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Cracking Native Advertisingon Mobile

7 Steps to

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7 Steps to Cracking Native Advertising on Mobile

Understand why in-app advertising can be a great option ��������������������������������������������������� 1Know and understand the relevant metrics for ad-based monetization �������������������������������� 2Be aware of the advertising format landscape �������������������������������������������������������������������� 3Understand the challenges of traditional mobile advertising ����������������������������������������������� 4Embed the ad into the app’s user experience ���������������������������������������������������������������������� 5Embed the ad into the app’s user interface ������������������������������������������������������������������������� 6Embrace a complete native experience ������������������������������������������������������������������������������ 7

SummaryIn 7 Steps to Cracking Native Advertising on Mobile, we start off by comparing the various mobile monetization models and see why advertising is a great option for app developers. We then shed light on the main metrics to consider for ad-based monetization, and give an overview of the most common formats available. We continue by explaining some of the challenges that traditional mo-bile advertising entails. We then show how novel, innovative forms of advertising, such as native ads, overcome these challenges by taking the user into consideration to achieve effective monetization with minimum churn. We go on by providing practical tips on the best ways to successfully imple-ment ads to maximize monetization and give them a native feel; we’ll see that the ad’s placement, trigger, as well as its level of integration into the UI and UX of the app are thereby key. We finish by explaining how to achieve a complete native advertising experience within your app.

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As a passionate mobile app developer, you know that making a great product is unfortunately only the beginning of success. Eventually, reality hits: effectively monetizing your app is vital for your survival.

For many reasons, you need to make money from your work.

Now, among other strategies, you might have considered monetizing with in-app purchase items. After all, freemium and free-to-play model success stories such as King’s Candy Crush Saga, Supercell’s Clash of Clans and radio app Pandora make the headlines on a regular basis and can easily turn your head. However, the truth is that only a few players manage to make it and really monetize their apps. Month after month, the top-grossing charts appear dominated by the same publishers.

With this reality in mind, monetization through advertising shines as an attractive option for develop-ers as users are not the ones bearing the costs. However, you need to keep in mind that a mobile app also represents a very specific and personal experience, inherently different from the online web. This is why mobile’s specificities and challenges need to be addressed head-on in order to achieve efficient monetization down the line.

This ebook will take you through 7 steps leading to a fully-native advertising experience.

In order to be effective, native advertising needs to be done right.

Let’s walk through it!

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The first step to decide on your app monetization strategy is to pick a revenue model. Three options are currently available:

• Paid apps

Except for a few outliers, this model is dying out. In 2013, 90% of apps were already free (Flurry)

and paid apps represented less than 5% of app store revenue (Distimo). Market reserach firm

Gartner even goes as far as to predict that as much as 94.5% of all app downloads will be free by

2017.

• In-app purchase items (IAP)

According to the app store research firm Distimo,

in December 2013 92% of all iOS app store revenue

came from IAP. On Google Play, this figure amounts

to a staggering 98%. However, you should also know

that, on average, less than 3% of users actually end up

monetizing through in-app purchase items. Although

the model can pay off, it requires a substantial amount

of data collection and analysis. Only few well-known

top-grossing publishers manage to make substantial

revenue from it.

• In-app advertising

When compared to the other models available, advertising can be a very viable option to achieve

effective in-app monetization. In fact, nearly one-fourth (23%) of all mobile revenues comes from

advertising on iOS. (vs 77% app store revenue, source: Flurry).

Advertising is also an increasing trend: general revenue from mobile advertising is expected

to ramp up in the coming years. According to Mary Meeker’s 2013 Internet Trends report, if you

compare the ratio of time spent on mobile inventory over the time spent using mobile phones to

other media, there is a $16 billion opportunity gap in mobile ad spending at the moment (in the

US only). Gartner also predicts that revenue from global mobile advertising will increase from $18

to $41.9 billion between 2014 and 2017.

1. Understand why in-app advertising can be a great option

97%non-purchasers

Less than 3% Virtual Goods Purchasers

Source: Flurry

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So, what’s so great about advertising? Integrating advertising into your app allows you to monetize a much larger share of your user base compared to in-app purchase items. Even if your app does offer IAP, advertising can bring easy additional revenue, especially from the majority of users that would not otherwise monetize through in-app items.

