A Beginners Guide to Ad monetization: The Fundamentals by Felix Braberg

is ad ARPDAL. So that's the ad revenue per daily active user.
And it's one of the most important metrics in mobile ad monetization, because basically it's the clear channel metric that you look at, because essentially it gives an indication of what your performance is. That is to say the ad revenue, despite of UA fluctuations.
So ad ARPDAL is one of these things that you should always track every day. Hello everyone and welcome to another very special episode of Two and a Half Gamers.
This is part of our individual series. I guess we call them ASMR Insights, where essentially one of the hosts of Two and a Half Gamers Trio just goes through something that they know quite well.
Mathieu, a couple of weeks ago, had a great episode on the introduction for beginners on user acquisition. So I thought I'd spend the next 20 or 30 minutes doing exactly the same.
So I'm going to give you guys a introduction on the most important aspects of ad monetization. The things I'm going to go over, I'm going to go over the basic terms and go through each one of them so you understand it.
Explain how the overall marketplace actually works. We're going to go in a bit depth onto ECPM and exactly how it's calculated.
And I'm going to go into how networks make money, soft launching, and the value of an impression. Then also I'm going to touch on what you should think about when you choose a mediation platform, what you should think and what metrics you should look at when you're scaling with ad revenue.
And then also go over the main ad networks that you can actually work with today. And I think that will take us about 20 or 30 minutes.
But basically, this is just designed to give you a great introduction into how mobile ad monetization works. But enough about that.
Who am I? I'm Felix. I'm one of the co-hosts on Two and a Half Gamers.
And essentially, I've been in the mobile industry now for close to eight or nine years. I started off working in two DSPs and one ad network so basically I've seen both sides of the coin.
DSPs and ad networks are the companies I guess that are buying the ads in the games that you're monetizing with ads and essentially for last couple of years, I've been helping publishers increase their ad revenue. So without further ado, what I want to start to talk about here is just the basic terms.
And essentially the main basic terms are that you need to know is ECPM, fill rates, ad revenue, obviously, ad ARPDAU and ad viewer rates. And we'll go through all of them now.
So first of all, the basic term that you need to know the most when it comes to mobile ad revenue is ECPM or effective cost per melee. That essentially means what a network pays you for a thousand impressions inside your application or game.
So they're grouped together in groups of thousands, a thousand interstitial impressions, a thousand rewarded impressions, and a thousand banner impressions, right? So that's essentially what you get paid. We'll go into that one in a bit deeper when we're done with the basic terms because it's quite an important one.
The next one is fill rate. That is the percentage of ad requests that are actually sold to a network when you show an impression to your user.
So if you have 1000 impressions, and if you essentially fill 900 of them, then you have a fill rate of 90%. So that is actually if you can sell all of these impressions that you're wanting to sell as well for a price.

So ECPM plus fill rate together equals ad revenue.

So essentially, ECPM and fill rate, that's how much together is how much money you actually get paid for the ads that you have in your game.

So those two components, right?

And what a lot of people get quite wrong is that they always chase after the highest ECPM. But also, you should also be looking at fill rates because I would gladly take a lower ECPM if it meant higher fill rates that resulted in a higher ad revenue, right? So that's how you need to think about that.
The next one, which is probably one of the most important terms, is ad ARPDAL. So that's the ad revenue per daily active user.
And it's one of the most important metrics in mobile ad monetization, because basically, it's the clear channel metric that you look at, because essentially, it gives an indication of what your performance is, that is to say, revenue despite of ua fluctuations so ad arp that was one of these things that you should always track every day and you should also refer to ad arp that when you're talking to networks because if you only talk about ecpm they might think you're a bit dumb and we don't want that and the next one is more on the design terms, which is ad viewer rate or engagement rate.

That is the percentage of users that actually interact with your ads. And there's a different metric on the different ad units, what's considered a good ad viewer or a good engagement rate.
Typically, you say that with rewarded video, anything below 45 percent of overall ad viewer rate on rewarded ad means that either the placement is not visible enough or the reward is not high enough to essentially watch these rewards and that's a good sign maybe to rethink one of these two aspects and make the rewarded ad placements better on interstit typically, if you actually want to earn money with interstitials,

you ideally want to have interstitials in the 70% to 80% range.

And that is essentially because the interstitial ad unit is not an opt-in format, right?

You don't choose to watch an interstitial.

