The Definitive

Guide to Ad
Monetization

How to design and make the most out of your

ad monetization strategy.
Table of contents
Making the most out of your ad monetization 3

Monetizing with user-initiated ads 4

Monetizing with system-initiated ads 9

How and why to A/B test your monetization strategy 12

Segmenting your user base 14

Wrapping up 15
3 The Definitive Guide to Ad Monetization | Making the most out of your ad monetization

Making the most out of

your ad monetization
Now more than ever before, mobile game developers - After reading this eBook, you’ll have concrete tips and
from hyper-casual and match-3 to strategy and RPG - actionable insights on how to best implement ads within
are using ads to monetize their users. your app. We’ll explore both user-initiated and
system-initiated ads, discuss the benefits of A/B testing
In fact, App Annie predicts that in 2019, 60% more apps your monetization strategy, and conclude with a brief
will monetize their games using ads, and that by 2020, overview on how to most effectively segment your users.
ad monetization revenue will overtake in-app purchase
revenue. Today, engaging ad units can be seamlessly Here we go.
integrated into the core loop of many games, meaning
game developers no longer have to choose between
maximizing revenue and improving player experience.
4 The Definitive Guide to Ad Monetization | Monetizing with user initiated ads

Monetizing with user

initiated ads
Start off your ad monetization strategy by implementing Offerwalls function like a mini-store inside of your
user-initiated ads. User-initiated ads tend to go game. They list multiple offers that users can complete
hand-in-hand with the narrative of your game and in exchange for receiving an in-app reward.
thinking about how to implement them should be
approached early in the game design process. Positives and negatives of user initiated
ads
What are user-initiated ads?
User initiated ads drive incremental revenue, often
They’re opt-in ad units which are only displayed to users
commanding high eCPMs because of the high quality of
if they’ve explicitly chosen to view them, and are always
the ad experience. But the real magic of these ads is that
accompanied by an in-app reward, such as in-app
they can actually improve user experience, increase both
currency, premium content, second chances, and more.
retention and session length, and even at times convert
The two main types of user-initiated ads are rewarded
your non-paying users into paying users. In fact, users
video ads and offerwall.
love them so much that we often hear that our partners
Rewarded video ads offer users a clear value receive complaints when they remove user-initiated ad
exchange - users opt-in to watch a video ad in exchange units.
for receiving in-app rewards.
5 The Definitive Guide to Ad Monetization | Monetizing with user initiated ads

As you can see in the graphs, user initiated ads increase D3 retention vs. impressions/user/day
ARPDAU and retention, two of many factors that make
up LTV. That’s because you’re driving incremental
revenue with each impression, while your users have an
easy, inexpensive way to progress in the game.
Essentially, by offering a free alternative to in-app
purchases, user-initiated ads let non-paying users
continue playing without needing to pay, ultimately
boosting retention.

The only downside is that, if not implemented

correctly, user-initiated ads may cannibalize IAPs.
More on that later.
ARPDAU vs. impressions/user/day
Some game devs are afraid that placing offerwall in
their games will decrease retention as the offers
require a larger time commitment in a different
game. However, this is unlikely, as the reward that
your users receive for completing these offers is so
significant to their game experience that they have
high motivation to come back to claim (and take
advantage of) their prize. In the A/B tests we’ve
conducted, we haven’t seen a drop in retention due to
the implementation of offerwall - in fact, in most
cases we’ve seen an increase.
ARPU vs. impressions/user/day

Read on for tips on user-initiated ad placements, how

to select the right reward for your users, benchmarks,
and best practices for the overall ad experience.
6 The Definitive Guide to Ad Monetization | Monetizing with user initiated ads