Finally, advertising allows you to get revenue from users who would eventually drop out of your app and move on anyways.

In light of these various elements and data points, it is clear that most developers should consider advertising to monetize their apps, either as a primary or as an additional in-app revenue source.

However, to fully benefit from the mobile advertising opportunity, you need the right strategy and understanding�

YOUR AD

AdvertisingRevenue

App StoreRevenue

77%

23%92%

IAP Revenuefrom Free Appsfrom Paid Apps (4%)

Paid Revenue (4%)Source: Flurry, Distimo

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To achieve a successful ad-based monetization strategy, it is essential to know the most com-mon metrics that will help you understand your ads’ performance and optimize your app inven-tory’s yield.

Click-through rate (CTR)Click-through rates measure the proportion of the users who, having seen the ad, decide to click on it.

Conversion Rate (CR)Conversion Rate (CR) measures the number of clicks it takes before a user performs the desired action (the conversion). This action generally depends on the goal of the advertiser, together with the pricing method used. A common type of conversion is the app’s effective install, along with a cost-per-install (CPI) pricing scheme. In the case of video ads, a conversion would most often consist of users watching the complete video (CPV, or cost-per-view).

End-to-end conversion rate (eeCR) End-to-end conversion rate (eeCR) takes the whole conversion funnel into account and measures the number of impressions it takes for users to complete a defined action (a conversion).

Generally, CTRs are most influenced by the quality of the ad format and the creative, while conversion rates, assuming that the user has not been mislead into clicking, depend on the fit with the audience, the appearance of the app in the app store, as well as whether or not the app can deliver on the ad’s promises. For both metrics, the quality of the targeting is paramount.

2. Know and understand the relevant metrics for ad-based monetization

Number of ClicksNumber of Impressions CTR =

Number of ConversionsNumber of Clicks CR =

Number of ConversionsNumber of Impressions eeCR = = CTR x CR

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eCPM Effective Cost-Per-Mille, or eCPM, is the primary metric and revenue KPI used to determine the monetary yield of an advertising space over a certain amount of impressions. eCPM represents the amount of revenue you are effectively earning for displaying a thousand impressions within your app or, to be more specific, within a certain inventory space. Especially if an advertising space is being paid on a cost-per-click (CPC), cost-per-install (CPI) or any other non impression-based pricing scheme, the eCPM normalizes these different monetization models to make them comparable to each other.

Example 2: CPI Pricing Model

Advertiser pays $2.4 per install for a specific ad offer, which is shown over 2 million impressions. The ad is clicked 54,000 times, receiving 2,700 installs.

CTR = Nr. of Clicks/Nr of Impressions = 54,000/2,000,000 = 2.7%CR = Nr. of Conversions/Nr of Clicks = 2,700/54,000 = 5%eeCR = No. of Conversions/Nr of Impressions = 2,700/2,000,000 = 0.135%

Revenue: 2,700 * $2.40 = $6,480

In the case of a CPI pricing scheme (or any other conversion-based pricing model), eCPM is a function of both the CTR and the CR.

Example 1: CPC Pricing Model

Advertiser pays $0.05 per click for a specific ad offer, which is shown over 2 million impressions. The ad is clicked 54,000 times.

CTR = Nr. of Clicks/Nr. of Impressions = 54,000/2,000,000 = 2.7% Revenue = 54,000 * $0.05 = $2,700

As you can see, and in the case of a CPC-based pricing scheme, eCPM is a direct function of the CTR.

RevenueNumber of Impressions eCPM = x 1000

$2,7002,000,000 eCPM = x 1000 = $1�35

$6,4802,000,000 eCPM = x 1000 = $3�24

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FrequencyEven though eCPM is a benchmark metric in monetization, it always needs to be placed in the broader context of its relationship to the frequency of the ad. The frequency consists of the number of times an ad is shown during a user session, or a specific amount of time.