You get served in interstitial, right?

So usually, you want to have that as high as possible because because essentially you're monetizing your users when they have no choice. The thing to be careful usually when interstitial ads though, is that it's quite a big drag on retention.
And usually what I sometimes recommend to people, we'll get to that on the mediation setups, but if you're running interstitial ads, what I usually recommend is actually testing out various bid floors, which means that essentially in the mediation platform, you say that I don't wish to have an interstitial ad unless they pay at least X value.

And essentially, that means you're not serving interstitial ads that otherwise wouldn't be worth that much.

And essentially, you're saving your retention that way.

So banners is another ad unit that's used quite widely here. I would also say that a good ad viewer engagement rate is usually anywhere between 80 to 90%, right? So if you think about it, the banner ad is a very small compact ad unit that's usually at the top or at the bottom of a game and usually when this makes money is that you need to have a big user base that watches these type of ads during gameplay and they watch it for a long time right so the ad viewer rate here needs to be quite high it needs to be visible at all times typically the puzzle genre monetizes banner ads the best, I would say, which also brings us quite neatly into impression per daily active user or the imp DAO.
So that is how many impressions you're serving over your daily user base. So what I usually say here is a good metric to start with is that you want to have around five rewarded ads in impressions per DAU.
Interstitials, the closer to seven, the better or higher is always better. And banners, typically you start to play around with something called the refresh rate of the banners.
In the olden days or on Admon mediation, refresh rate typically is around 30 seconds. So one new banner ad every 30 seconds.
And on other mediation platforms like LevelPlay and Max, you can even set it to every 10 seconds. So the trade-off you're doing there is that you're showing a lot more banner ads.
And that means actually the impressions per DAU on LevelPlay or Max can actually get up as high as maybe 90 or 120 in some of the best games that I've worked on. So those are the main kind of beginner or terms that everyone should be familiar with.
And those are some good benchmarks, I think, as well. But in general, it's quite simple.
The more users you have that watch, the more ads, the more you're going to get paid. So that's kind of the supply side, where basically you get users in your game or app to watch ads, and then you sell them.
We'll get on to the demand side a bit later. But just also wanted to talk a bit about eCPM, right? So this title is essentially what we talked about before, Effective Cost Per Melee.
That's what we said. You get paid for 1,000 impressions.
And the interesting thing here is like, what actually do you think decides what the ECPM is?

Like, how do networks actually know what to pay you for your impression, right?

So the different ad networks, they work with different amount of inputs.

So basically, it's rumored that Google uses 91 different factors in determining the ECPM,

the networks, they work with different amount of inputs. So basically it's rumored that Google uses 91 different factors in determining that ECPM they're willing to pay.
Applovin, I think I've heard, uses 70 or 71. IronSource uses 61.
And basically they're weighted to different things. But all networks have access to certain data points that everyone has access to.
And pretty much the main ones that decide actually what your network pays you for impressions is they track the last seven days of data of their actual performance in your app or in your game. And basically that decides what they're willing to pay for impressions when they see new users.
So the main things they look at is click-through rates. What's the average click-through rate they saw in the last seven days? So how often do users actually click on the ads that they show them? What is the install rate? Like the day users actually download and start using these apps that were shown in user acquisition campaigns.
The competitiveness, so how often they bid for a user or lose. So that's the win rate.
So how often do users actually win bids or how often do they actually win bids in the last seven days? Obviously, geolocation is one of the most important factor because that decides usually on average how wealthy a user is. So the god geolocation that still pays the highest eCPMs is the state.
And then one other thing that they actually look at is the percentage of the user base that has made an IAP before in that network's history. So one interesting factor to know is that if you're running UA, the eCPM or average value of your users tends to increase.
Now, why is that? So let's say you're running UA with a company like Mintegrel and they bring a user to your app, they're using it, and then they see it in the mediation platform. Essentially, that means that Mintegrel for that user has tagged a bunch of data that they already know about that user to their backend, which means that they can assign a more accurate value of that user to the game or to the actual app, which means that they can make a more informed decision on what they're willing to pay.
So that's typically what you see ECPM increase when you're doing paid search, right? Or paid UA. And one other thing is called, or is like based that ECPM is decided on is the number of impressions that was shown to the user before.
So all networks basically have algorithms based on something that I call the recency effect, which essentially means that they assume that the first impression a user sees every day has way more attention span than subsequent impression, which means that the highest price you'll ever get paid for an impression for a user is the first one that they see in a day. So why is this important? So if you're showing, let's say 12 rewarded videos on an imp DAO in your app, that means that the value will gradually decrease of each impression as you reach the 12, right? So it's, yeah, one is worth more than two, two is worth more than three and so on.
And so it goes, right? So those are the main things that networks actually take into account when deciding the ECPM. And kind of, you think about it, we'll get into optimization a bit later, but the only thing you can kind of do here, because you need to be okay with the fact that, you know, these networks get paid to show ads for users install other apps, right? So you only truly get quite high ECPM if you have a quite valuable user base.
And that's usually what decides the ECPM, right? So one other thing that you can do as a studio to actually increase the ECPM is to play around essentially with competitiveness, which we said

