Over the past year, mobile advertising, both on the mobile web and within apps, has witnessed a backlash of negative consumer sentiment. In late May, PageFair reported that one in five smartphone users worldwide are using ad blocking. And for the first time, ad blocking is now possible inside mobile apps.
However, gaming apps are in a unique situation in that they are traditionally very strong in-app advertisers. These apps have much to teach the rest of the mobile ecosystem, about the right way to advertise and make money. 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 their highly engaged user base. But there are other factors contributing to their success, including the following:
Emotional Targeting That is Additive
According to Unity Technologies, 46 percent of gamers prefer rewarded videos to other types of ads in free to play games. From the start, gaming apps have an advantage because they know which ad format (video) resonates most with their audience. Gaming apps also know well what motivates their audience, and how to play to audience desires.
Alawar, a leading game publisher, is a great example. In their apps, they offer helpful, insider tips in return for users watching videos. Whenever the player initiates the video, they get tips on how to advance in the game. But Alawar is going beyond the standard rewarded video scheme. They wait until the player is stuck and then promote the video, knowing that is when he/she will be most apt to watch it.
This kind of emotional targeting helps Alawar achieve two ends – earn money for the video view, while increasing user satisfaction with the game. It seems unbelievable, but it is true: users of gaming apps actually opt-in to view video ads, and perceive them as a welcome, additive part of their experience.
Hyperlocal Ads That Are Served in The Right Place, At the Right Time
Geolocation is an extremely powerful tool for improving ad targeting and the overall performance and revenue-generating potential of ads. Gaming apps are pioneers in taking geolocation to the next level, through hyperlocal targeting of game users.
For example, several weeks ago, Pokémon Go’s developer, Niantic, made headlines when they hinted at plans to adopt a “sponsored location” revenue model. In this model, companies – namely retailers – will be featured in games, and Pokémon Go will receive compensation on a per-visit basis – e.g., each time a Pokémon Go user set foot in a physical store featured in the game. This is a new, innovative approach to geolocation.
Being Open to Competitive Advertisements in Their Apps
In addition to being the best category for in-app advertising performance, industry research shows also shows that ads for gaming apps (appearing in all types of apps) are the top performing industry category. Knowing how well gaming app ads perform – and that gaming fanatics are likely interested in learning about all sorts of games – gaming apps are not opposed to the idea of displaying in-app ads from competitors. It would be difficult to find another industry that is open to doing this, but it is happening in gaming apps and it is helping them generate a lot of revenues.
Knowing What Metrics Really Count – And Emphasizing These in Discussions with Advertisers
Gaming apps, especially smaller ones trying to compete with bigger players, are using newer metrics to convey the quality, not just the quantity of their impressions. The most commonly used metric, eCPM (cost per thousand impressions – calculated by the cost of a campaign, divided by 1,000), is a good baseline, but it unfairly favors apps with larger audiences, since the cost per one thousand impressions is lower. eCPM also falls short when it comes to conveying the level of user interaction that can be expected for ads.
For these reasons, gaming apps are now supplementing eCPM data with other metrics that communicate the retention and engagement of their audience, such as average revenue per daily 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. While a small gaming app’s sheer audience numbers may be on the low side, their audience may be much more micro-targeted, and figures like ARPDAU and LTV will reflect this, putting them on a more even playing field with larger competitors.
The strategies described above are helping gaming apps win at in-app advertising. They are making ads appearing in mobile gaming apps less aggravating and more frictionless. They are also helping smaller players better compete with larger ones for ad dollars, by emphasizing audience quality over quality. At the highest level, gaming apps are succeeding in striking the critical balance, showing us that ads don’t have to be disruptive and can actually enhance the user experience. This is a lesson of utmost importance that companies from all industries can apply to their in-app ad monetization efforts.
This post is part of our contributor series. It is written and published independently of TNW.