In cases where the ad is triggered naturally (no action from the user), eCPM has a negative relationship with frequency, as an ad shown more often during a single session is likely to have a negative impact on the users and subject them to ad fatigue. In other words, with all things being equal, increasing the amount of impressions per user session has a strong chance to decrease your eCPM.

Fill-rateFill-rates measure the percentage of instances in which a publisher has successfully displayed an ad out of the total number of times the ad was requested. When the requested ad is not served, then the user will simply not see any creative. It’s important for a publisher to maximize the fill rate in order not to miss out on chances of a user to click on an ad and ultimately make revenue from it.

Example 3:Group A: 100 users being shown 10 impressions each. Group B: 200 users being shown 5 impressions during an identical lapse of time (eg. one session).

Even though both groups are shown an identical amount of impressions overall, users of Group B are subject to a smaller amount of impressions on an individual level. Therefore, Group B is likely to yield a higher click-through rate as its users are less fatigued by the ads displayed. Consequently, eCPM is also likely to be higher for Group B than Group A.

In the end, the same amount of overall impressions and an identical payout , both groups will be likely to show different eCPM levels because of the frequency at which the ads are displayed per session.

Number of ads deliveredNumber of ad requestsFill-rate = = CTR x CR

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Next, it’s important to know the main options when it comes to choosing the ad format to dis-play in your app. Here’s a digest of the most common ones available on the market today:

Banner ads are the most widespread form of mobile adver-tising. They simply take up part of the screen, either at the top or the bottom. They are easy to implement but are quite disruptive to the user experience, as they can’t be hidden. On top of this, there is always the risk that the users become insensitive to them (ad blindness), simply stop seeing them, or click on them by mistake (the so-called “fat finger” issue). Banner ads tend to be characterized by the lowest average CTRs and therefore require a lot of impressions to generate substantial revenue. They are not incentivized and are usually priced on a CPC or CPM basis.

(Full Screen) Interstitial ads pop up and generally fill up most or all of the app’s screen, so it is impossible for the user to miss them. They can be considered intrusive as they disrupt the user experience if shown too often or triggered at non-op-timal moments (more on trigger optimization later). For this reason they also don’t require as many impressions as banner ads and usually offer higher eCPMs. They are generally not rewarded and mostly come with a CPC or CPI pricing scheme.

3. Be aware of the traditional advertising format landscape

e�g� 320 x 50px

e�g� 320 x 480px (Portrait)

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Offer walls (or app walls, also called app lists) are full screen interstitials that display several ads as a list, somewhat imitating the app store. This way, many apps can be displayed at the same time. Users are often rewarded for completing an action for each ad, such as downloading an app (Android only) or watching a video. This format is usually triggered by the users themselves, for instance by the way of a “more games” button on the app’s home screen. As they are user-triggered and provide a more engaging experience, offer walls require very few impressions and foster high eCPMs. They usually come with a CPA (cost per action) pricing scheme.

Video ads are an increasingly popular format. They show users a short video about the advertised app or game and offers the possibility to download it. The main pricing models for video ads are CPV, or Cost-Per-View, whereby the advertiser is charged once a user has watched the entire video, and CPI (the user downloads the app related to the video). This format offers good value for the user as it comes with engaging content, which in turns means higher CRs and eCPMs. Video ads are sometimes incentivized (whereby either watching the full video or downloading the advertized app is rewarded).

e�g� 60 x 60px (app icon)

e�g� 400 x 300px

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Format type Banner ads Offerwalls Interstitial ads Video ads

User value Intrusive High user value Rather Intrusive High user value

Necessary amount of impressions

High amount of impressions

Very low amount of impressions

Lower amount of impressions

Very low amount of impressions

Average eCPM level Low eCPMs High eCPMs Medium eCPMs High eCPMs

Main pricing model CPC CPA CPC, CPI CPV (Cost per iew), CPI

In this chart we plotted the various formats’ average CTRs against their average eCPM levels to give an indication of where the different formats are positioned.

Since eCPM is a direct function of the CTR, the positive relationship between them does not come at much of a surprise. The main result is that both these metrics are correlated with the ad format’s level of integration into the app). We’ll revisit this idea throughout the paper.