was a third factor that they look at, right? So what you can actually do to increase competitiveness, and we'll get onto this later, is to add more partners that contribute to the overall share of ad revenue in a meaningful way to your users. We'll get onto that later.
But I also just wanted to spend a bit of time talking about how ad networks actually make money, because it's one of these things that a lot of people who start out in the industry don't quite understand. So at its core, a network or an ad network on mobile, they connect people who have user acquisition budgets to people who want to download apps, right? So if you're playing another game, if you're in another app and you see an ad, you essentially sometimes want to download that, right? But that essentially means that what the network actually does is two main things, right? They provide the connection or that's the SDK connection and link where they can put an ad in front of that user.
And what that also means is that they also have algorithms based on talk to ensure that the ad they're putting in front of the user is more likely to match up with the targeting that you're doing and actually monetize in some points. So ad networks make money typically in three main ways.
That's through margin that they take on the user acquisition campaign. So you bring them $1,000 a day to reach X amount of targets.
They charge anywhere. Yeah, no one really knows what the exact margins are.
They're quite secretive about this. I mean, from the end of year statements of Applovin, it looks like they're charging anywhere between 40 to 60%.
And you have to assume that it's kind of the same across the board at Google, Maloco, and all these other ad networks. The other thing that networks do to make money is that they charge actually their publishers.
Actually, that's what you call an app or a game that has ads inside of it, publishers, because they're publishing ads, right?

So they also charge typically a 30% fee to show the ad. And then that 70% of the rest of the revenue actually goes to the publisher, which showed the ad, right? And these things two together, the user acquisition margins and the ad monetization margins together make up the majority of ways that ad networks actually make money.
And then there's a third way. And it's quite interesting also.
So ad networks also make money a third way through reselling their inventory. you.
So what a lot of people, when you start off in the ad monetization industry, don't realize

is that when you're starting ad monetization, you think that 100% of, let's say you install Vungle, the Vungle SDK, you assume that 100% of the Vungle SDK ads that you get through Vungle is essentially all Vungle demand, but it's not. so what you can also do is you have the sdk link as a network right with the publishers and that means that you can actually also also earn a margin by allowing something called exchanges or resellers to bid in on your inventory and what you can do then is, you can actually see this in something called an

AdOps TXT file. So when you're actually starting off with ad revenue, you have to add something called an AdOps TXT file and an info.plist for each and every network that you're carrying, and you have to put that on your webpage.
And what that list actually is, and you get that list from networks is a list of all the resellers that are currently buying into the inventory and bolstering that inventory essentially so typically networks charge a 36 fee for resellers to actually buy via their sdk and this varies quite a lot between network and network so sometimes reselling is like 50 of a of a network's traffic, and sometimes it's 30. For big ones like Meta, Google, and AppLivin, it's quite a lot less.
But for the other ones, sometimes it's quite big. So that's actually why you need to keep your AdApps.txt file up to date when you actually make it.
So as soon as you actually start launching ads and you have a

mediation platform and multiple networks, you actually need to set up an AdApps.txt file. How this works is that a crawler for every network goes into your store listing, your iOS and Apple one, iOS and Android one.
And what they do is they look at the publisher website that you've listed there and then they look at the extension

