Selecting an Ad Provider for Your Apps
This is the first post to share my experiences on App Monetization Strategies. Check back frequently as this will be an on-going series.
As an app developer, it’s critical to know as much as possible about app monetization strategies. Many popular strategies today include ads as a revenue component, but navigating the sea of different ad providers can be harrowing. Should you choose one ad network or multiple ad networks? What about an ad exchange or mediation layer? Read on to find out more about mobile ad providers.
Introduction into Ads
First, it makes sense to get acquainted with terms and metrics used in the mobile ad industry. The easiest way to do this is to think of what happens when a user uses your app. First, your app asks your ad provider for an ad by making an ad request. If your ad provider has an ad available to fill your request, your app’s user will see the ad and you’ll be credited with an ad impression. The percentage of ad requests you send that are filled by your ad provider is your fill rate. Maximizing your fill rate is very important because it represents the percentage of the time your app is displaying an ad – if you’re not displaying an ad, you’re not making any money!
The ads that your ad provider serves will make you money when a specific event occurs. The three most common events are an impression, a click, and an action.
- Impression – Ads that pay per impression are sold on a CPM (cost per thousand impressions) basis. For example, if you are displaying ads that pay $1.50 CPM, you get paid $1.50 per thousand impressions of the ads that are displayed in your app.
- Click – Ads that pay per click are sold on a CPC (cost per click) basis. For example, if you are displaying ads that pay $0.15 CPC, you get paid $0.15 per click on the ads that are displayed in your app. Note that this means it’s possible to show 1,000 impressions of CPC ads and receive no payment whatsoever if no one clicks on the ads.
- Action – Ads that pay per action are sold on a CPA (cost per action) basis. However, since in the app business the action is usually a user downloading and installing an app after clicking on an ad, these ads are more commonly referred to as CPI (cost per install). If you’re the buyer of installs, these ads are referred to as PPI (pay per install). Since you’re paid only when an action occurs, it’s possible to both show 1,000 impressions of CPA ads and receive dozens of clicks and receive no payment whatsoever if no one actually performs the action that is required to receive payment.
Since many ad providers show users ads that are sold on a CPM, a CPC, and a CPA basis in your app, it’s necessary to have a common metric to compare all the different ads being shown so that you can maximize your revenue. This metric is called the effective cost per thousand impressions, or eCPM. eCPM is an apples-to-apples measure of the revenue you expect to receive by displaying 1,000 impressions of any particular ad.
Types of Ad Providers
Although there are dozens of ad providers in the marketplace today, there are four main types categories: ad networks, ad exchanges, mediation layers, and ad management platforms.
- Ad Networks match app developers who display ads in their apps with advertisers who want to pay for ads in apps. Usually, advertisers pay on a CPC (cost per click) basis, so your app’s click-thru rate (CTR – the number of clicks divided by the number of ad impressions, usually displayed as a percentage) is vital. As a general rule, the higher your app’s CTR, the higher your app’s eCPM will be since you will be receiving more revenue for the same number of impressions (remember, eCPM is your revenue divided by the number of thousand impressions displayed). Some examples of ad networks are AdMob, Quattro Wireless, Millennial Media, Google AdSense, Greystripe, and VideoEgg.
- Ad Exchanges pool together ad networks and other advertisers and match them with app developers. This gives developers a larger pool of ads from a variety of ad networks versus just one ad network / advertiser, so you generally will see a higher fill rate from ad exchanges versus an ad network. In return for pooling together advertisers, ad exchanges usually take a fee for their services. Two examples of ad exchanges are Mobclix and Smaato.
- Mediation Layers allow developers to pool together ad networks and exchanges so that the provider paying the highest eCPM is served first, the second highest eCPM second, etc. By pooling together ad providers, mediation layers help increase fill rate as no single ad provider can guarantee 100% fill. Some examples of services including mediation layers are AdWhirl and Tapjoy.
- Ad Management Platforms allow developers to optimize and target all of their revenue sources that they promote in their ad space, including ad networks / exchanges, cross-promotions (both other apps and in-app purchases), and campaigns sold directly to advertisers. This degree of optimization and targeting empowers developers to maximize their ad revenue by serving the ad that makes them the most money to particular user segments and users in specific geographic locations. Ad management platforms also save developers the time and hassle it takes to jump between iTunes Connect and their ad network sites to try and determine out how well their cross-promotional ads are performing. In short, every revenue opportunity can be managed easily since all the controls that ad networks use to make money have been turned over to developers so that they can also benefit from them. Burstly and AdMarvel are currently the only ad management platform available to mobile developers.
Which Ad Provider Should You Use?
You should use an ad provider that gives you the flexibility to allocate your inventory across multiple ad networks / exchanges dynamically because eCPMs and fill rates vary constantly. If you lock yourself into using just one ad network or ad exchange provider, you are at their complete mercy with respect to your revenue opportunities. Ad networks and ad exchanges are used to competing for your business, so you should be using a platform that empowers you to switch ad partners instantly if your needs are not being met. I feel very strongly about this fact – otherwise, I wouldn’t be working with the Burstly team. I have been burned and I have seen other developers get burned because their primary ad network/exchange eCPM or fill rate dropped dramatically.
Have any other tips on selecting an ad provider for your ad-supported apps? Is there a specific topic you’d like me to address in my App Monetization Series? Let me and your other fellow developers know!