Sources: AppFlood, AppLift, Demand Media, YuMe

0�5%

1

5

10

eCPM (USD)

5% 10% Average CTRs

Classic Banners(web legacy)

StaticInterstitials

Offer Walls (non-incent)

Video Ads

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4. Understand the challenges of traditional mobile advertising

Ads are often considered to generate an intrusive user experience, and there is a reason for it. The mobile screen, especially on smartphones, is rather small and offers a more intimate experi-ence, which can easily be disrupted by intrusive and suboptimally placed or timed advertising.

For instance, placing a banner at the bottom of the screen during gameplay is at best likely to be ignored by the users, and at worst might irritate them and make them drop out of the app. In many cases, they will just click on the ad by mistake. It has been shown by Goldspot Media that accidental clicks (the so-called “fat finger syndrome”) account for over 50% of overall smartphone clicks.

If you don’t take the specificities of mobile into account, you are likely to suffer the following consequences when displaying ads:

So, how can you prevent this?

It is paramount to understand that, with free apps, monetization is just one part of a more holistic user lifecycle. More specifically, it is strongly correlated with retention and engagement metrics. Basically, the more time users spend engaged in your app, the bigger your chances of monetizing them down the road, be it through in-app purchase items or advertising.

Here is a diagram that shows the user lifecycle, how its various parts interact with each other as well as the most common KPIs for each of them.

ViralityFacebook shares

ReferralsReviews

ROI-positiveUser

Acquisition

Monetization

APRU = total revenue / #users

ARPPU = total revenue / # paying users

Monetization rate = % of users that made in-app purchases

RetentionDay 1, 7, 30

Daily Active Users - DAUDaily New Users - DNU

EngagementAverage time in-app / session Total daily sessions / DAU

• Disrupted user experience

• User churn, low retention rates

• Bad app store reviews and user mistrust• Ad fatigue / ad blindness

• Lower click-through rates and eCPMs

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Now, the issue with advertising, especially the more classic forms of mobile advertising, is that they create a trade-off between retention and engagement on the one hand, and monetization on the other. Indeed, because of all the reasons mentioned earlier, displaying intrusive advertising is likely to disrupt the user experience and cause your users to drop out of your app. Therefore, there is a delicate balance to strike if you want to monetize by displaying ads without spurring a higher churn rate in your user base.In order to prevent these undesirable effects, you can consider resorting to innovative and native forms of mobile advertising. In a nutshell, the main goal of these new forms of advertising is to mitigate and even go as far as to get rid of this trade-off between monetization and retention. Below is a simple scheme with their main features:

ParadigmRetention / monetizationTRADEOFF

Retention AND monetization

User Impact Rather Intrusive Value-adding

Ad Format Standard Native

Average eCPM Low - Mid High

By opting for these new forms of in-app advertising, you can monetize your users all the while offering them a value-add in their app experience and increase your overall eCPM.

Let us now see how to strive towards these innovative and native forms of advertising, and eventually reach a fully-native ad experience.

Traditional Innovative

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5. Embed the ad into the app’s user experience

Embedding the ad into the user experience means carefully selecting when and how it will be triggered. The method used to trigger the ads has indeed important consequences on the performance of the ad space, as it is directly linked to the way the users perceive advertising.

There are two main options to trigger the ads in the least intrusive way:

• Natural trigger: the ad is triggered automatically. Since the ad is in this case shown to the

users who have not actively chosen to see an ad, the best is to trigger them at natural breaking

points in the app’s user flow, such as at the end of a level or upon returning to the home screen.

• User trigger: the users trigger the ad through their own action. This is the best option in terms

of user friendliness due to the fact that the users see the ad when they themselves decide that

they want to see it. This will generally yield fewer impressions per user session, but those will

be displayed with intent. Users will then see the ad at a frequency that suits them and be more

engaged, which in turn will increase click-through rates and conversion rates. Coupled with a

lower amount of impressions, user-triggered ads are then also likely to yield higher eCPMs.

In the example below, we’ve pictured the example of a “more games” button placed on the home screen of a popular action game. The button then redirects to an offer wall where the user is able to choose between several games.