adapps.txt

and essentially what they do is they look at the publisher website that you've listed there, and then they look at the extension adapps.txt. And essentially what they look for there is the codes that you actually give an approval for resellers to show ads.
And it's essentially a anti-fraud tool. So you should never really change this on requests.
The only thing that you should do with this file is maybe once a month start to update it because essentially the amount of resellers that networks work with varies quite a lot. And if a network is 50% resellers, you're actually losing quite a lot of money if you haven't updated this file.
So once a month is really good. The seller's JSON is exactly the same, but it's based on iOS and it does the same thing.
So that is a good introduction for the first, I don't know, 20 minutes right now on what actually and how the industry works with some metrics. So I just wanted to go into also on soft launching and how you should think about ads when you're actually scaling or getting started with ads.
So the most important thing that I usually tell developers

is that during soft launch or technical launch,

it's not that important to actually have

a mediation platform set up

because essentially what you're trying to track

in early stages of the game or app

is essentially how many ads you can show

or what we talked about before. What is the ad viewer rate and what is the impressions per DAU, right? So using the metrics that I highlighted earlier in this episode, that's usually a good North Star metric to think about.
It's like, don't worry too much about ECPM at all when you're getting started, because there's tons of things that we just highlighted you can do to actually increase it. So usually during soft launch, I just recommend to try to get that ad viewer rate and impressions per DAU as high as possible.
And basically what you're fighting against then is the retention, right? So if your users are watching a lot of ads, and that usually means that your retention, your day one, day seven, all these retention metrics will actually drop quite significantly because ads do drag quite a lot on when you're adding them.

but usually like here what i would say is uh if you're running a game i get i'm sorry here i guess what i'm trying to say is like the main question that you think about is kind of what is the value

of an impression and how you should think about that when you're actually doing your economy and budgeting balancing. So typically for a game that's 100% ad revenue driven, this usually means in the States that you're pretty much getting paid about two cents per rewarded impression.
And then globally, excluding the United States, this typically means that you're getting paid 0.8 of one cent. Interstitial ads, you typically are paid in the States on iOS and Android around two or one cents per impression.
All of this factors depending on what the ECPM is, right? Which we talked about a bit earlier. And a banner impression in the States is, yeah, typically for one impression is like 0.019 of one cent.
So it's quite low, right? Which is why you need to get the impression per DAU and ad viewer rate so high to actually earn any meaningful revenue from ads, right? So now we can kind of move on to choosing a mediation provider. So choosing a mediation is quite interesting, right? Because there's three main mediations that you can currently use.
There's a couple of more, but basically the three mains that are usually used that basically I would say is probably 95% of the whole mediation market is AdMob, AppLovin, and LevelPlay. And I'm planning to do a video each covering how basically the mediation platforms work that I will release in the next coming weeks.
But essentially, I'll just go quickly through the main three mediation platforms here. So AdMob is the first one.
It was basically launched in 2007. Then it got bought by Google.
It's basically the OG. It's been around for ages.
And what AdMob does extremely well is banner revenue and ad quality right so basically So basically, typically the banner revenue on AdMob is the highest and native. So basically that's what they do extremely well.
Interstitial and rewarded revenue typically has been higher on either App Lovin or Levelplay, but that's what AdMob does really well. App Lovin is also has their own mediation platform called Max, which is currently the industry leader.
Probably the share of, yeah, percentage of apps that are actually using Max that have ads is probably in between 75 to 85% right now. And typically the main benefits of working on Max is that you get access to ad ROAS and blended ROAS campaigns for user acquisition, which means you can actually optimize based on people watching ads instead of making IAPs.
They have really strong ECPMs on rewarded video and interstitial, but ad quality on AppLubbin can be quite bad, which negatively affects your overall retention metrics. Then you have Level Play by Unity, which is quite strong on Interstitials and Rewarded, usually not quite as strong as Applovin, but very strong as well.
Both Applovin and Level Play are not as strong on the banner side as AdWob, but basically Level Play also has good Interstitial and rewarded. But what LevelPlay really does quite well is that they have really good data manipulation tools, which means that you can actually use it and dive really deep into data, which is quite good.
They also have a cross-promotion tool that you can use for a fee, I believe. But that's just a brief overview.
I've been talking for 23 minutes already, and I kind of want to keep this under 30 minutes. So the next thing I wanted to talk about is scaling.
So you've done your soft launch, your technical launch, you see impressions. And before you're actually starting to scale your game, the first thing you want to do then is add the mediation platform.
And if you think back to how you as a publisher can actually impact the overall ECPM, one of the main things you can do is competitiveness, right? That we talked about. And the main thing you can do to increase competitiveness is actually adding networks that compete in your ad stack because that essentially increases the average value of your impression.
So the first thing you need to start doing when you scale is actually think about what networks to add. So the best rule of thumb here is that because mainly all networks are now on bidders or header bidding.
So it's technically a lot easier to

