In-App Ads Improve LTV for Both Publishers and Brands

Aurelie Guerrieri

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App publishers spend a lot of time balancing user experience and monetization. Some believe that a happy user and in-app ads are mutually exclusive - that ads undercut in-app purchases, irritate users and ultimately drive them away - leaving publishers and brands at odds.

In truth, there is a wealth of data to support the idea that native, in-app ad formats that provide utility, use video, or meaningful value exchange actually improve several key metrics pertinent to both publishers and brands, including a customer's Lifetime Value (LTV).

The challenge is getting brands and publishers to understand that their individual objectives and paths to monetization are actually very well-aligned. Their shared business risk of irritating customers - is easily overcome by one mutually-beneficial solution: new native ad formats and approaches.

Defining Lifetime Value (LTV)

LTV is the sum of a broader equation with three parts: monetization (revenue from ads, subscriptions or IAP), retention (largely based on engagement and user lifecycle) and virality (the value of each user in referring others).

A recent survey found app publishers agree LTV is a significant metric, but only about 5% measure it. This is a clear indication developers are over-concentrated on early-stage marketing activities correlated with virality and retention, and not focusing enough on monetization.

The problem is that publishers get caught up trying to achieve scale ASAP through virality, while eschewing ads based on the assumption users find ads inherently irritating. This perception is both incorrect and at odds with the ambitions of brands seeking to engage mobile users.

What a brand wants, what a brand needs

Consider for a moment the world of in-app advertising from the POV of a consumer brand. They too measure LTV of customers and see investment in in-app ads and native content as critical to monetization and retention. Specifically, brands want to measure engagement within apps (again, same as publishers) and demonstrate how users value the engagement (because what we value, we stick with and share).

On the surface then, brands and publishers seem well-aligned around the objectives of engagement, retention and virality. So why the reticence to go all-in on in-app ads? The issue, of course, is that publishers care first and foremost about user experience and are predisposed to thinking of brand advertising as the polar opposite to retention.

But this overlooks that both brands and publishers rely on fresh, first-person data to succeed. We just haven't gotten to the point yet where that data is being harmonized, shared and actioned at scale. It's a transitional stage, but it's changing. New ad formats and approaches are creating opportunities for both publishers and brands and there is growing evidence that in-app ads are good for everyone's business.

The proof is in the numbers

One of Cheetah's clients, the publisher of a popular free calendar app, wanted to improve UX while also increasing their LTV by providing relevant in-app content to engage users and monetize. So, we created a simple, elegant native ad format on the app's lock screen that allowed users to get targeted content tailored to their calendar items. As a result, the client's revenues tripled to millions per month, with a 20% rise in Daily Active Users and total user grew to more than 100 million.

In another example, FusePowered - dubious of the notion that ads detracted from user's in-app purchases (IAPs) - looked at native rewarded video and found that, not only are ads not an impediment to IAP, they actually improve both the number of IAPs and average value:

"Of those who did not watch a rewarded video, only 0.7% made an IAP. In comparison, 4.7% of players who watched a rewarded video made an IAP. That's 6X more conversions from players who watched rewarded video than from those who did not."

For both publishers and brands, these kinds of results are electrifying. The brands want in, they want it to be easy and they want to scale quickly. That's why app publishers need to work with a partner that provides easy integration, a variety of native ad formats, a transparent view of metrics, quick payouts and presence in foreign markets to scale globally.

Conclusion

Native in-app ads that blend with organic experiences and offer something in return for a user's attention demonstrably improve engagement and LTV for both publishers and brands.

Value exchange and rewarded video techniques can be effective, as is creatively tapping into moments of utility and unused screen real estate.
In all cases, finding a partner with the business intelligence, tools, network and global reach help you scale is key.

Aurelie Guerrieri, VP of Global Marketing Solutions for Cheetah Mobile/Cheetah Ad Platform.

Originally Published at Mobile Advertising Watch

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