Example: “more games” button

The users trigger the ad themselves

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Moving up a notch: Engagement ads

One way to climb the engagement scale a bit further and to approach a native-like experence is by having the user perform an action and interact with the ad unit itself in order to access the underlying offer. Through such mechanisms, users need to complete a given action in order to access the ad, which results in the latter being felt as part of the overall user experience. The main benefit is that the displayed ad offer is then perceived as the result of this specific action rather than mere advertising, which in turn enhances the overall native experience.

This type of ad belongs to the category of rich media ads and are not native in the most commonly-ac-cepted sense (as they are still inherently distinct from the app’s main content). However, they are a good alternative to more traditional and passive ad formats such as static interstitials or video ads.

Conversely, ads do not necessarily have to include such engagement components in order to be considered native (although some do, such as Facebook’s in-feed mobile apps, which users can scroll through).

Engagement ad examples from AppLift’s monetization solution PlayAds:

The Scratch Screen

With the Scratch Screen ad unit, the user is prompted to scratch a preliminary screen in order to reveal the underlying ad offer, which is usually an interstitial. The advertisement is then perceived as the result of a conscious and controlled action by the user.

The Slot Machine

With the Slot Machine ad unit, the user is asked to tap a button in order to spin a virutal slot machine. After a few attempts, three identical signs are aligned and the underlying ad offer is unveiled. The advertisement is then perceived as the reward of this mini-game.

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Embedding the ad into the user interface is necessary to offer your users a seamless experience and to give them the impression that the ad belongs to the app’s content, thereby increasing its “native” feel. There are two main levers to act on to achieve this: streamlining the ad’s design and integrating it further into the app’s content and user flow.

Visual customizationCustomizing your ad to your app’s look and feel is an easy extra step to increase the native feeling of the ad. Jumpy the Frog Jumpy the Frog is a casual arcade game that integrated AppLift’s PlayAds monetization solution. Here, the ad uses the game’s frog character along most of the ad experience to reinforce the feeling that the users do not leave the game. More specifically: upon losing three times in a row, users are shown a customized gift screen. Clicking on one of the gifts then opens a scratch screen, such as presented earlier. The ad offer is then finally revealed.

6. Embed the ad into the app’s user interface

CTR CR eeCR13.62% 3.86% 0.53%

Jumpy the Frog:

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Integration into the app’s contentFully tailoring the use of advertising and promotion to your product or gameplay will provide a more enriching and seamless user experience.

Integration example:

Sweets ManiaSerbian mobile game developer Webelinx integrated an ad unit directly into the content of their game Sweets Mania by introducing a fully-native element into the level selection page. In this case, the ad is displayed on a handheld panel by one of the game’s alien characters. The content of the ad is itself customized in terms of font, color and overall appearance to match the game’s user interface. Consequently: the ad, through its native feel, gives the impression of being seamlessly integrated into the user experience of Sweets Mania.

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7. Embrace a complete native experience

The ultimate step in achieving a complete native experience is by using what is commonly referred to as “native ads”. Through the latter, ad units are extensively tailored to your app’s content, user experience as well as user interface, in order to end up with no (or very little) dif-ference between the ad and the rest of the app’s content.

Fully native mobile ads, which are nowadays often simply dubbed “native ads”, are mostly known in the context of certain categories of apps: social networks such as Facebook, Twitter, messaging apps such as Tango, as well as news apps such as Forbes.

With native advertising, publishers create the ad units themselves in order to extensively tailor them to the design, look and feel of their app and can thereby use the same font, color, layout, etc. as the rest of the app’s content. IFor this reason, native ads cannot be characterized by specific features (such as their dimension) presented by standard ad formats such as interstitials or baby banners. Each app’s unique user experience lends itself to a different ad format, which is why they need to be extensively customized.

In a nutshell, native ads match both the form and function of the user experience. Typical formats include Search Ads, In-Feed Ads, Promoted Listings, Promoted Videos and Sponsored Posts.

With the right approach, fully native ads can also easily be integrated into games. In the example below, management game Happy Mall’s Singaporean publisher Happy Labs used PubNative’s solution (more on it later) to integrate advertising into the gameplay, using two distinct mechanisms (see below and on the next pages).

