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Bozo’s course on Mobile Dev Memo Academy: Ad monetization in mobile games 101

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KEY HIGHLIGHTS

💡 The 3 stages of evolution of early native ads.

💯 The best known native ad examples – Barack Obama, Farmville, Pokemon Go.

👨🏻‍💻 How recent incarnations of native ads are accessible to smaller game developers.

🤔 The factors that an app should consider evaluating the opportunity with native ads.

👀 Most native demand comes from brands – not from games or performance advertisers.

🎥 How CPMs for native ads compare to rewarded video or interstitial ads.

👌 Why native ads may not be a natural fit for performance advertisers.

🧐 Do native ads cannibalize your rewarded video, interstitial and banner ads?

🙋 Why revenue impact shouldn’t be the primary criteria for assessing viability of native ads for a game.

😅 The key pitfalls that a developer should watch out for while evaluating native ads.

KEY QUOTES

Connecting ads to the content

There has to be a more natural fit between the brand and the game. So that led us to have Farmers Insurance, offering to insure your crops in Farmville. Or, for example, Century 21, which is offering real estate in WeCity, the city building game.

Leveraging the game’s natural ad spaces

So you will have natural advertising spaces within the game like billboards or TV screens, and you will show ads there, but you will not directly work with the advertiser, but you will actually have an ad tech partner – so an ad network that works either with brands directly or their agencies or DSPs.

An opportunity to advertize seamlessly

The first thing I would do is check if my game has these native and natural advertising spaces already, where I could show these ads. So think of billboards, pitch side ads in sports games, racing tracks and racing games and so on. And even if they are not implemented, so you don’t have to have them, think about: could I add these easily into my game without jeopardising the user experience.

Location location

Because we are in such an early stage, demand and fill rates are going to be extremely low outside of tier 1 countries. So if you don’t have users in Tier 1 countries, or you don’t have a significant number of users, then again, native ads will probably not matter for you at this point, but things will change.

How demand is tied to content

Demand is unlike rewarded video and interstitials where most of the demand is actually coming from our fellow gamers and other gaming companies. In this particular case, demand is coming from non gaming brands. So it’s usually consumer brands with which ad networks are working either directly or through agencies or through the DSPs. That’s in terms of what kind of ads they can expect. In terms of fill rates, I would say that in Tier 1 countries, the fill rates tend to go around 20%, which is much lower than what you’re used to get for rewarded videos and interstitials again, but it’s an entirely different beast.

The upside to having unrelated ad content

It’s not all necessarily about the revenue impact, it’s also about the user experience, which is nice. Yeah, they fit nicely and basically you’re diversifying your portfolio with in-game ads that are not only gaming related, so it has some benefits to it that are not strictly about the new revenue stream.

Being mindful of placement

You need to make sure that you’re implementing things the right way, so you don’t end up in a situation where there are a lot of accidental clicks if the ad is very close to the area where a user would click because he wants to play the game.

FULL TRANSCRIPT BELOW:

Shamanth: I’m very excited to welcome Božo Janković to the Mobile User Acquisition Show. Božo, welcome to the show. 

Božo: Thank you. 

Shamanth: Excited to have you because I’ve certainly heard very, very good things about the last class you taught at the Mobile Dev Memo Academy, and very excited to check out your course. And certainly also to dive into all things ad monetization in today’s interview.

Božo: Yeah, thank you. I’m really excited to be joining your programme as well. 

Shamanth: Indeed, we’re going to be talking today about native ads, and the native ad monetization opportunity. And really, when I think native, in my mind comes it across as one of those terms that can be almost a buzzword. But you really seem to know and understand not only how to leverage it, but also leverage it for games at scale. And all of that is definitely something we’re going to be diving into today. To start off, can you give us background about native ads? And obviously, these have been around even before mobile apps were a thing. So what did this look like prior to mobile apps?

