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Monetization of applications.Part1

The issue of monetization of applications thrills many of their developers. In this article, we shall view the methods of receiving income. First of all, we shall study the basic metrics, get acquainted with types of advertisement, and then pass to the methods of cooperation with advertisement networks. In the end of the article, you will find tips for advertisement optimization.

What is ads monetization for?

Rates of development of mobile ad market cannot but wonder. American agency eMarketer states that in 2016 brands will spend at least USD 100 billion for this article of expenditures, which is almost 4.5 times more than was spent in 2013. According to analysts’ forecasts, the highest growth will be with the companies from the USA and China which are going to double and triple their expenditures as compared to 2014. Manufacturers from Great Britain, Japan, and Germany do not lag behind – they are planning to spend the lion’s share of ad assets for advertisements in the mobile sphere by 2017.

That’s why during selection of the model that facilitates the monetization of apps their owners should pay special attention to advertising.

This earning method is optimal for apps which are free for a user. Also, it is fit for conventionally free apps in which purchases are made within apps. According to statistics, only the tenth of users make purchases in apps, while advertising enables app owner to monetize the remaining part. As one of the variants of development of this monetization method, the ads and ad videos impressions to users could be chosen – as soon as you find out that they are not interested in purchases within the app.

The undeniable advantage of such type of earning is the fact that it could be used in all types of apps – even in those with not very long session duration. Apart from that, it should be noted that monetization with the help of advertising helps the app owner to reduce the risk if it ceasing to get income: even if your app drops down in users rankings and will not be bought, you will be receiving income owing to those who already installed and uses it.

Basic metrics

Metrics are indicators which characterize quality and quantity of ads.

  • Number of queries from the app to server for ad impressions (Requests). Not every attempt of a user to open an add leads to its impression. Proportion of the number of successful impressions and the number of attempts is called fillrate. With right settings, such type of ad as banners will have a fillrate close to 100%, but newer types of advertising, like videos, could have a lower indicator.

  • Number of ad impressions on platform (Impressions).

  • Number of clicks (user clicks) on the shown ad (Clicks).

  • Number of app installations on the gadget on which the ad was shown and the user clicked on the ad (Installs). The user has to activate the ad while having Internet connection, for the fact of installation to be marked.

  • Ratio of the number of clicks on ad to the number of impressions, calculated in per cent (CTR). Thus, if there are five clicks on average for 100 impressions in your app, your CTR indicator is 5%. Metrics reflects the quality of ads and indicator of their relevance (i.e., correspondence to interests) for your audience.

  • Conversion (CVR). That is the number of installations, divided by the number of clicks – shown in per cent. This characteristic reflects the quality of app and its page in the store.

  • Amount of money, paid by advertiser for a thousand ad impressions in app (CPM). For publisher, CPM is a reward paid by ad network for one thousand impressions. It is necessary to take into account that networks charge their own fee – as a rule, it constitutes 30% of the sum.

  • Estimated cost of 1 click for ad (CPC).

  • Estimated cost of 1 installation of app (CPI).


Advertisers can prefer working with the help of СРМ, CPI, or СРС. This means that some of them are ready to pay for the number of ad impressions, while other would count the number of app installations or number of clicks. Some advertisers set more original terms of cooperation – they pay for conversion in app or for users’ actions in it. Such metrics are called CPL (cost per lead) и CPA (cost per action).

The principle of work of advertising in mobile applications is rather simple – it is easy to guess that the more you sell the app, the larger the traffic is. This value is usually measured by special metrics – MAU (monthly active users) and Sessions, showing the total number of sessions.

The volume of traffic directly influences your earnings – the more users use your app, the more ad clicks you get.

Sometimes it may seem that it suffices to choose advertiser with the best offer – for example, the one who pays the most for 1,000 impressions of their ad. Still, it may well be that ratio of attempts of impression to the number of real impressions will be rather low – and, as a result, you will not receive the income you count on. Another variant – your users won’t find interesting the ads offered by ad network, and the ads may irritate them so much that you will lose your positions in the rankings.

