The First Thing to Consider When Starting Ad Monetization
The ad market is a market, too
What keywords come to mind when you hear "ad monetization"?
When discussing ad monetization, the most frequent keywords are usually performance metrics like eCPM, Requests, and Impressions. Since metrics expressed in numbers are intuitively easy to understand, many developers mostly focus on figuring out how to increase eCPM and boost impressions.
However, we shouldn't forget that these metrics are merely end results. Whether you're just starting with ad monetization or you've already started but want to troubleshoot and improve, you can only begin defining the problem if you understand the background and logic behind how these metrics are generated.
Fundamentally, ad monetization is possible because there are advertisers wanting to buy ad inventory (demand) and publishers wanting to sell it (supply), and their needs intersect at a certain point. Of course, what's more important here is the willingness on the demand side. If advertisers have no need to advertise, the publisher's inventory simply won't sell. Ultimately, you could say that the demand side has been driving the growth of the ad monetization market.
In this post, I want to look at ad monetization precisely through this lens of supply and demand.
What do advertisers buying ad inventory actually want?
The answer is simple. Since they are spending money to run ads, they want to get clear results in return. A "clear result" means making their product or service known to as many people as possible and ultimately driving actual sales.
Assuming a mobile environment, advertisers want to expose their product to potential customers through ads to build awareness and trigger further actions like clicks or purchases. If the results they get from the ad outweigh the cost of running it, that's an efficient ad. Naturally, advertisers are willing to pay more for efficient ad placements that guarantee results.
Our attitude toward the CPM era
Thus, ad tech evolved to meet advertisers' needs to identify "more efficient ads." As billing models like CPM, CPC, and CPI emerged, the technology to track metrics like purchases, installs, clicks, and impressions developed alongside them. Among these, the CPM model became the most universal standard, naturally making the concept of effective cost per mille (eCPM)—the average rate per 1,000 impressions—emerge as a crucial metric for publishers.
So in a market where CPM is mainstream, what do paying advertisers want? Obviously, they want to elicit a response from potential customers through ad exposure.
To do that, the ad first needs to stand out. This is the exact opposite of what publishers usually want: from a usability standpoint, publishers prefer ads that blend naturally into the app's content and stay out of the user's way. However, as we noted earlier, the ad market—like most markets—is driven by the logic of demand. Ads that users don't notice are highly likely to be judged as low-efficiency ads. Low-efficiency ads have low demand from advertisers, which drives down the rate. This is why it's hard to expect meaningful ad revenue purely from ads that "look great for UX because they're unnoticeable."
Noticeable ad formats = higher rates
The rates and evolution of various mobile ad formats are also deeply tied to "efficiency." Looking at the main types of mobile ads, average rates generally increase in this order: Native, Banner, Interstitial, and Rewarded Video (RV).
First, Native is exactly what it sounds like: a format where publishers receive the ad components and can customize them for a natural look. If implemented too stealthily, its rate might actually be lower than a standard banner. On the other hand, if a Native ad is designed in a size and shape that catches the user's eye, its rate can go up.
For Banners, the 320x50 strip banner is the most common, but the 300x250 Medium Rectangle (MREC) banner is also frequently used. Naturally, since the larger MREC is much more noticeable to users, its rate tends to be higher. Even within the same ad format, the more prominent it is, the better its efficiency—and the greater the chance of a higher rate.
What about the remaining formats? Since Interstitial and RV both take over the entire mobile screen, they obviously command the user's attention and easily prompt reactions like clicks or installs. Because of this, it's easy to guess that their rates are substantially higher than those for native ads or banners.
Additionally, while Interstitials can usually be skipped within 5 seconds, RVs are unskippable and mostly feature much longer 30-second videos, making them another highly preferred format for advertisers. That's why RV rates tend to be the highest of them all.
Wrapping up...
As the market economy has recently worsened, ad budgets are trending downwards, and traditional ad formats are evolving into formats that can deliver higher performance on the same budget. For example, Banners used to display only images, but they've gradually evolved into multi-format layouts that also show video ads to drive user engagement. Interstitials and RVs frequently feature playable creatives where users can actually try out a game, and recently, end cards have become mandatory to naturally encourage clicks and installs.
To sum it up, the very first thing publishers need to think about regarding ad monetization isn't individual metrics, but rather: "How attractive are my ad placements to advertisers?"
If you want to boost that appeal, you obviously need a strong understanding of what kinds of ads your app's users respond favorably to and what actions are expected when an ad is shown, so you can guide them toward the outcomes advertisers want. In other words, you have to fully grasp the characteristics of your app and the tendencies of its users to set up a fitting monetization strategy. In future posts, I'll dive deeper into exactly what kind of ad monetization strategies you should adopt.
Read more on DelightRoom's ad monetization
⏰ Curious about DelightRoom's secret to ad monetization?
