibility of existing ad placements

This is a low effort-high impact change. Though some of the users might be engaging with the ads already, the ad placements might not be visible to most of the users. They might be hidden inside a screen which most of the users don’t visit often. Making the existing placements prominent in the UI helps in improving the engagement rate.

For e.g. some apps have an ad placement in the home screen.

New placements

In addition to the existing placements, there will be some opportunities within the app to introduce new ad placements. Start experimenting with them and rollout if the results are positive.

Monetizing non-paying users

This is a big one. Segment users into paying and non-paying. Start showing more ads and new ad placements to non-paying users without compromising in their user experience. They don’t mind watching ads and they are aware of the fact that publishers need to make money and there is nothing wrong in showing ads. This will work only if the ads are non-intrusive.

Playing with caps and rewards

Experiment with the reward values & frequency of rewarded video ads and impressions capping for interstitials. Identify the sweet spot and rollout globally.

Ad mediation

If there is no scope for improving ad revenue with in-game placements, then we can run experiments with different ad networks using ad mediation. Try out different waterfall settings and see which one yields more. Continue experimenting because ad networks keep updating their offerings.

Please note: Improvement in ad revenue may not always result in improvement in overall revenue. Don't roll out the above changes without experimenting and ensuring that they are not cannibalizing IAP.