Can Ads and User Experience Coexist?

This is a repost of an article originally published on Brunch on September 7, 2018.

Since joining DelightRoom, the company behind Alarmy, the question I’ve heard most from acquaintances is: "Can you really build a business out of an alarm app?" Once I tell them Alarmy has achieved 26 million downloads worldwide and boasts 1.5 million DAU, they usually start nodding in agreement. (If you’re curious about Alarmy, you can check out this post.)

However, when they hear that Alarmy’s revenue model relies heavily on ad revenue, their looks turn worried again. Sometimes it’s because they don’t realize how massive the mobile ad industry is, or how much ad monetization can be generated based on a service’s user traffic. But more often than not, they express concern that while ads bring immediate monetization, they degrade the app's usability and quality.

Finding the Golden Point Between Ad Revenue and User Experience

In reality, ads generally do have a negative impact on usability. Therefore, it’s crucial to figure out the extent of this impact—to understand whether a new ad placement, despite bringing in high immediate ad rates, is causing so many users to churn that total revenue is actually shrinking. In short, the key to ad monetization is finding the Golden Point between ad revenue and user engagement.

It's vital to find the Golden Point between ad revenue and user engagement, which might initially seem unable to coexist.

To achieve this, rather than looking at the product and ads separately, it's necessary to plan and analyze ads as part of the product itself.

If an ad placement exists within a product spec scenario, such as a new feature or design, the question of when and how to show that ad to users must be included in the scope of planning. When analyzing this, you have to consider both usability and profitability by analyzing not only usability metrics like User Engagement, but also monetization metrics generated by that ad placement, such as ARPU (Average Revenue Per User) and LTV (Lifetime Value).

In Alarmy's case, the Today Panel provides content that might be useful in the morning after waking up, such as weather, horoscopes, and news. Previously, we simply displayed a banner ad at the bottom. Later, when we designed that ad space as a native ad, we continuously analyzed and improved both revenue and usability metrics, which allowed us to increase user dwell time on that screen while also improving the ad click-through rate by more than three times.

The current Alarmy Today Panel screen. Weather, news, and even ad content are designed together into a single screen.

Leveraging User-Friendly Ads

Just as we at Alarmy are striving to display ads without harming usability as much as possible, the advertising industry is constantly agonizing over this, attempting new, user-friendly ad formats.

Rewarded video ads, widely used in game apps, provide specific rewards like game items or currency when a user watches an ad. By having the user interact with the ad in exchange for a reward, they are highly effective at driving user engagement and clicks. Because users proactively watch ads to get the rewards they need, there are many reported cases where both revenue and usability metrics, such as gameplay time, increased together.

Native ads, which we also use in Alarmy, are another widely utilized format. The biggest feature of mobile native ads is that ad resources (ad images, copy, etc.) can be customized to match the app's design. This allows the ad to harmonize with its surroundings and behave like surrounding content, thereby enhancing the user experience and reducing aversion to ads.

An example of an Alarmy native ad. A design similar to the alarms themselves minimizes resistance to the ad.

Because these ad formats foster more interaction with users compared to traditional banner/video ads, they yield higher ad rates and are increasingly being adopted by advertisers and publishers alike.

Wrapping Up

Ad optimization and Ad Tech are incredibly difficult and complex, but they also seem to offer plenty of room for improvement. At DelightRoom, the creators of Alarmy, we are making numerous attempts and efforts to optimize monetization while maintaining maximum usability, and we plan to continue sharing our experiences related to this. I hope we can use this as a foundation to share diverse opinions and feedback with those who have similar interests.