Božo: Yeah, so that’s a very good question, because I feel that the term native advertising & native ads, has seen a tremendous evolution over the years. And it’s definitely something different to what it used to be a few years back. It probably makes sense to differentiate among several types of native ads, at least what they used to be. So the first type I would say is when brands are finding natural advertising spaces within the games, and so they start showing ads there. So think of billboards, or pitch side ads or TV screens, and where you might have seen the ad in the real world that’s happening in the video game. And this is probably where most collaborations used to be back in the days. 

I know one example that basically got a lot of attention from mainstream media as well. And that is back in 2008 or when Barack Obama was running for presidency, actually, he was running ads in an NBA Live game by Electronic Arts. That got a lot of attention from both from the industry, but the general public as well. And that’s just one example of how things used to run. 

And then the second type I’d like to point out is where we take it a step further, and we say, okay,

There has to be a more natural fit between the brand and the game. So that led us to have Farmers Insurance, offering to insure your crops in Farmville. Or, for example, Century 21, which is offering real estate in WeCity, the city building game.

So I’d say that, you know, this is the next step that the industry took. 

And finally, the third stage, at least in this life cycle of native ads, I would say is when developers and brands are not only focusing on in game elements, but actually expanding their collaboration to the real world as well. And one example your listeners and followers might be familiar with is when Niantic work on their game Pokémon GO in collaboration with McDonald’s in Japan, so what was happening is basically, Pokémon GO turned McDonald’s restaurants in Japan into Poke Stops and Pokémon GO gyms. Back in the day, it was reported, but not officially confirmed by either side. But basically Niantic was charging McDonald’s anywhere between 15 and 50 cents for each unique visitor for Pokémon GO players that were visiting McDonald’s stores. So this is basically how things used to work.

Shamanth: Yeah, yeah. Crazy, right. And I would imagine that for McDonald’s to do that deal, or Obama to do that sort of deal, they would have needed fairly big partnership teams or BD teams, fairly big teams of lawyers and attorneys and brand managers to sit down and talk to each other and make some of these things happen. And, of course, with some of the more recent native ad opportunities that you have seen, that sort of heavyweight BD team involvement isnt nearly as necessary. So can you talk to us about what some of the more recent incarnations of native ads are – and how is that different from the models you’ve described that were prevalent in the past?

Božo: Yeah, absolutely. You’re absolutely right. So before, it used to be the game of big players, so a big brand who has a significant advertising budget that they can dedicate, and have probably creative and business development and legal teams, all of the things you pointed out. On the other hand, for developers, it was also a huge effort because you need to do the extra development, extra design work, again, plus business development and legal. And plus you needed to have a substantial user base in order to attract attention from the brand because you’re working with them directly. And so from that point, we actually see transition in the last year, year and a half or so, where native ads are getting a completely new meaning. And this means that smaller games and small brands can collaborate together, but not necessarily directly. So let me just describe how it works. 

So usually it will come down, it will boil down to the first model that I described.

You will have natural advertising spaces within the game like billboards or TV screens, and you will show ads there, but you will not directly work with the advertiser, but you will actually have an ad tech partner – so an ad network that works either with brands directly or their agencies or DSPs.

And in that way, you’re getting necessary demand for your game. It’s much easier because you don’t have to work with a lot of brands at the same time. It’s a lot less development effort on your end. 

So basically a lot less dev effort on my side as a developer and as an advertiser, I also get a more diversified advertising spend. And it’s a win win situation, I would say for both parties, and it’s a lot more scalable.

Shamanth: Yeah, right, and it sounds like, with the more recent incarnation of these ads, they’re being treated almost as standardised ad placements, much like rewarded videos would be or interstitials would be and then you’re like, right, maybe I have a football game and there’s a placement that I identify, so any ad can fit in there. Right?

Božo: Absolutely.

Shamanth:  So, let’s assume an app is considering running native ads. What are some of the questions they might ask to evaluate the opportunity? What should they look for within their app, but also outside when they look at providers to assess whether this is a good fit or not?

Božo: Absolutely. So, I would say that we are still in early stages of adoption of this format, at least on the side of gaming studios. I would say that anyone who’s implementing native ads at this point is probably an early adopter or even an innovator and we still have a way to go for this to be more commonly known and used. 

