The Best Hybrid Monetization Strategies

by Claire Tak on Jan 21, 2021

Hybrid monetization is a monetization strategy that uses a combination of in-app purchases (IAP) and in-app ads to maximize profits. A solid monetization strategy starts with an understanding of how users behave in your apps so that you can design monetization mechanics that are informed by this behavior. 

In a 2019 games monetization survey, the majority of developers agreed that in-app ads generate incremental revenue and that rewarded video is highly complementary to driving increased in-app purchases.

The best way to monetize is to think about how to present an engaging and optimal experience for your app users. This can be done in a variety of ways through several levers including in-app-purchases, Liveops, rewarded videos, or adjusting the frequency or placement of ads in your app.

How to use hybrid monetization most effectively

In order to make money consistently and continue to drive growth, you have to find out what is resonating with users and what isn’t. In order to do this, developers will often test and measure results. 

By using ads, such as rewarded videos, you can start to learn what rewards or ad mechanics resonate with which user. Then, you can optimize where to place the ads in the game. Frequent interstitial ads can cause a negative user experience, so ad placement positioning, frequency, and understanding ad performance are important.

Oftentimes, studios segment players, using different kinds of ad units or ad rules-based in-app behavior such as if they are non-paying or paying users in the last month, for example.

The key is to find a balance with high overall app engagement and success in monetizing your users.

Michael Fortune, Director of Product Marketing, AppLovin

Ad frequency: What’s the “right” amount?

In the gaming world, developers use rewarded video ads to incentivize players to advance through the game by offering more coins or extra lives, for example. Which ads are shown and the frequency in which they are shown are important to balance, as you don’t want to experience a high churn rate because of too many intrusive ads such as interstitials.

On the other hand, you want to be able to monetize the cohort of players who aren’t making in-app purchases show the ad enough times so that it will prompt the user to engage.

According to a survey, a good goal for getting started with rewarded video ads is to aim to show 3.5 ads per day, per player. Engagement with a rewarded ad is up to the user to click on, so showing roughly 10 ads helps drive the 3.5 per day target.

Design the ad into your game

It starts with motivation. What does the player need to do in order to advance quickly in the game or level? 

Encourage engagement by building the ad experience into the game itself, based on user behavior. You can do this by identifying what the reward is and what the player needs to do to earn it, so they are more likely to interact with the ad. Will they receive an extra life or a boost in progression for watching an ad? 

Good hybrid monetization takes different segments into account and makes sure the monetization mechanics speak to each player type. Segmenting means it won’t be a one-size-fits-all strategy—this should be tailored to different types of players and their in-game behaviors. 

Here are some examples of how you can start segmenting out users:

  • Long-term players vs. new: These two segments might enjoy different types of rewards  
  • Engagement and time: Users who engage for three hours a day vs. 20 minutes per day 
  • Liveops engagement: Players who engage in a recent Liveops event vs. those who don’t

Live operations

Gaming studios use Liveops in to generate engagement by providing new content and monetization opportunities.  Liveops can also be a useful feedback tool to understand how any of the following may resonate with users:  

  • New features
  • Exclusive content
  • Events
  • Bundles that combine in-app purchases

Bundles are usually a combination of live events, exclusive content, or new features that are offered to users for a limited time. It can also be tied to holidays and in-game promotions to keep users engaged. 

How to choose a monetization solution

These days, automation is the key driver to help optimize, test, and refine the best hybrid monetization strategies. A solid monetization solution helps provide automation to help your business scale. Automation also helps improve efficiency so your team can focus on making engaging apps and games for your users. The ultimate goal is to be able to see what’s working through testing, make adjustments, and reduce operational costs for your team. 

Not all monetization solutions provide the same features and key tools. When searching for the best monetization solution, look for one that gives you:

  • Access to top in-app bidder demand 
  • Easy-to-use A/B testing
  • Developer-friendly integration process 
  • Cutting-edge brand safety tools to keep user experience and retention high

Have you heard of MAX? It’s AppLovin’s industry-leading, full-stack monetization solution based on in-app bidding that has produced incredible results for developers around the world. 

Review your metrics and benchmarks, check churn, and test often

Testing is an integral part of an optimal hybrid monetization strategy. Some developers start testing once they notice a plateau in their IAP revenue. Others will have multiple A/B tests running consistently to make incremental improvements and boost overall revenue. 

Some best practices for testing include:

  • Using a smaller user base (such as 10 percent) to running a test for 10 to 14 days, for example.
  • Assessing your ARPDAU (active revenue per daily user) and compare it to your benchmarks.
  • Checking to see if the ad frequency is the same as in your calculated estimate, especially if your results aren’t as high as what you expected
  • Reviewing and optimizing the variables of your ad implementation, including responsiveness, creatives, frequency of ads shown, and engagement

While you test, keep an eye on how many users are churning, based on the types of ads they are being served. If you noticed big dips, you may need to revisit your testing strategy and make adjustments. 

Your hybrid monetization will continue to improve as you consistently test, figure out what is resonating with users, and make optimizations to elevate the overall user experience. 

Claire Tak is Marketing Manager, Content at AppLovin.