Interstitial Ads: The Core Trend Driving the Ad Market

Our Dilemma with Interstitial Ads

If you ask what the most popular ad format is in the current mobile ad market, any app publisher with some experience in ad monetization will unhesitatingly point to interstitial ads.

Projected CAGR of interstitial ads (2025–2030)

It's no exaggeration to say that interstitial ad formats evolved alongside the growth of the gaming market. Today, we see a wide variety of these full-screen ads: from standard interstitials, to longer Rewarded Videos that give users a perk, to App Open ads that appear over the splash screen upon launch.

The creative assets used aren't just static images anymore; they include videos, playable ads, and more. Often, a single ad impression combines multiple creative formats. These advancements are driving better performance for advertisers and higher revenue for app publishers.

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Example: Video Ad → Playable → App Install Screen

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The biggest advantage of interstitial ads—the reason they bring in higher revenue for publishers—is undoubtedly their price point. On a CPM (Cost Per Mille) basis, interstitial rates are, on average, more than five times higher than banner ads. Consequently, when you have limited ad impression opportunities within an app, interstitials can contribute much more significantly than banners.

Also, they can be integrated differently from banner or native ads, which must be embedded directly into a screen's UI. Because interstitials cover the entire screen, they sit within the user flow rather than a specific screen layout. This means you can show them even in apps with very few screens, or right on top of a screen that already contains other ads.

However, since these full-screen formats evolved specifically for games, non-gaming apps face a few hurdles when trying to adopt them. For instance, implementing Rewarded Video requires in-app currency, which most non-gaming apps simply don't have. Standard interstitials are relatively easier to adopt, but non-gaming apps often only have one core user journey, unlike the repetitive end-of-stage loops found in games. Dropping an intrusive interstitial right in the middle of that single core journey can be highly burdensome.

Pie in the Sky

At Alarmy, we've wrestled with this dilemma quite a bit. Implementing them raised concerns about balancing usability with monetization, but not implementing them meant leaving serious revenue on the table.

In fact, five years ago in 2020, DelightRoom ran an experiment where we added an interstitial ad into Alarmy's core user flow. At the time, we saw the potential to roughly double our revenue, and our D1–D7 retention didn't drop at all. However, user complaints definitely spiked.

Our past attempt at Alarmy,
Why We Chose Usability Over a 2x Revenue Increase

Whenever you insert ads, user complaints are inevitable. Typically, the bulk of the negative feedback rolls in during the first week and tapers off shortly after. The crucial part here is assessing the severity of the complaints. If the feedback isn't just "Why did you add another ad?" but rather "This ruins the core value of the product," then you have to take it very seriously.

After directly testing the usability themselves, the product team decided that even without a drop in retention, we didn't want users to endure a frustrating ad experience just to use our app. Ultimately, we concluded the experiment by removing the interstitial ad altogether.

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And Yet, It Was Too Good to Give Up On

Having already verified the massive revenue potential of full-screen ads, we kept brainstorming ways to organically blend them into Alarmy. Over time, we added Rewarded Video to our premium ringtones in 2022, and an interstitial ad to our snooze feature in 2024.

Both placements successfully drove revenue, but because we were overly cautious, they ended up outside the core user flow. As a result, the returns still paled in comparison to the revenue potential we had seen in our 2020 experiment.

We concluded that, just like before, the ads needed to be in the core flow. However, standard interstitial formats—which typically force you to wait 5 seconds before skipping—inevitably disrupt the user's journey. So, the dilemma only grew.

"How can we eliminate the friction users feel with standard interstitials, while still delivering ad performance that satisfies advertisers?"

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A New Approach

After much deliberation, DelightRoom decided to build an entirely new ad format.

Here is the product spec we envisioned for the ad:

A full-screen ad that appears above the UI, clearly capturing the user's attention without being unnecessarily intrusive, and instantly dismissible at any time so it never interrupts the user's flow.

To meet all these somewhat idealistic conditions, we looked at the ad formats most favored by app publishers from a user-experience standpoint. We leveraged those elements to design a full-screen ad with a highly natural layout.

We then ran an experiment integrating this new format into Alarmy's most critical flow: dismissing an alarm. After a week of testing, retention naturally remained entirely unaffected, and user complaints were practically non-existent.

The Lite Popup ad screen applied to Alarmy

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Just to be absolutely sure, we monitored the retention metrics all the way out to Day 14, but we still saw zero drop-off. The experiment with this new ad format, born from years of consideration, was a resounding success beyond our expectations.

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Looks Good, Performs Better

If retention didn't drop, how did the ad monetization perform? Back when we were planning this format, one minor fear was that it might suffer from a low click-through rate or low bid prices.

Fortunately, our fears were unfounded. The ad looked great, and it performed great.

Click-Through Rate: 2.3%
Bid Price: $2.70 (approx. 3,800 KRW)

Fueled by the performance of this ad placement, Alarmy's ad revenue jumped by +30%, and it now accounts for 15% of our total ad revenue.

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Lite Popup: A New Ad Format Provided by DARO

Having gained total confidence through our success with Alarmy, we decided to officially roll out this ad format on the DARO platform as well.

Through this experience, we confirmed that a clear sweet spot exists between user experience and revenue. Now, any app developer using DARO can easily implement this Alarmy-verified ad format into their own apps.

As proven in Alarmy, this ad format features an instant-close design. Users can dismiss the ad the moment they want to, meaning their app flow goes largely uninterrupted. The natural UI also minimizes any jarring visual friction. Most impressive of all was the ad performance: yielding a 2.3% CTR and a $2.70 bid price. As seen in our Alarmy case study, this ultimately resulted in a 30% boost in ad revenue with absolutely zero drop in retention.

We're thrilled to share this new ad format—crafted from years of trial and error—with other app developers via DARO. We know firsthand that striking the perfect balance between monetization and user experience is no walk in the park. That's exactly why we hope more developers can break free from this dilemma and discover new possibilities by partnering with DARO.

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⏰ Curious about DelightRoom's ad monetization secrets?

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