What is In-App Advertising?

by Claire Tak on Mar 5, 2021

Mobile ad spending will reach $400 billion by 2023, with consumers spending an average of over three hours on mobile apps.

These figures show the opportunities for developers to grow their apps and improve profits by understanding how in-app advertising works, what ad formats are common and the benefits. 

What is in-app advertising? 

The popularity of free apps and mobile games has, in tandem, also given rise to mobile ads and ad networks. Mobile app advertising is a way for app developers to make money in their apps by serving ads within the apps. Mobile ads are served through a mobile ad network, a platform that connects developers and advertisers. 

Over the years, the format of mobile advertising has changed because of the sheer number of apps on the market. This, coupled with programmatic ad buying and real-time bidding has impacted the industry by adding automation and higher efficiency for developers to manage ads.

The types of ads have also become more intuitive. For example, some ads let users see what the app is all about by showing them key functionality and then asking users to upgrade. The same is true for mobile gaming apps where players may play a few levels for free before paying to unlock the rest of the game. 

In-app ads: The players involved

There are a few parties involved in getting an ad to appear within an app. 

  • App publishers: Developers and app publishers integrate a mediation platform and several ad networks  through a software development kit (SDK) 
  • Ad network: The network serves as the connection between advertisers and publishers. The ad network ensures that the ad supply from publishers is matched with the advertiser’s demand. 
  • Mediation solutions: Helps developers to maximize ad revenue by connecting them to multiple ad networks and then optimizing the yield across all of the connected demand sources. This drives more competition and higher profits for developers.

How does in-app advertising work?

An ad is requested, it goes through the mediation solution first. From there, it goes to the ad network and figures out the highest paying ad for that user.

These ad networks are able to promote an app to thousands of users and drive high-quality traffic, which means users are more likely to engage with the ad.

What are the in-app advertising formats?

There are a variety of ad formats that serve different purposes in order to reach a user and get them to engage and ultimately drive higher revenue for you. Here are the main ad formats to be aware of:

  • Interstitial ads: These ads take over the entire screen during a break in between levels of a mobile game, for example, or during a natural break in an app. They are meant to grab the attention of the user by taking over the screen. Because of this, developers should be strategic in how and when they decide to show this kind of ad.
  • Banner ads: Also known as display ads, banner ads are a traditional method of advertising that takes up space either at the top or bottom of a screen. 
  • Rewarded video ads: These are opt-in ads that give players a clear value exchange. The ad may offer a player an extra life, coins, or power-ups after they watch a video. 
  • Native ads: They’re called “native” because they blend into the background of the screen. 
  • In-stream video ads: These ads are shown within the video, either before, during, or after the video plays. 

The benefits of in-app advertising

It’s estimated that by the end of 2021, there will be 7 billion mobile users with app-install revenue exceeding $7 billion. The potential to grow your in-app advertising revenue is huge. 

In addition to advantages in the market, here are a few benefits of in-app advertising for developers:

You can earn more money: Because there are a variety of ad formats, developers can test different kinds of ads to see which ones resonate. You can combine mobile-app ads with in-app purchases—a strategy that’s proven to be successful.  

Create a better user experience: Designing an ad into a game is one way to seamlessly integrate your ads so it creates a less disruptive and engaging experience. Rewarded videos and ads are both great examples of getting users to interact with the ads at optimal, specific times. 

Improve user engagement and retention: A user is more likely to engage with an ad that is integrated into the right places, with great timing, and provides value. This can ultimately improve user retention and in-app engagement—metrics that drive lifetime value, or LTV. 

Maximize your ad revenue with MAX and find exponential growth with AppDiscovery

Understanding the different kinds of in-app ads is an important component in scaling your games and business.

If you’re interested in maximizing your ad revenue through in-app advertising, MAX is the most powerful monetization solution for this.

Here’s why it’s the secret weapon for app developers

Once you’ve increased your earnings with MAX, it’s time to leverage AppDiscovery, the growth engine to take your business to the next level.

Claire Tak is Marketing Manager, Content at AppLovin.