manage your mediation platform now than it was a couple of years ago. But what you want to start doing is if you're starting off and you have maybe 50 to a hundred dollars of daily ad revenue, pretty much here, you only need about three or four networks because honestly, usually what a network impacts if you're adding a good network is anywhere a 5% to 10% increase on ad ARPDAO.
So if you think about that, right? So if you're earning $100 a day and you're increasing the ad revenue by 10%, if you're adding a really good network, that means you're increasing by about $10 a day, right? So that's how you should think about it, right? So as uh effort as you put into the daily or optimization of it just remember that the returns that you're actually getting is like yeah that's a good way to think about it right so yeah don't spend too much time on it for just 10 of a hundred dollars a day but if you're earning ten thousand dollars a day that's actually time quite well spent right so because that equals that equals like $1,000 a day, right? So if we think about networks, so usually I'd say up until maybe $500 a day, it's fine for three or four networks. We'll go into which ones I would usually recommend.
But basically, as you're scaling in daily ad revenue, it's also very important that you scale your ad stack at the same time, right? And what that means is you basically need to try some of the networks and basically see if they're actually improving the competitiveness of your stack. And if they're not, you need to remove them because they're actually not doing anything.
And then it's just headache to get paid from all these various different networks. So choosing main networks, what I usually see people starting with on Android.
Interstitials, I would usually recommend starting with Applovin, Meta, Google, Unity, Maloco, Mintegrel, Immobi, Liftoff, and DTX on interstitials. On rewarded video, the biggest ones that I currently see is Applovin, Google, Meta, Google Ad Manager, Surprising still holding on quite tightly, Mintegirl, Unity, Maloco, IronSource, and Imobi.
On Banner, the biggest network is actually Amazon Publisher Services on Android. Then Google Bidding, Meta, Imobi, Pubmatic, Google Ad Manager is quite good on Banners still on Android, Mobile Fuse, and Digital

Turbine. On iOS, on interstitials, the ones I usually start to recommend to work with is AppLovin, Google, Unity, IronSource, Minty Girl, Maloco, and Liftoff.
That's kind of the same on both interstitials and rewarded videos. That's the same list.
And then again, on banners, on iOS, Amazon is still the biggest.

Google bidding is after that,

the second biggest.

Maloco is really good as well. AppLove and Imobi, Verve, Liftoff and Somato are also quite good.
Those are ones I would usually recommend to start with. But usually what you want to do here is you add a network in an A-B test when you're starting a new one.
And you just want to make sure that the ad arc doubt is actually increasing. And basically also what you want to look at when you're running these tests is what is the share of revenue that that network is taking, right? So you want to have all your networks over at least 5% share of revenue.
And you don't want to have ideally a network over 40 because essentially then, then they have pricing, like power in your app. So usually you find it that the apps that have the best ad or the best metrics in ad monetization, are usually the apps that, yeah, have a good balance on the network.
So it's also important that you, as you scale the game, right, you also need to scale your capabilities alongside it. So you also need to have, if you're starting to earn usually around 15 to 25k a day in ad revenue, that usually means that you can actually have account managers at all of these apps.
And basically you should have regular dialogues with them. And when you're having these regular dialogues, what's actually important to think about is asking sometimes some stupid questions.
Because essentially, how networks sometimes divide demand on their platform is sometimes able to be managed by humans, right? So if you actually push a little bit, sometimes you can get basically better terms. And I always joke about the fact that the best ad monetization managers are constantly grumpy.
so the best way to actually get quite a good outcome with all the networks is basically to be grumpy. And yeah, I think that sums it up.
In the coming weeks, I'm going to do an in-depth dive on both AdMob, AppLovin, Max, and Unity Levelplay to kind of show how it works and how to get started there. But I think that's a good place to end it for today.

Please remember to subscribe and also be grumpy.

I'll see you next time.

Thank you so much for tuning into one of these special episodes of ASMR

Insights.

This has been Felix.

I've been giving you a nice little walk in on introduction on how to think

about ad monetization.

If you have any questions, message us.

We have a Slack group and it's linked below.

Best of luck to you all.

Bye-bye. Thank you.