For years, publishers have been trying to find the perfect way to monetize their games. While in-app purchases (IAPs) used to be the king of the game monetization world, in-game mobile advertising has been skyrocketing in popularity as more developers see it as an effective monetization opportunity.

One of the reasons for the rise of the ad business model can be connected to the evolution of the ad experience in mobile gaming into more engaging formats, with rewarded video ads at the forefront of this trend. Players are now driving increased demand to see more video ads in exchange for free quality content and rewards. The majority of developers claim that retention rates rose after making the shift to an opt-in ad format. Talk about a win-win scenario!

Mobile advertising is increasingly becoming an important source of revenue for publishers. It’s no accident that King, who was making a lot of money just from in-app purchases, decided to embrace ads once again. After being acquired by Activision, King reintroduced ads in 2017 after 4 years without them.

The numbers say it all. Among the 50 top grossing games on Google Play Store, almost 80 percent of them serve ads. In-app advertising is expected to rise over the next few years as well, with Statista predicting it to hit $117 billion globally in 2020.

Supporting all players

This doesn’t mean that IAPs are going to disappear though, as they still account for a big revenue stream for game developers of mid-core and hardcore genres and deeper casual games. A study conducted by AdColony in 2017 suggests that only 31% of revenue comes from video ads, while 43% is coming from IAPs.

However, when you look deep into revenue generated by IAPs it “never rose above 5% for most games.” Developer Hyper Hippo told Chartboost that players “went from [saying] ‘Ads are evil, they’re blocking my game’ … to suddenly ‘We want more, we want more!’”

This trend is likely to continue growing now that more brands are finally targeting games as a media source. Fyber commissioned a study showing that “77 percent of brands report that they have asked their media agencies to invest in in-app advertising inventory.” In addition, “91 percent of media agencies and 87 percent of brands say they plan to advertise in games.” With such a huge market out there, who can blame them? Over 2 billion people worldwide already use a smartphone and there are almost twice that amount in apps on the Google Play Store.

The game publishers’ dilemma

Lisa Pak

Lisa Pak, Ad Monetization Manager at Wooga

To show or not to show ads is no longer the question. A hybrid model with the perfect combination of IAPs and in-app advertising seems to be the monetization sweet spot for most game publishers. So the question is: how to combine them effectively? Our customer, Wooga, has seemed to figure it out.

Recently, Wooga’s Ad Monetization Manager, Lisa Pak, wrote an article on Medium about how they have started trying to optimize their revenue through rewarded video ads in their popular game, June’s Journey. Their goal is “to increase revenue from rewarded video ads to about 30% of [their] overall revenue” by finding a “sweet spot” between IAPs and ads. All without damaging the users experience, of course!

It’s a dilemma many publishers are facing. Too many ads can scare users away, while not enough ads can also cause them to abandon ship.

On average, Pak says the players of June’s Journey view about 2.5 ads a day. This will be different for publishers based on their unique user base and story line. Most players aren’t in your app for long periods of time. Developers like Wooga are placing the ads to help encourage users to keep playing.

Pak suggests that publishers should “make sure that engaging with ads becomes part of the playing routine.” The players will start to expect the ads before they pop up. If you aren’t sure, try starting with a single ad placement to test the waters before you dive in.

The sweet spot

To find the perfect balance in this ever-changing ad ecosystem, our customer Jam City does a continuous assessment on how players engage with their games. User experience comes first, and ads are implemented to enhance that experience. Nothing is taken for granted. “We let data talk and sentiment walk” says his CEO, Chris DeWolfe.

An additional reason for the growing trend on in-game advertising are Hyper-Casual Games, an up and coming genre that rely mainly on advertising. They “are lightweight games with simple mechanics that offer instant gameplay” and are “infinitely re-playable, making them highly addictive and engaging.”

The game mechanics aren’t as sophisticated as games like June’s Journey, and they drive lower revenue per active users than any other genre. Despite all that, they still have received a lot of attention from publishers and players alike. Recently, they’ve been “grabbing 10 out of the top 15 spots in the top downloaded charts, versus a year ago when they held a ‘mere’ 3 spots on the top charts.”

Thinking along the lines of a 70s arcade game, hyper-casual “consider[s] factors like session length and number of sessions per day when designing their ad implementation.”

Seems like ads have grabbed the baton and started running with it. More and more people are opting to view ads in exchange of rewards. In the words of Hyper Hippo, “we want more!”

Whatever the reasons, it will be interesting to see what the future holds for the mobile market  as technology evolves and more players, publishers and advertisers embrace in-game ads.