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Gamers: Here's How You Can Optimize In-App Advertising Strategies

While many industries are struggling to monetize from in-app advertising, gaming apps are in a unique position to fully exploit this valuable revenue opportunity. Here are some tips for doing so.

For the app industry at large, news regarding the revenue-generating potential of in-app ads is a mixed bag. On the one hand, in-app advertising represents the fastest growing segment of advertising, digital and offline combined. On the other hand, consumers are growing frustrated with too many intrusive ads, so much so that one in five mobile devices worldwide now has an ad blocker deployed, according to PageFair. For the first time, PageFair found that ad blocking is now possible in apps.

Gaming apps, however, are in a unique situation in that they are traditionally very strong in-app advertisers. According to industry research into click-through rates (CTRs), gaming apps are clearly the best category for in-app advertising performance, likely the result of highly engaged users. From this position of strength, how can gaming apps further maximize their in-app advertising strategies?

Learn from the mobile web’s past mistakes. Much of the backlash against mobile advertising has been the result of poor practices on the mobile web. As mobile web advertising has exploded, it has lacked checks and balances, resulting in avalanche of intrusive, untargeted ads – which have the equally negative impact of slowing down web pages and degrading the user experience.

Gamers have an opportunity to learn from these past mistakes. They should focus on delivering exactly the types of ad formats users prefer (namely video) and targeting them precisely when these ads are apt to be the most gratifying. For example, videos (offering tokens or tips to help a user advance through a game, in return for the ad view) can be displayed right when a user is stuck. In this way, video ads can be perceived as an additive, helpful part of the game. In contrast to interstitials and banners, we have never seen complaints in the app store regarding a gaming app having too many video ads.

Gaming apps that display in-app ads (of all types) have to always keep on eye on maintaining a critical balance between ad revenues and a slick, fast user experience. This should be a key criteria as they evaluate mediation services and ad networks.

Focus on the right metrics: This is particularly important for smaller gaming apps, as they try to compete with bigger players. The reality is that only a small amount of apps enjoy a high-level of ongoing user retention and engagement. 40/20/10 percent retention (after 1 day, 7 days and 30 days respectively) is considered a benchmark for decent apps.

In this context, eCPM is a good metric for conveying the quality of impressions and their relative cost, but it falls short on conveying the quantity. In addition to eCPM, gaming apps can relay the retention and engagement of their audience through metrics like average revenue per daily active user (ARPDAU) or life-time value (LTV). ARPDAU communicates the level of user engagement; the higher the ARPDAU, the better quality/more engaged the audience and the less intrusive ads are.  Figures like ARPDAU/LTV can be especially helpful to smaller games as they compete with larger ones. While their sheer audience numbers might be smaller, but their audience much more micro-targeted.  

Placement, timing and other considerations: Ad placement is especially important in gaming apps, because nothing annoys users more than accidental clicks or unintended redirects. In the case of full screen ads (interstitials or videos), these should never interrupt gameplay, so they should not be displayed midgame.
 For ads that are visible midgame (banners or native ads), these should be placed as far away from controls as possible. It can also be a good idea to display ads at certain junctures in the game, like when a player has completed a level. Gaming apps also need to be extremely judicious when deciding the ideal period between consecutive ad impressions. Too many ads, displayed in too short a period of time, may scare users away.

Finally, gaming apps should have a mechanism to segment users by paying versus non-paying users, and adopt different monetization approaches for each audience segment. These segmentation options can help  monetization a great deal, when implemented correctly. The fact is, most users do not like paying for apps (despite the nominal cost of most apps, around $1), or making purchases in apps. It is often advisable to leave the “whales” - or paying game users - alone. These are often highly engaged users, and excessively displaying ads is apt to do more harm  (potentially annoying and alienating them) than good (eliciting more money). Gaming apps should focus targeted ads towards non-paying users, where there is the most benefit to be gained. One particularly interesting strategy involves rewarding ad video views with an opportunity to sample a paid game feature, for free. This enables gaming app publishers to better monetize their non-paying user base (through ads), while also giving these users a chance to experiment with paid features, with the goal of ultimately converting them to paying users.

In summary, these days it’s hard to avoid discouraging news in the online advertising industry, particularly mobile advertising. However, the highly engaged nature of their audience gives gaming apps a clear advantage. By heeding lessons from the mobile web; emphasizing the right metrics and paying careful to attention to add placement and timing, gaming apps are in a great position to drive revenues from in-app ads.

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