Rewarded ads offer a ton of value for users of freemium games and apps. That much is clear — and getting clearer every day. After all, why would consumers want to endure mandatory, unskippable ads like pre-roll videos, when instead they could choose to engage with ads on their own terms — and earn in-app rewards in exchange for their time and attention? The answer is obvious, and that’s why consumers say they prefer rewarded over any other type of video ad experience.
Less obvious is just how much value rewarded ads bring to app publishers. Sure, there’s the incremental revenue they generate on top of in-app purchases, but there has been very little research conducted to demonstrate the overall impact that rewarded ads have on an app’s three core KPIs of user spend, session frequency and retention.
So we decided to find out just how much value rewarded ads bring to app publishers, aside from incremental revenue. Specifically, we wanted to find out how much more value rewarded ads offer publishers as users complete more of them. In other words, as a user completes more ads, do they become more valuable to a publisher?
The answers can be found in our latest Maximum Impact Report: “Exploring the Effect of Rewarded Ads on User Value.” Looking at 10 different high-volume apps with monthly active user bases ranging from 100,000 to nearly 2 million, we first cohorted users based on the number of rewarded ads they completed during their initial two weeks, then measured their average performance during the following 30 days for in-app spend, user sessions and 30-day retention.
What we found was that the more rewarded advertisements a mobile app user completes, the higher their engagement, retention and in-app spend metrics climb.
Rewarded Ads & In-App Spend
Let’s start by looking more closely at the relationship between the number of rewarded videos a player watches and the amount of money they spend on in-app purchases. Of all three metrics studied, ad engagement appeared to have the strongest impact on in-app spend, with a strong positive correlation existing between the number of ads a user completed and their subsequent in-app spend.
Users who watched five videos or less spent an average of 43 cents on in-app purchases during their first month. But when users took the next step and watched at least six to ten videos, their in-app spend jumped nearly 3x to an average of $1.23. It continued to climb from there, with the average increase across all cohort groups equalling 142%.
The highest group of ad consumers — those who watched 20 or more videos in their first two weeks — ended up spending an average of $3.47 on IAP during the next 30 days. That’s more than eight times as much as those who only watched 0–5 ads!
There used to be — and in some cases, still exists — a fear that that rewarded ads might cannibalize the incentive to make an in-app purchase. If players can earn in-game currency or premium items for free, the logic went, then why would they pay for them? But many studies have since demonstrated that this is rarely the case. In fact here, not only did rewarded ads not cannibalize IAP spend, but they actually appeared to positively — and significantly — influence it.
Best Practices to Maximize Ad Engagement
Because rewarded ads appear to have such a strong positive impact on a user’s likelihood to spend, it is important to expose users to ads relatively early — and to offer frequent opportunities to engage. This can be done by integrating multiple rewarded ad formats, using currency sale promotions, gamifying the reward experience, and a myriad other strategies. Our new Maximum Impact Report provides more details on eight suggested best practices to maximize rewarded ad engagement, so be sure download the full report for more!