Are developers finally beginning to warm to mobile ads?

Developers have always had an uneasy relationship with ads, on account of the potentially negative impact they can have on the player experience and retention. But could this frosty relationship finally be beginning to thaw?

Hands-up any developers who decided to get into game development to make money from ads? Anybody? That’s because fundamentally, ads and games come from different planets. On one side you’ve got developers who are all about making great games that players will love, whereas ads can disrupt the player experience and turn some players off.

As a result, developers have always had an uneasy relationship with ads. However, in Free-to-Play (F2P) games, where only 2-3% of players spend money, ads are a vital and increasingly important part of the monetization mix.

Keen to learn more about the experiences and attitudes of developers towards ads, we first ran our In-Game Advertising Study three years ago. We spoke to hundreds of publishers and developers and perhaps unsurprisingly, found a serious lack of confidence in how best to approach ads and a widespread fear about how ads might impact retention. However, from our most recent Study it seems that developers are beginning to warm to ads.

The tide is turning

Last year, the majority of developers (51%) still viewed ads as a ‘necessary evil’, but our 2017 study shows that the tide is beginning to turn. Most developers now (49%) view ads as an ‘important monetization opportunity’, with an increasing number (21% up from 11%) admitting that ads actually ‘enhance player progress’.

So what’s changed?

The short answer - rewarded video ads.  Rewarded video ads have surged in popularity to become the most frequently used ad format deployed within 58% of F2P games (up from 44%), ahead of video ads (38%) and banners (34%).

Unlike banners and interstitials, rewarded video ads are a win-win scenario. Developers can integrate the ads seamlessly within the game mechanics so that there’s much less of an impact on the player experience. For the players, rewarded video ads are an important way of progressing through the game without having to spend money. While those players who hate ads, don’t have to endure them.

It’s this symbiotic relationship which is giving developers a newfound confidence in their approach to ads, with the number of developers describing their ad strategies as ‘effective’ doubling since last year, while the number feeling ‘cautious’ and ‘unsure’ has decreased.  

Ad strategies are becoming more complex  

Another key shift evident in our latest study is that developers are now adopting more complex ad strategies and integrating an increasing number of ad networks and mediation partners, to ensure that fill rates are high and eCPMs are maximised.

For example, there has been a significant leap in the number of games which integrate six or more ad networks (17% of games up from 8% in 2016). In addition, the use of ad mediation tools has also increased, with developers selecting unbiased over biased mediation platforms.

The vast majority of F2P games now also use multiple ad formats to maximise revenue, while only 20% of core games and 7% of casual games now don't use ads.

It’s clear that developers are becoming more confident and beginning to adopt more complex ad strategies, so that the ads they do show earn the best possible return. However, when it comes to increasing ad frequency most gamer makers are still spooked.

Is over caution costing developers?

While it’s great that developers are now embracing ads with a new confidence, when it comes to total game revenues, ads still only account for around a third.  This figure hasn’t changed in three years, even though ad strategies have become more effective.

The reality is that ad revenue won’t really increase until developers start to show more ads per session, as currently the majority (40%) only serve one or less ads per session. When it comes to increasing ad frequency, player churn (26%) remains the main concern, alongside lower levels of player enjoyment (21%) and less player engagement (18%). There is also a concern that higher ad frequencies could lead to lower eCPMs (12%) and a drop in ad fill rate (7%).

The fact that so many developers are holding back on ad frequency is particularly curious when you consider that in F2P games, around 40-60% of players leave after just one session, while only 2-3% will go on to spend money in-game.
As a large percentage of players have no intention of spending more or returning to the game after their first session, why not monetise them more strongly through ads?

The question is, are developer’s frequency fears legitimate?  A study undertaken by the University of San Francisco, using deltaDNA data, found that ad frequency was not a contributory factor in players leaving. The study found that the significant factor was the in-game experience, which can be effected by poorly placed ads.

Therefore, it’s fear than data which is leading publishers and developers to adopt ad strategies which show fewer ads and ads later in the game.

Despite the complexity of the ad monetisation market, game makers are now more confident than ever in their approach to ads and how best to integrate them in ways which enhance, rather than detract from the player experience.

However, frequency fear is still widespread, reflected by the fact that ad revenues, as a percentage of total game revenues, haven’t changed.  However, over the next twelve months I would expect this to change, as the trend for publishers to adopt more sophisticated analytics tools which enable them to view the whole game economy continues.

As a result, developers will be able to see first-hand, the impact that increased ad frequency has on the player experience, retention and the game economy as a whole.  As this kind of insight becomes more widespread amongst publishers and developers, we will begin to see ad revenues increase and the frequency fear diminish.

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