Placing user initiated ads limited time. You can run pop-ups for the time that
your promotion is going on to educate users on the
Where and when to place any ad unit is crucial to offerwall, remind them about the campaign, and
balancing a positive user experience for your players encourage them to complete as many offers as
and an effective monetization strategy for your possible, further increasing your ad revenue.
business. Having said this, because user-initiated ads
are opt-in, the focus should be less about not harming Rewarded video
user experience and more about making sure that you Rewarded video ads can (and should) be placed in many
are implementing these ads so they function like an locations within your game. Why? Two reasons. First,
integral part of your in-app economy. In many ways, rewarded video requires far less of a time commitment
rewarded videos are more of a product feature than from users than an offer available through the offerwall.
an ad, and in order to maximise their potential you Second, each user is different, and your placements
need to treat them as such. For example, should reflect that diversity. While some users may
user-initiated ad placement is important for making prefer watching a video on their home screen to get more
sure that in-app purchases aren’t cannibalized and coins, others are more likely to engage with an ad after a
that users are being offered in-app content or rewards level fail in order to continue playing.
when they are most likely to need them.
Like the offerwall, make sure that your rewarded videos
are both visible and easily accessible. Your whole
Offerwall
placement strategy should center around your game
When it comes to offerwall, the traffic driver is a key
loop. For example, consider placing a rewarded video
component to success, which is usually displayed as a
after a level fail, in which you can prompt your users to
call-to-action button within your game. We
watch an ad in exchange for a second try at a level in
recommend placing the traffic driver in two different
your game. When you give your players more
locations within your game and that they’re visible to
opportunities to progress within the game, you’re
100% of your users, such as home screen and your
improving retention since they’ve received another shot
in-app store.
at completing the level.

In order to boost your ad revenue with offerwall,

consider running a double-credit promotion which
gives your users double the offerwall rewards for a

Did you know?

Thanks to the double credit offerwall promotion, Gamebasics
tripled their ad revenue. Read the case study here.
7 The Definitive Guide to Ad Monetization | Monetizing with user initiated ads

There are no disadvantages to being aggressive with Base your rewards on segments or game
rewarded video ads, so go forth and add as many progress
placements as you’d like. Each user is different, shouldn’t their rewards reflect
their diversity?
Setting the right reward amount
Personalize your rewards by utilizing user segmentation.
Next it’s time to choose the right rewards to give your For example, you can give your most loyal users rewards
users in exchange for interacting with user-initiated that are less valuable because they’re already hooked,
ads. but for users who play less frequently consider giving
Make your rewards different than IAPs but them bigger rewards to tease them into playing longer.
still valuable You can also use segments to nudge non-paying users to
We mentioned earlier that if not implemented make IAPs. By exposing non-payers to exclusive in-app
correctly, rewarded ads can cannibalize IAPs. To get experiences in exchange for opting into a user-initiated
around this, make sure the reward users receive after ad, you increase the likelihood of eventually being able to
viewing a rewarded video is different than the rewards convince those users that in-game content is worth
listed in your IAP store, but still worth watching a video purchasing. One such way to do this is to give
for. This way, your paying users will continue to pay for non-paying users limited IAP currency every few weeks
IAPs, and your non-paying users will have a reason to when they engage with your rewarded video ads.
engage with reward video ads. However, make sure that you cap the reward in order for
Note that in some cases it’s alright that user-initiated them to be pushed into making IAPs down the line.
ads cannibalize your IAPs, as long as your LTV is Skip to section 4 to learn more about utilizing
greater than the cannibalization of your IAPs. segmentation.
Remember that the value of your first rewarded video
impression is significantly higher than, say, the fifth
impression. Capping the number of impressions can
help ensure that high-value impressions actually justify
the cannibalization.

Pro tip
Not Doppler almost doubled their engagement rate by implementing rewarded
video. Read more on how they did it.
8 The Definitive Guide to Ad Monetization | Monetizing with user initiated ads

Adapt rewards to in-game progress The secret here is to find the balance between
Your rewards should correspond with the position your maximizing your offerwall revenue and minimizing
players have reached within the game. On Level 1 they your IAP cannibalization in order to improve your LTV.
could, for example, get 2 coins for watching a video. And how do you do this? A/B testing, of course.
However, once they’ve reached Level 20, they should
get 40 coins. In other words, the reward should reflect Crafting a better ad experience
their progress within the game. After all, by Level 20, Having a countdown timer by your rewarded video
40 coins aren’t worth much. traffic driver can help generate more impressions.
Balance the exchange rate Naturally, more impressions will lead to more clicks,
When setting up your offerwall, be sure to pay special which in turn leads to more revenue. Users who want to
attention to the exchange rate, or in other words, how engage with rewarded video will do so either way, so
many virtual items your users receive for one dollar of your goal should be to try and convince those users who
revenue you generate. As a rule, the higher your are on the fence. Putting a timer that makes it clear that
exchange rate, the higher your UR, ER, and completion there is a limited period to engage with a rewarded
rate will be. video can push hesitant users to make a quick decision
about engaging with rewarded video.
Our recommendation is to offer at least the same
exchange rate you offer in your store. For example, if a Additionally, you can improve the ad experience by
user pays $1 for 3 gems in your store, make it the same creating an explanation page that outlines exactly what
on your offerwall. You can even offer more gems for $1 your users will receive in exchange for completing an
on your offerwall, as unlike the app stores, the offerwall offer or watching a rewarded video. If users understand
doesn’t take a 30% cut - leaving you with more revenue. in plain words what’s in it for them, they’ll be more
likely to engage and complete offers, boosting revenue
for you.

