Jan 20th 2022

The Complete Guide To Mobile Ad Monetization

From revenue to networks to best practices, this guide covers everything publishers need to know about mobile ad monetization.

When it comes to mobile ad monetization, there’s a dizzying number of variables that stand between success and failure.

For app publishers, figuring out how to balance monetization tactics, where to place ads, and how to find the right ad partner can be an overwhelming process, while advertisers are constantly navigating evolving ad formats, creative standards, and customer expectations. No matter what kind of apps you develop, understanding the various elements of mobile ad monetization is critical to success — but where do you even begin?

That’s where Vungle comes in! In this guide, we’ll cover a wide range of topics related to mobile ad monetization, including key metrics, how to calculate and increase revenue, and more.

Jump to a section…

How can app publishers get advertisers on their apps?
What is eCPM and how is it calculated?
Why is eCPM important?
What are some ways to increase eCPM?
How much can publishers make from mobile app ad revenue?
Gaming vs. non-gaming app revenue
What are the best practices for creating and publishing mobile ads?
Mobile ad best practices for publishers
What is app bidding?
What are the benefits of app bidding?
What are the best practices for app bidding?

How can app publishers get advertisers on their apps?

In the modern app ecosystem, publishers have many options for implementing in-app ads — but deciding which approach to take requires careful consideration for the revenue potential they provide, as well as the user experience. The good news is that the mobile industry is rapidly evolving, resulting in new innovations that strengthen advertiser and publisher partnerships. Here are just a few of the forms those partnerships might take:

  • Direct deals: Publishers and advertisers (who can often be other publishers!) can negotiate the sale of ad inventory directly, either in-person or through a third-party broker.
  • Ad networks: Ad networks facilitate commercial relationships, acting as an intermediary between large volumes of publishers and advertisers based on existing supply and demand.
  • Ad waterfalls: Waterfalls allow publishers to manually prioritize multiple demand sources in order to drive more revenue. They can be developed and managed using any number of technical solutions including supply-side platforms or custom ad servers.
  • Programmatic supply-side platforms: Publishers work with supply-side platforms, or SSPs, to automate the management and sale of their ad inventory to brands and other apps willing to pay for the opportunity to connect with new audiences.
  • Programmatic ad exchanges: Programmatic exchanges assemble inventory from publishers, networks, and SSPs and pair it with demand from advertisers through real-time bidding auctions.
  • App bidding: App bidding allows publishers to hold real-time unified auctions between programmatic and network-based demand sources within the app itself. This model cuts down SDK weight, generates more revenue, and improves efficiency compared to the waterfall approach.
  • Hybrid solutions: Hybrid ad solutions can offer any combination of features described above. For example, a hybrid ad solution might feature app bidding within an ad waterfall.

For more in-depth information on these partnerships, read How to Get Advertisers On Your App: A Beginner’s Guide to Mobile Ad Monetization.

What is eCPM and how is it calculated?

One of the most important metrics to understand when planning your mobile monetization is effective cost per mille, or eCPM. Publishers can calculate eCPM using a simple formula: divide the ad revenue earned by the number of ad impressions served, and multiply the result by 1,000. This formula can determine the eCPM of specific ad placements or all placements in an app.

How do you calculate eCPM diagram Vungle blog v2

It’s important to note that eCPM is not interchangeable with CPM, though they sound similar and are easily confused. Cost per mille (CPM) measures the cost for advertisers of serving 1,000 ad impressions. The problem with applying the same measurement to publishers is that, depending on the ad format and deal terms, some ad networks do not pay publishers by impression but rather use more in-depth performance metrics. Since the value of a single impression varies depending on the payment model, CPM cannot always accurately or effectively represent it.

Effective cost per mille resolves this dilemma by measuring the effectiveness of ad inventory, regardless of format. Publishers use eCPM to optimize ad placements, monitor monetization campaigns, and measure overall ad monetization.

Why is eCPM important?

eCPM is immensely useful for publishers as a single metric that unifies the tracking of ad inventory effectiveness across any format. If your app supports full-screen interstitial and MREC placements, eCPM can tell you which ad unit is the higher performer and earning more revenue. Publishers use these insights to enhance their monetization strategies’ performance by optimizing placements and making other improvements to the app itself. On top of that, eCPM can be a reliable metric for predicting the value of newly acquired users.