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In-Game Native Ad Example: Happy Mall Story by Happy Labs

Use Case A:The ad unit is integrated along a series of specific game missions. The ad is slightly differentiated by the layout, but the call-to-action is very similar to the other native buttons.

Use Case B:The ad unit is integrated in the form of an in-game billboard, clickable the same way as any other element from the gameplay. The ad unit also includes a description of the advertised game offer.

Use Case B

Use Case A

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How do native ads work (from a technical point of view)?

Fully native ads include the features specified earlier in the ebook: they are deeply embedded into the app’s user experience and user interface.

What is however completely specific to native ads is that they are extensively customized for one particular app’s category and form of content (eg: in-feed ads). In this sense, they go way beyond standardized formats such as classic banners, interstitial or video ads. For this reason, it is not possible for publishers to display “turnkey” or ready-made ads such as the standard formats mentioned above.

Indeed, once publishers have implemented their custom native ad units into their app’s user interface, they can retrieve specific elements from the offer in order to populate the ad, such as the advertised app’s name, icon, description, rating, etc. Depending on the way the native ad is structured, publishers can decide which elements they want the ad to display, thereby making it truly unique.

This process does not necessarily require the integration of an external SDK as it can be performed through a custom ad-request API.

For instance, PubNative is a monetization solution powered by AppLift’s technology whose API allows publishers to efficiently request over 21 parameters in order to build custom and unique native ads within their apps (see next page)�

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1. xyz...2. xyz...3. xyz...4. .....

1. nice!2. Cool3. Fancy4. .....

IconApp Name

DescriptionImage

App NameImageApp Icon

Native Ads through the PubNative API integrationRating Description

...

20+ different parameters

Rating

API

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Achieving effective ad-based monetization and maximizing revenue while preserving a great user experience is no easy feat. However, through the tips presented here, we hope we managed to give you a better idea of how to get started. Good knowledge of the main metrics, the ad format land-scape as well as a better understanding of the potential pitfalls of the more traditional forms of advertising so far is the first step. Moving to innovative and native forms of advertising that boost your eCPMs while preserving and even fostering the user experience is the second step. Getting to a complete native experience through ad units customized at the app level that match both the form and the function of the user experience is the final step.

With this kept in mind, you should be all set to start monetizing your app with native advertising.

Good luck!

Conclusion

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About AppLift

AppLift is a mobile games marketing platform. The company was founded in August 2012 by Kaya Taner, Tim Koschella and Hitfox Group. AppLift’s platform helps mobile game advertisers acquire loyal and paying gamers at scale on a performance basis. Via its proprietary Customer Lifetime Value Optimization Technology for user acquisition, AppLift focuses on tracking and maximizing the lifetime value of the users delivered to optimize campaign ROI and achieve the most efficient allocation of marketing budgets across traffic channels.

On the supply side, media partners can easily and effectively monetize all their mobile traffic with relevant game offers, on both iOS and Android. Through fully native advertising, as well as a proprietary eCPM optimization algorithm, developers can maximize revenue while preserving their app’s user experience.

AppLift offers its partners extensive and personalized support in order to deliver the highest performance. AppLift partners with 300+ quality game publishers such as King, Wooga and EA and with 2000+ Media Partners to deliver high-quality traffic.

The company is headquartered in Berlin with further offices in San Francisco and Seoul.

About PubNative

PubNative is a mobile publisher platform fully focused on native advertising for apps and mobile web. PubNative is available through an API and therefore does not require the integration of an SDK. Publishers can request over 20 creative assets to enrich their ads and thereby create any number of combinations for unique and truly native ad units. PubNative’s eCPM maximization ad-delivery algorithm thereby optimizes yield for publishers through machine learning patterns. The platform additionally offers publishers numerous ad delivery and targeting features as well as extensive inventory management tools.

The company plugs into the PubNative Exchange, a programmatic App Promotion Exchange with advertising offers from 300+ demand partners worldwide.

PubNative is headquartered in Berlin with further presence in San Francisco and Seoul. For more information on PubNative, visit www.pubnative.net

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San Francisco, CA 94103

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