Listen up!
Jane Anderson, Head of Ad Monetization at ZeptoLab shares insights on
how to successfully balance user experience with ad monetization. Listen to
the podcast or skim highlights.
9 The Definitive Guide to Ad Monetization | Monetizing with system initiated ads

Monetizing with
system-initiated ads
Now that you’ve integrated user-initiated ads into your Interstitials are full-screen ad units which offer
game mechanics, it’s time to consider how and when users the option to exit or skip, and are designed to
you’ll place system-initiated ads. ensure minimal disruption to the user experience.
In this section, we will cover everything you need to Today, interstitial ad units can hold many ad types,
know about system-initiated ads - from ad placements such as static images, video ads, and even playable
and benchmarks, to when and how exactly you should ads.
implement them. You’ll learn how to maximize revenue
without compromising user experience. Banners are rectangular ad units that can remain in
place for the duration of time that a user spends
What are system-initiated ads? within a game. They are typically placed on the
bottom or top half of the app screen. The
System-initiated ads don’t require users to opt-in in
advertisements within the banner container refresh
order to view them. Rather, the developer decides when
automatically after a certain period of time. Like
to place them and how often users engage with them.
interstitial ads, they can be either static or animated.
System-initiated ads are valuable for helping you
monetize those users who won’t ever engage with opt-in
ads, and are useful for games that don’t have an evolved
in-app economy, like hyper-casual games. The two
types of system-initiated ads are interstitial ads and
banner ads.
10 The Definitive Guide to Ad Monetization | Monetizing with system initiated ads

Positives and negatives of

system-initiated ads

Developers are often afraid that system initiated ads D3 retention vs. impressions/user/day

may negatively impact user experience, retention, and

session length. Fortunately there are many ways to
mitigate these concerns. Consider sticking to natural
pauses in gameplay, capping the frequency of when you
serve ads, segmenting your users, and A/B testing your
placements. Unfamiliar with these terms? Don’t worry,
we will discuss all of these topics in length throughout
the eBook.

The biggest advantage system-initiated ads have for

game developers is their ability to drive incremental
revenue from all or most of their users. That’s because
insterstials and banner ads ensure that you’re ARPDAU vs. impressions/user/day

monetizing all of your users - not just those who

opt-into a rewarded video or offerwall.

Not to mention, the more system-initiated placements

you’ve integrated into your game, the higher your
engagement rate and usage rate will be. (Not sure what
these terms are? Skip to the benchmarks section for a
definition.) Why? You’re addressing the maximum
amount of user segments possible.

However, it’s important to keep in mind although your

engagement rate and usage rate will rise, eventually
ARPU vs. impressions/user/day
your retention may drop due to user frustration. That’s
why, as you can see from the ARPU graph, it is crucial
that you A/B test your interstitial placements in order
to find the sweet spot between revenue and number of
impressions. Once you’ve found this sweet spot, you’ll
be able to maximize LTV without harming user
experience.
11 The Definitive Guide to Ad Monetization | Monetizing with system initiated ads

Placing system-initiated ads When it comes to interstitial ads, there is no definitive

number of how many you should show to your users. In
Breaks - or natural stopping points - are a great time for order to find the ideal number, ensure that you A/B test
serving interstitials, as users aren’t immersed in game various intervals and number of impressions in order to
play, therefore they won’t get frustrated with an ad determine the perfect strategy.
interrupting their game. It’s best to show interstitial ads
at the end of a timed segment or level, at the Crafting the best ad experience
completion of each single game, or with each level
increase. There are many factors that can contribute to a positive
Banner placement should not be next to interactive system-initiated ad experience. For interstitial ads,
buttons in order to ensure that users don’t accidentally game developers have the option of choosing the
click on the ads. Fat finger syndrome is a real thing, so amount of seconds before the X-button appears.
avoid placing banners in areas where there is a lot of Sometimes, system-initiated ads could result in a drop
user interaction. in retention due to the fact that the user doesn’t choose
whether or not they want to engage with them.
Pacing and capping system-initiated However, giving your users the option to skip through
ads the ad this will ensure that your retention isn’t lowered.