What are some ways to increase eCPM?

Increasing your eCPM has a corresponding impact on the revenue your app generates. The strategies to do so will vary, but the goal is to incentivize advertisers and the automated platforms they use to dedicate more ad spend towards your inventory. Here are a couple of techniques publishers can use to drive revenue:

  • Choose the right mobile ad placements. While publishers can’t always guarantee what kinds of ads will appear in their apps, they can implement placements and formats that work well with specific user experiences. Knowing the difference in earning potential between rewarded, display, and interstitial placements is the first step in building an effective ad monetization strategy.
  • Choose the right advertising partner. Publishers can work with ad networks or use programmatic bidding platforms, but in all cases, they need the right advertising partner. Ideally, the right partner can help publishers optimize ad placements to get the desired results; some ad partners (like Vungle!) can also help publishers determine how to implement new placements or update existing ones to maximize revenue.

Want to know more? Read the full post — What is eCPM? How to Calculate Effective Cost Per Mille.

How much can publishers make from mobile app ad revenue?

Once you understand how eCPM is calculated, you’re one step closer to being able to predict overall mobile ad revenue. That’s only one-third of the mobile app ad revenue formula, though; you’ll also need to know the number of daily active users (DAU) across your portfolio and the number of ad impressions you’re able to serve. Together, this data will help you figure out how much you’re able to make from mobile ads placed in your apps.

Exact mobile ad revenue depends on a wide number of variables like format, placement, and impression numbers, but on average developers can expect to make between $0.05 and $20.00 for every 1,000 ads served in their mobile apps. That’s a pretty wide range, but there are steps that your monetization partners should be taking to ensure you’re on the higher end of the scale:

  • Mobile ad targeting: Ad targeting quality refers to any measures taken by the ad network or platform to ensure that your game or app is showing the right ads to the right audience. For example, it would be a misstep if ads for hyper-realistic shooter games were running in a family-friendly mobile app.
  • Mobile ad creative: The best targeting in the world can’t ensure results if the ads being delivered don’t compel audiences to take action. Is your demand source showing ads that have attention-grabbing visuals and clever copy? If not, it’s probably worth diversifying your demand sources that can deliver premium ad creative.
  • Mobile ad placement: Finally, it’s important to consider the state that the user is in when deciding where and when to serve your ads. Ad placement is typically the responsibility of the developer, but a hands-on ad network with extensive experience can advise you on the best practices.

Gaming versus non-gaming app revenue

Because mobile games have relied on in-game advertising as a source of revenue for so long, their ecosystem is slightly more mature than in non-gaming apps. As a result, mobile game ads are able to generate more revenue: from around $0.15 per 1,000 impressions for banner ads to $20.00 per 1,000 impressions for rewarded ads. Some high eCPM placements include:

  • Interstitial ads placed at the end of a level
  • Rewarded ads placed at the end of a level
  • Rewarded ads placed in a dedicated reward section of the IAP store

When it comes to mobile games, ads should make sense contextually and not interrupt the gameplay experience. Rewarded ads work particularly well because mobile games often have their own economy, and bonuses like virtual currency or special items enhance the gameplay. For players, engaging with an ad is a fair price to pay for getting more enjoyment out of a game.

Revenue in non-gaming apps typically isn’t quite as high. Non-gaming app publishers can expect to make around $0.05 per 1,000 impressions for more passive formats like banners, and $8.50 or more for rewarded ads placed at the end of a particular piece of content. However, rewarded ads aren’t a good fit for every app — it needs to have some kind of in-app economy that can be supported with virtual currency or other rewards.

Ad placements with high eCPMs in non-gaming apps include:

  • Interstitial ads placed at the end of content
  • Display ads like medium rectangles (MRECs) shown when downloading content
  • Display ads shown during ad search
  • Display ads placed on the home screen

For more information on all things monetization, check out Mobile App Ad Revenue: How Much Can Developers Make?

What are the best practices for creating and publishing mobile ads?

Mobile advertising is a vital part of any comprehensive growth strategy. In 2020, mobile ad spending exceeded $90 billion in the U.S. alone. However, that also means the mobile market is more crowded and competitive than ever before. In order to stand out, publishers must adhere to mobile ad best practices to drive revenue while ensuring the best possible end user experience.

