What is mobile ad monetisation and how it works? Part 1

Why you need to read this text

Every mobile app publisher wants to earn money and acquire new valuable users. One way to monetise is to insert ads inside the app. It looks pretty simple: you have set placements, embedded SDKs — now get your money.

Work with an ad network

Let’s imagine a developer. He created a mobile game and now wants to earn money from advertisements that will be embedded in it. He inserts some X ad network and now gets a little profit from it. Where does this profit come from? There are four actors participating in this process: developer, ad network, advertisers and users. Advertisers serve advertisements and pay in order for them to be published. The developer sends a request for ad impressions. The network gives one of its ads to the developer and also declares a percentage of the cost he wants to get from the impression.

A trivial scheme of how ad monetisation works. The network gets a request for ads from the developer (or publisher) — it then gives him an appropriate impression from its advertiser.

Competition

Let’s say the developer had read our article to this point and suddenly decided to insert the second network to his game. Would it be enough to only add its SDK? Technically it is possible in the case that those networks’ SDKs do not conflict with each other. Doing it this way is not very efficient however. Without comparing the impressions revenue from each network, the developer will not know which network is more profitable at that moment. Therefore, every impression can theoretically be sold, but not necessarily at the best price.

  • Both ad networks start competing with each other and as a result they decrease their commissions

Mediation

As we said before, the ad mediation platform distributes impressions between ad networks. This process is called a waterfall — an arranged list of advertising networks that in turn are requested if they have suitable ads. This process is defined as “calls”. They are also called “instances”, “placements”, “ad units” etc. But we consider the “calls” definition as the most appropriate. The amount of calls to a waterfall depends on the server of the ad mediation platform. The most common amount is about 20 times but it can vary up to 100 times.

Setup

How does it work: you point out the desired CPM for each network and arrange them in the order you would like them to be called by the ad mediation platform. CPM — cost per mile — is the revenue you will get from the network for each 1,000 impressions of ads through your app. Why 1,000? Evaluating revenue in dollars is much simpler than in cents. Additionally, setting up the cost for 1,000 impressions gives a network the possibility to buy back particular users for different prices, getting on average the set value, except for the cases of hard floors.

  1. Soft floor — CPM varies. It can be either higher or lower than what has been set by the developer. But on average the result will probably be lower. This is the most common floor among networks.
  2. Target floor — when ad networks can give the ad either higher or lower than the set CPM. When the volume is high the average cost should match target values though.
An example of a waterfall

Bidding

Earlier we described how the call works. In fact this is a brute-force attempt (submitting many different requests in order to eventually guess the correct one) on networks until the moment there is a suitable option. An alternative approach is one call per network. There are two types of this — the first involves a price that is already known and the second one involves an unknown cost.

An approximate scheme of the work of a hybrid waterfall. To be clear, a sequential call process is described here.

Optimisation

In order to understand which way of working with mediation would be the best, there needs to be multiple setup tests. Waterfalls are being optimised with split-tests. The more data on the waterfall we have, the more precise output we will have. Most mediation platforms give developers all the tools to try both types of waterfalls and compare them. But even with high volumes the result is not always obvious. Therefore, it is crucial to evaluate them on a lower level than simply a comparison of the metrics of two groups. Self-made mediation scores an advantage because of the quality and quantity of experiments with split-tests.

Future

Everyday mediation configuration and optimisation could be pretty boring and time-wasting. At AppQuantum we solve this issue with presets — sets of specific calls to specific waterfalls with requests that are the most suitable for these networks. This allows prioritising requests inside of the network and getting 15–20% more revenue.

Summing Up

Let’s go through the main theses of this article. In order to establish successful monetisation of your app, do not stop at just one advertising network — it is always better to immediately install a mediation platform and to connect several networks. It is not worth writing your own self-made mediation solution since you can freely use ready-made ones. Build your waterfalls, do not neglect experiments, and search all the opportunities for optimisation.

What’s next?

In the second part of the article we will tell you in detail about the process of mediation configuration from a technical point of view. Subscribe to our blog to get all the updates and we promise you it will be of great interest and extremely useful!

Definitions

Ad Mediation Platform — a service that enables publishers to monetise their apps. You install this platform to your app by using an SDK that helps to distribute displays among ad networks on purpose to increase revenue.

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Mobile Game Publisher

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