The Power of Two

Aug 31, 2022
By: Carolyn Hom

The first half of 2022 has been a wild ride. Discretionary spending has slowed in the US thanks to inflation at a 40 year record high and the cost of necessities rising faster than average incomes. While the in-app purchase volume continues to grow alongside overall growth in the smartphone market, we also see US smartphone in-app purchase spending trends increasing at a slowing rate. 

(Source: eMarketer)

Consumers holding onto their dollars means apps can no longer rely on IAP alone to stay afloat. 

While mobile app users are tightening their belts, advertisers are pushing even harder to get those users to selectively spend with them. Cue increasing advertiser budgets to soften that blow – the IAA market is expected to reach $343.5 Billion by 2027, exhibiting a CAGR (Compound Annual Growth Rate) of 20.73% during 2021-2027. With more money being spent on channels like in-app mobile with higher user engagement, the right strategy can help capture advertiser spend.

IAP + IAA strategies in tandem are not a new idea. We tapped into Meta Audience Network’s report examining mobile game developer’s attitudes towards IAA and IAP monetization models where we found that 93% of developers surveyed use in-game ads as part of their games’ monetization mix – right on! App developers understand that ads can be an integral part of the monetization strategy and 56% of developers agree that rewarded video can in fact drive in-app purchases

So – how do I increase ad revenue to counteract the slowdown of revenue coming in through IAP?

Doubling Down on Ad Optimization 

We’ve established that complimentary revenue streams bring a healthy balance to an app’s growth strategy. Ad optimization can actually be broken down into two areas – app level optimization and demand stack optimization. 

App level optimization covers how the ad is integrated into your app, impacting the user experience with ads, both system initiated and opt-in. Think of this area as creating more opportunities for ads to be displayed. KPIs you’ll focus on improving in this area are engagement rate and completion rate, thinking through the in-app mechanics that drive users to see ads and get through the ads to reach additional exciting experiences.

Identifying with the user journey and motivations are essential in understanding how to optimize for engagement and completion rates. 

Demand stack optimization follows the tried and true path to maximize fill rate and CPM so that every ad opportunity yields the most revenue. This can be thought of as making the best of the ad opportunities created through app level optimization. The KPIs to be in tune with here include fill rate, response rate, and network and instance latency. 

Your ad mix is only the beginning of demand stack optimization and even this can change over time as the makeup of users evolves. While a 100% bidding setup is ideal for less manual waterfall management, we understand that a hybrid approach using both bidding and non-bidding (waterfall) demand sources is necessary with in-app mobile demand availability today. Creating key focus areas within waterfall optimization will help ensure that your work is meaningful and brings more revenue to the ad opportunities created in your app level optimization efforts.  

Building the best possible demand mix for your app requires a best-in-class mediation platform to simplify optimization. 

The Power of Two

Bringing app and demand level optimization workflows together creates a strong IAA offering, especially today as even the best IAP strategy is being hit with larger economic factors. 

DT can help you build a tailor-made strategy that brings you the best of both worlds – talk to us today.

By Carolyn Hom
Read more by this author