Mobile ad best practices for publishers

  • Place ads strategically. Like ad formats, ad placements go a long way towards determining success. First and foremost, make sure that the ads don’t negatively impact the user experience. Beyond that, look into placing ads where they will have the most significant impact, which will vary by app and ad type. Consider how formats like video, playable, and rewarded ads will appear to mobile users to find the best configuration.
  • A/B test ad placements. The best way to determine whether your ad placement strategy is working is via A/B testing. This is particularly useful for rewarded ads, which are among some of the highest-performing ad formats.
  • Disable ads for paying users. Ad monetization and in-app purchases can happily coexist in the same ecosystem. If users are paying for the app itself or a subscription to the app’s services, consider disabling ads for this segment of the audience. This empowers users to select their preferred “payment” method.

For more mobile ad strategies, read Mobile Ad Best Practices for Publishers & Advertisers.

What is app bidding?

Sometimes referred to as “in-app header bidding,” app bidding is a programmatic advertising sales technique in which mobile app publishers offer inventory to multiple demand sources in real time via a unified auction. The approach allows media buyers with different models (such as programmatic ad networks or DSPs) to compete on an even playing field, increasing publisher revenue as a result.

All demand sources involved in the auction receive and process bid requests that contain information they can use to programmatically determine what they’re willing to bid for the impression. Once bids are returned and the winner is selected, the resulting ad is then served to the user. This entire transaction takes place in seconds.

What are the benefits of app bidding?

Though many publishers continue to rely on other selling techniques, app bidding has created a buzz in the industry — and for good reason. App bidding offers many benefits over traditional mobile ad mediation, including:

  • Flattening the waterfall: The waterfall model uses historical data to determine the order of network calls. Once a network secures the top spot, they have little incentive to bid competitively, and eCPMs suffer as a result. App bidding uses real-time data, benefitting publishers, and media buyers alike.
  • Increasing competition: Mobile ad networks are key revenue drivers for app publishers because they offer premium formats designed for mobile deployment. But managing multiple relationships may not be scalable. App bidding gives publishers the best of both worlds by allowing SDK networks to compete alongside major ad exchanges and DSPs at the same time, thereby increasing revenue. More fair competition is better for everyone.
  • Improving transparency: Some parts of the programmatic world have been referred to as a “black box” because of their lack of transparency. App bidding solves for this by holding programmatic players to stricter standards. It can allow for situations in which all bids are visible and all demand sources can see which bids are winning, while publishers can get a clear picture of what ads land in front of their users.
  • Reducing manual work: Many publishers manually optimize their waterfalls on a recurring basis by running reports, analyzing the results, and adjusting demand sources in the waterfall. Managing this process is inefficient and time consuming compared to app bidding, where open market competition produces passive optimization for the publisher.

Despite these benefits, some publishers are less bullish on app bidding than others. Often, objections are rooted in the associated fees or engineering work needed to initiate the system, or simply a lack of understanding for how it works. The technology is relatively new, and some solutions merely introduce complexity without delivering value.

What are the best practices for app bidding?

When it comes to app bidding, most of the legwork is in choosing the right platform. Over the past few years, the number of bidding platforms has exploded, so let these best practices guide your choice:

  • Look for diverse demand sources: Your app bidding solution should include a range of mediated networks and a big DSP marketplace to promote healthy competition and drive revenue. Ideally, they will also support direct deals and cross-promotion and allow networks using historical data to bid.
  • Follow the money: Choose a platform that offers fair, unbiased competition among demand sources and effective fees. If they can be beaten, choose another solution.
  • A/B test bidding solutions: When in doubt, run a test. You may work with a mediation partner that offers an app bidding solution. Still, it could also be worth testing a platform that plugs into your existing monetization stack.
  • Embrace parallel bidding: Ad tech evolves quickly, so some publishers choose to bet on multiple solutions at once. You can also take a hybrid approach, plugging in a programmatic platform lower in your waterfall.

For more comprehensive information on all things app bidding, read What Is App Bidding? The Complete Guide to Programmatic Ad Monetization.

By now, you should be armed with all of the information you need to embark on a successful mobile ad monetization strategy. Remember, picking the right ad partner is an important part of the journey — and Vungle can help! Our comprehensive monetization and in-app advertising solutions drive growth and engagement, while Vungle Creative Labs uses industry-leading technology to optimize creative performance. Get in touch!

Vungle Marketing

Vungle Marketing

Blog