Additionally, you can choose whether your interstitial

With interstitials, pacing and capping ensure that your
ads should display static images, video, or even
users don’t experience ad fatigue. More importantly,
interactive formats. While some people assume that
you want to make sure that you don’t end up disturbing
video ads are far more engaging than static ads, this
your users with too many ads that detract from the
might not always be the case. It is crucial to A/B test
overall app experience. Showing multiple interstitial
each format to determine which one leads to higher
ads in a short period of time will create a poor user
engagement.
experience that will result in lower retention, fewer
impressions, and the possibility of bad reviews in the
app store.

Finding the sweet spot of how many ads to show your

users and the interval of time between those ads will
ensure you preserve a good user experience, as well as
increased receptiveness to the ads you’re serving.

Did you know?

ironSource interstitial ads consistently impress publishers with the highest
eCPMs and fill rates in the industry.
Learn how ironSource's interstitial ads significantly increased Madbox's
revenue.
12 The Definitive Guide to Ad Monetization | How and why to A/B test your monetization strategy

How and why to A/B test

your monetization strategy
Now that your system-initiated and user-initiated ads The A/B testing tools on today’s market
are in place, the time has come to discuss the best
practices for optimizing your monetization strategy. There are three primary methods by which app
The best way to discover which strategy works best is to developers can A/B test their monetization strategy.
A/B test everything.
The first method is to release a change to all of your
Why A/B testing monetization users in one go and see if internal metrics were
strategies is key impacted. However, the inability to test the change
against a true control group means that more often
A/B testing monetization strategies is crucial, since it than not the results are unreliable and speculative.
allows you to discover the sought after “sweet spot”
we’ve been talking about throughout this eBook - the The second option is to run a test through two different
perfect balance between user experience and maximum builds, essentially creating two updates to upload to the
revenue. app stores, then segmenting which users would receive
which update, waiting for each user to install the
When game devs and monetization managers A/B test update, and then finally wait for the results of their
their monetization strategies, they’re able to see how tests to come back. This whole process is time
users are reacting to different ad implementations. consuming, requires extensive developer resources,
Therefore, conducting these tests will help you iterate and isn’t realistic for most game developers.
and optimize your ad monetization based on
comparative data.
13 The Definitive Guide to Ad Monetization | How and why to A/B test your monetization strategy

