Effective Monetization Without Compromising UX? Native Advertising Balances Both
The app economy can be a challenging place to run a successful business. With both Google Play and the App Store boasting over a million apps each, spiraling user acquisition costs and only a handful of publishers making the majority of the revenues, app businesses have had to find ways to generate sustainable revenues to stay afloat.
Ad funded monetization on mobile is one such solution, but it has had its problems. Initially driven by banners and interstitials, app businesses had to find an uncomfortable balance between monetization and negative UX that frustrated users with disruptive advertising.
Native advertising, however, offers a solution to this problem. Encouraging publishers to naturally integrate adverts within a game or an app, native allows effective monetization without compromising the user experience – balancing business goals sensibly with UX.
Ad funded monetization: A brief history
The evolution of mobile advertising as a monetization tactic goes hand in hand with the evolution of another important industry trend: the rise of the free app.
After the early days of the app industry were dominated by paid releases, app developers began to realise that releasing an app for free could have real advantages over charging an upfront fee. Allowing developers to reach out to millions of smartphone and tablet users without forcing them to pay meant that offering an app for free became a great way to rapidly grow a user base.
However, the rise of the free app also meant developers had to work out a way of monetizing their user base after the install. In-app purchases (IAP) became the main tactic for many developers, with companies attempting to coax users into spending on in app currencies, items or products to return their investment. But to support IAP models, developers realised they needed to continue to find new ways to acquire users for their apps to keep a consistent flow of revenue—especially in the early days when retention was generally ignored.
This point is where mobile advertising stepped in. Supporting advertisers by getting their SDKs integrated into other apps, mobile advertisers began to offer free app developers the chance to display adverts for their products within other apps. Taking banners and interstitials from the web, mobile advertisers helped developers at the thin end of the wedge by allowing them to make a small amount of money from users viewing their apps.
And at scale, it worked. The most famous example of that is Flappy Bird. Using banners to generate $50,000 in revenue a day at its peak, it showed that ad-funded monetization could work for app businesses.
A rotten user experience
There was, unfortunately, a problem with mobile advertising as a monetization method. As with the web, banners and interstitials did not offer a natural advertising experience.
Instead, they started to rapidly annoy users. Screen hogging banner adverts got in the way of users, sending them to apps they weren’t interested in when the user accidentally interacted with them. Interstitials, meanwhile, disrupted the user experience totally, dominating the screen and often appearing in the most annoying places—such as right after a user opened an app—to generate ill-gotten revenues.
As for publishers and advertisers, irritating mobile advertising damaged their business prospects too. Google rapidly cracked down on banner abuse within the mobile web, punishing sites with poorly integrated mobile adverts as early as 2013. Users increasingly stopped interacting with adverts, driving click through rates as low as 0.04% for certain app categories.
With users increasingly avoiding interacting with disruptive advertising on mobile, some unscrupulous businesses turned to bots to generate fraudulent interactions—which, in 2015, accounted for a worryingly high 11% of mobile display advertising clicks. As a result, mobile advertising, based on poorly adapted web formats, had probably damaged app businesses as much as it has helped them make money. Short-term revenue gains were counterbalanced, first, by users turning to ad blockers to avoid annoyance and, second, by businesses fed up of poor performance.
In short, something needed to change. And that’s where native advertising stepped in.
Native advertising on mobile has proven to be a successful monetization solution because it is all about offering a natural experience to the user. A framework rather than a format, native encourages publishers to find a natural place to insert advertising. Whether during a pause in a mobile game or within an activity feed in a social media app, the key to native success is offering a natural advertising experience at a natural time.
From an execution perspective, mobile native adverts clearly outperform their peers. As eMarketer reported in 2015, the majority of advertisers using native formats reported higher audience engagement, greater brand lift, higher click through rates and better quality leads over other advertising types.
In terms of monetization, native adverts can make a highly positive impact on a publisher’s revenue streams. Facebook is the most high profile example of this, with the company’s native in feed advertising options powering it to multi-billion dollar success. Native advertising also offers tangible benefits to smaller companies. For example, game developer Hipster Whale, the makers of indie hit Crossy Road, credited native advertising as a major reason they generated $10m in revenues.
And that’s the best part about native advertising. Although it can seem complicated to integrate for a smaller developer, taking the time to find a natural place to insert adverts into your app without sacrificing the user experience can benefit any sized app business.
So, when it comes to considering ad-funded monetization for your app, make sure you consider going native. While there’s a time and a place for banners or interstitials, native offers greater returns for you as a publisher and a higher quality app experience for your user.