Types of ads for mobile apps

Banners are the most popular type of ads with advertisers – it has a relatively low indicator of ratio of the number of impressions to the number of clicks, and a rather high index of fillrate. Studies show that users consider banners an obtrusive type of ads, taking it loyally only in utilities. You must have come across too bright and annoying banners which cover functional buttons in the app or irritate with constant movement and change of background colors.

Interstitials is the ad that makes a user perform a certain action, for example, to click the icon of ad closure. Most often, such ad covers the whole screen of a mobile device, and its demonstration precedes the start of work with app or is a sign of some stage, for example, successful ending of another level in game app. This ad can be in a category of media or static. Thus, a user can be offered to evaluate a demo-version of a new game. At that, he does not have to close the started app. The ratio of the number of impressions to the number of clicks in such advertising is rather high.

Video is a variety of the above mentioned type of ads. Videos cover the whole scree; also, it is possible to choose ad which is impossible to close without watching it to the end, or video that could be closed after certain period. Short videos are usually of the first type – they cannot be skipped, while videos with the length of more than 30 seconds could be closed after 5-10 seconds by user. This type of advertising requires the most investments from content or product manufacturer – however, the payment for 1,000 demonstrations is the highest, as well. Still, you must remember that impression will be counted only if user watches video to the end.

Native ad is advertising that is most natural-looking for users; it could be identified by them as a part of app. It is a relatively new type of advertising that is actively used in Facebook. Studies show that such ads do not cause negative reaction of users. However, payment for such type of ads is not as high as for, say, videos.

While choosing a type of ads that you want to integrate into your app, try to balance the wish to get maximum profit and necessity for preservation of app’s functionality and convenience for users.

Methods of cooperation with ad networks

The first and the simplest methods of cooperation with ad network received a name Direct Integration. In order to start working using this method, it is necessary to choose a network and set its sdk – and the ad will be shown in your app. The advantages of this method of cooperation with advertiser include absence of technical difficulties, quick work, and simple settings. However, you’ll have to choose between advertisers who are ready to pay small reward but work in all corners of the world and those who specialize on the countries of specific region but pay more.

Another method of cooperation with advertiser – cooperation through mediator, i.e., intermediary. He takes up all the work on search for ad networks and distribution of traffic between publishers. For that, he will charge ad network with certain fee or require his ads to be placed in your app. This variant of work is one of the most optimal: you receive a possibility to remotely manage the ad impressions, choosing ad networks that are best for you. Mediator will show ads in certain order, so you will be able to set the order that is the best for you. Thus, if you cooperate with two advertisers, you will be able to set the sequence of ad impression – the first one shown could be the ad with higher CPM indicator, but with relatively low ratio of the number of successful demonstrations to the number of impression attempts. Should the demonstration be unsuccessful due to certain reasons, the impression of ad with lower CPM will start automatically. When choosing a mediator, pay attention to terms of cooperation and take into account whether they charge a fee for services, what that fee is, whether customer support service is good enough, etc.

You can also prefer mediator who automatically distributes traffic between ad networks. Still, this variant of work has its drawbacks, as you cannot be sure in efficiency of intermediary’s actions and whether they lead a fair game, not preferring as networks at their own discretion, which will finally lead to decrease of the level of monetization of their clients’ apps. Automatic services are very popular in the USA and Western Europe, where ad market is peculiar for the large number of competing ad networks.

A method of app owner independently finding an advertiser is called Direct deals. An undeniable advantage of this type of work with ad network is possibility to choose the most suitable for the audience type and category of advertised product: for example, apps for sportsmen are fit for interstitials with advertising of sports nutrition or sports apparel, and teen games are for for videos with other game apps, gadgets, and other stuff that may be interesting for juveniles. Such type of cooperation with advertiser allows you to abandon paying a fee to intermediary. Usually, such type of cooperation supposes fee for app installation – that’s why is isn’t fir for banners due to their low conversion. Apart from everything else, you’ll have to monitor and optimize ads yourself, choosing it for your app.

 

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