The third option is to utilize a third-party tool, which A/B testing frequency and pacing is important as it
automatically allocates specific traffic to each group in helps reduce ad fatigue and ensures maximum revenue
real-time, letting developers experiment without without risking user churn.
exposing their whole audience to the change.
The frequency capping feature allows publishers to
For example, with the ironSource A/B testing tool, control the number of times an individual user sees an
which is available on the ironSource mediation ad within a session, while the pacing feature allows
platform, you can test just about everything - from them to manage the spacing between each ad
rolling out new ad units and making adjustments to impression.
placement level rewards, to changing capping and
pacing settings. You’ll save precious developer While it’s important to A/B test frequency and pacing
resources, be able to test with far less risk, and be given on all ad units, it’s especially important to test them on
the right metrics to make data-driven decisions that interstitials as they’re system-initiated, and the chances
will increase revenue and retention. Learn more about of users getting frustrated is higher. Remember the
the ironSource A/B testing tool here. system-initiated LTV graph which peaks at a certain
impression? Your goal here is to find which frequency
Here are some tests to try out and pacing settings will give you the highest peak and
no drop.
1- Introduce a new ad unit
A strong monetization strategy utilizes a healthy mix of 3- Experiment with ad content
ad units that combines, for example, user-initiated ad One of the biggest questions in the ad monetization
units like rewarded video with system-initiated ad units space today is whether or not game developers should
like interstitials. To find the perfect mix, we suggest show their competitor’s ads. But Jarkko Rajamaki, VP
adding a new ad unit to your current strategy to see if Advertising at Rovio explained to us that after
the addition improves KPIs. conducting a series of tests, Rovio discovered that users
who install competing games actually have the highest
The only way to do this is by testing one ad unit at a retention of all their users. Want to learn more? Click
time and tracking results. For example, you can here to watch his presentation from Gamefest 2018.
introduce an offerwall to Group A, and leave your
current strategy for Group B. What can you expect to Try this same test out yourself. You’ll quickly discover
see? In an ideal world, non-paying users will convert that showing competitor ads can have a positive impact
into paying users - and not the other way around. Those on revenue without necessarily damaging the retention
who already make IAPs will continue to do so, but when of users. Why? If your users like your game, chances are
non-paying users are exposed to the benefits that they’ll love your competitors’ games as well. And the
paying users receive, over the long term they’ll be more better these competitor ads perform (the more users
inclined to make IAPs. click to install), the higher your eCPM. Don’t worry
about losing these users to your competitors, as loyal
2- Test different frequencies and pacing users will almost always come back to your game.
As we covered earlier, exposing users to a high
frequency of system-initiated ads ultimately leads to a
drop in CTR and sometimes retention.
14 The Definitive Guide to Ad Monetization | Segmenting your user base

Segmenting your user

base
User segmentation is the process of dividing up your But rather than just taking an all or nothing approach,
user base into groups based on their behavior and consider showing less ads to users who spend more.
demographics - such as age, country, gender, paying or Further segment your paying users based on the
non-paying, app version, level reached, etc. As each and amount of revenue they bring to your game. Typically,
every one of your users engages with your game we break down paying users into whales, dolphins, and
differently, you should tailor your ad monetization minnows (and these categories differ based on game
strategy accordingly. and genre). Show each of these segments a different
amount of ads based on the amount of revenue they’re
With user segmentation, you can provide users with a already generating in your game. For example, you can
customized ad experience designed to balance revenue show your IAP whales 0 ads, your IAP dolphins 1 ad per
and user experience for that particular group. Serving session, and so on.
ads to fit a specific audience and better understand the
behavior of certain groups of users will help you Engaged players
improve ad implementation, and improve user Engaged users are those who are actively engaging with
experience. your ads. Be sure to offer these players more rewarded
ads. Why? One of the most beneficial features of
Understanding your players rewarded ads is their ability to convert non-paying
users into paying users. Once your users are exposed to
the benefits that are only available to paying users, the
Paying players
chances of them converting are higher. They’ll be more
Paying players are those who purchase IAPs. Be aware
invested in your game, thus driving both higher
of the amount of ads you serve these users. As we
retention and revenue.
mentioned before, you don’t want to aggravate them
unnecessarily.
15 The Definitive Guide to Ad Monetization | Segmenting your user base

Zero value players There are many ways to segment users by country.
Zero value users are those who don’t bring in any IAP For example, you can offer users from tier-1 countries
revenue nor opt-in to user initiated ads. Use a double rewards every time they complete an offer.
prediction tool to determine early on which users are Because they have more disposable income, they’re
unlikely to ever engage with ads or pay for IAPs. Once more likely to purchase IAPs once they’ve gotten a
you’ve segmented this group, show them taste of the premium content.
system-initiated ads like interstitials and banners, as
these ad units credited for monetizing 100% of users, If your IAP revenue is significantly low in tier-2 and
not just those who opt-into rewarded videos. tier-3 countries, try replacing your in-game store with
an offerwall. There’s no chance of IAP cannibalization
Location, location, location since there isn’t much purchasing to begin with.
The monetization habits of users vary by country -
players in the US behave differently than players in
APAC. As advertisers are willing to pay more to have
their ads served to tier-1 countries, eCPMs in those
countries tend to be higher.

Wrapping up
Designing the optimal ad experience - maximum
revenue for you and a positive experience for you users
- will ensure a positive impact on all aspects of your
business. Once you’ve discovered this sought after
sweet spot, you’ll end up forming a virtuous cycle of
growth, as an effective ad monetization strategy will
lead to positive user reviews, more downloads of your
game, and obviously more revenue in your pocket.
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