Understanding AdTech for Efficient Ad Monetization (1)

1. Introduction...

Working at an app studio during this current trend where most apps rely on ad revenue as their core business model, I've noticed something: outside of the person directly in charge of monetization, most stakeholders in related departments often end up participating in related tasks without a solid understanding of ad monetization. Of course, this is largely due to environmental factors; it's not that they don't care about monetization, but rather that this kind of information has rarely been provided to them beforehand.

Most of the companies I’ve experienced or encountered didn't have a dedicated expert solely for ad monetization. Instead, someone juggling multiple roles (usually a product planner) was left struggling alone, barely managing to keep minimum ad monetization operations afloat. Ironically, this phenomenon was common even in companies that adopted ad revenue as their core business model. While there are various superficial reasons for this, from my personal observations, the following three reasons seem to be the biggest factors:

① Even top decision-makers lack knowledge about ad monetization, so they don't fully grasp its importance.

② It looks easy because existing traffic generates some level of revenue even with half-baked operations.

③ They are too busy developing the core service to worry about ad monetization efficiency, so they put it off for later.

Reason ① is actually the fundamental problem. Especially in small startup environments, instead of understanding and researching ad monetization to develop their own best practices, they often rely heavily on their ad monetization partner's reps and demand insights from them. Furthermore, because they still manage to generate some revenue despite this, it leads right into problem ②, or alternatively, if the revenue isn't substantial enough to care about, it results in the procrastination of problem ③.

Ultimately, these problems cause the service and ad monetization to evolve completely separately, which can degrade overall ad revenue and UX efficiency, resulting in the unfortunate situation of missing out on opportunities to generate significantly more revenue.

If your goal in reading this is simply to slap a banner ad at the bottom of the app screen and earn a decent income—without caring about the unified performance of the service and ad revenue—I should warn you upfront that reading this post might be a waste of your time.

Throughout my experience, I've found that the best approach is to consider ad monetization from the foundational stages of service development, evolving both the service and the monetization as a single production track.

To provide a starting point for fundamentally solving the numerous issues I've encountered in the field, I plan to write an in-depth guide on AdTech—the realm of ad monetization—from the basics to advanced stages, which will help team members at app companies better understand their work. Let's start by looking at the general concept of AdTech.

(1) What is AdTech?

AdTech = Advertising + Technology

AdTech is a portmanteau of Advertising and Technology, which collectively refers to all advertising technologies used directly or indirectly in ad transactions. Literally translated, we can just call it 'ad technology'.

A similar term, MarTech, is a portmanteau of Marketing and Technology. It has a broader meaning, encompassing all technologies and tools used not just for simple ad transactions but across marketing as a whole. Specifically in the realm of tools, it can even include CRM tools (e.g., Salesforce) used for ad sales and revenue management, so it is somewhat different from what we understand as ad technology.

In English, Marketing and Advertising might seem similar, but they carry subtly different meanings. While Marketing refers to the entire process, including ad strategy, branding, and viral efforts, Advertising aligns much more closely with the actual ads we see right in front of our eyes.

(2) Why You Need to Know About AdTech

Some might think, "I work at an app company, so why do I even need to study ad technology, which is a marketing thing?"

To explain the reason simply, it's actually quite straightforward: 'to make money.'

As monetization methods for an app company, there are several options like the ones below:

• IAP (In-app Purchase)

• Subscription

• IAA (In-app Ads)

• Paid App

• Freemium (Free + Premium)

What is Freemium (Free + Premium)? A hybrid app operation model that is fundamentally free but differentiates itself by making certain features available only through payment. Depending on what payment method is introduced for the higher-tier features, it can be combined with IAP or Subscription (Alarmy's premium subscription model also borrows this approach).

Among these various monetization methods, the most widely used approach today is IAA.

While the concept of purchasing an app was strong in the early days of the mobile market, as monetization-based free apps utilizing IAP and Freemium models emerged, users increasingly preferred free apps over time. During this shift, since there were many apps (e.g., weather apps) where dividing features into tiers was awkward, IAA began to gain attention as another primary monetization method. (In fact, because this transition had already set a precedent on the web, it was able to progress even faster on mobile.)

Additionally, as this significantly raised the basic quantitative and qualitative standards of apps, many small app companies started wondering, "Is the content our app provides really worth purchasing from a user's perspective compared to other apps?" Right around this time, some casual games introduced IAA, and this coincided with a period when ad demand vastly outweighed supply, leading to massive advertising success. Through these cases, IAA cemented its place as Ad Monetization, one of the most fundamental monetization methods in the gaming market.

Recently, rather than sticking to just one monetization method, a hybrid approach that mixes IAA and IAP has also been gaining popularity. This method provides some content for free while showing ads, and then leads users to paid purchases or subscription payments strictly for the most popular premium content.

In particular, the emergence of rewarded video—which offers in-app currency previously only obtainable through purchase as a reward for watching ads—really put the hybrid IAA/IAP approach in the spotlight. While casual games quickly adopted IAA as a monetization model from the early days of the market, slightly more hardcore genres like collectible RPGs or strategy games faced difficulties. Their high revenue dependence on the IAP model meant they had to take a conservative stance, fearing backlash from paying users. In this environment, unlike traditional ads, rewarded video served as a way for users to acquire additional in-app currency, alleviating those earlier concerns. Furthermore, as rewarded video began demonstrating a killing-two-birds-with-one-stone effect by helping to retain casual users who lacked purchasing power and were prone to churning—thus contributing to increased retention rates—the hybrid approach rapidly emerged as the number one monetization model for gaming apps. For non-gaming apps, KakaoPage would be a prime example.

Ultimately, advertising has become an absolutely unignorable tool for maximizing revenue and keeping a development company alive. But just as nothing in the world comes easy, ad monetization is no different; it's incredibly difficult to achieve high performance without a basic understanding of ad technology.

It goes without saying that a seller trying to sell a product must thoroughly understand their 'product', the 'buyer's needs', and the 'distribution process'. Here, the 'product' is the ad, the 'buyer's needs' can be interpreted as marketing, and the 'distribution process' corresponds to the various technologies within AdTech.

To achieve full ad revenue performance, planning, design, and engineering must be carried out concurrently with ads in mind. Therefore, you cannot rely simply on a single ad monetization manager; every member of the company must work together.

Therefore, for a member of an app company today, understanding ad technology can be seen as an absolutely essential task.