However, there are things that we already know and should be mindful of if we are even considering running native ads in our game.

The first thing I would do is check if my game has these native and natural advertising spaces already, where I could show these ads. So think of billboards, pitch side ads in sports games, racing tracks and racing games and so on. And even if they are not implemented, so you don’t have to have them, think about: could I add these easily into my game without jeopardising the user experience. 

So we’re not talking about banner ads and just putting it simply on bottom or top of the screen. Is there somewhere where I could actually implement them and make it look nice. And so if this is the basic thing that you should consider, and then if this proves to be true, then you need to move into other steps and things to consider. 

First, you need to understand your audience size. Although you don’t have to be a multi million DAU game, you still need to have some decent scale, at least some scale of, let’s say 100k DAUs in order for this effort to make sense. And one more thing about the audience you need to make sure that your geo distribution is appropriate for this type of format.

Because we are in such an early stage, demand and fill rates are going to be extremely low outside of tier 1 countries. So if you don’t have users in Tier 1 countries, or you don’t have a significant number of users, then again, native ads will probably not matter for you at this point, but things will change. 

So those are two things that I would consider at first. And then the third thing that I would like to understand when evaluating this opportunity is how many opportunities for showing ads or for getting those impressions, I have in the first place. So, I need to understand my session length, and the number of sessions during the day, and how many times I will have the opportunity in one minute or in any amount of time to show an ad. When I have an understanding of that, I need to get inputs, some estimates or assumptions from the ad networks, what are the fill rates that are reasonable to expect per country, and also the CPMs that are reasonable to be expected in order for me to come up with at least a rough but reasonable understanding of the revenue potential for my game. And if all of these things make sense, and if I’m comfortable with moving forward, then I’m making an informed decision: okay, yes, this makes sense. Let’s move into the implementation phase.

Shamanth: Right, right, so the number of boxes that need to be checked, it sounds like from does it even feel right for the game to decide whether there’s enough of a market, there’s enough of a user base, and whether the partnership is right – sounds like the number of boxes they need to check. Out of curiosity, they do have to have an SDK from one of these ad providers?

Božo: So my understanding is that the SDK is definitely a requirement – as for the rewarded videos or interstitial ads.

Shamanth: Got it. Got it. And I know you said the fill rates tend to differ by country since it’s somewhat early on as compared to some of the other ad formats rewarded or interstitials. What sort of fill rate can you expect? What are the CPMs – and any other aspects of demand can an advertiser expect via native ads?

Božo: Okay, so the first thing you know, any developer that’s considering this should know is that

Demand is unlike rewarded video and interstitials where most of the demand is actually coming from our fellow gamers and other gaming companies. In this particular case, demand is coming from non gaming brands. So it’s usually consumer brands with which ad networks are working either directly or through agencies or through the DSPs. That’s in terms of what kind of ads they can expect. In terms of fill rates, I would say that in Tier 1 countries, the fill rates tend to go around 20%, which is much lower than what you’re used to get for rewarded videos and interstitials again, but it’s an entirely different beast. 

And in terms of CPMs, I think what’s reasonable to expect is CPMs that are two to three times lower than for rewarded video, which is obviously the best performing format on the monetization side, but as more competition comes in, this will probably change as well for the better. But for now, you should just be realistic and keep your expectations lower than for the best performing formats, which are already in such a mature stage of development.

Shamanth: Yeah. And out of curiosity, why do you think that most of the advertisers on native are brands because I would imagine if I could show as a performance advertiser – if I could show an ad in a football game, that gives me access to gaming audiences. Wouldn’t this be a natural fit for performance advertisers as well?

Božo: You’re right. It can be used for performance as well. The thing is that, at the moment the demand that we see, in some cases, it doesn’t even require a click. So it’s a pure awareness campaign, and so doesn’t require a full attention from the user. It can be implemented in more ways and more flexibly, than if it required a click or an install. It doesn’t mean that all demand is non clickable, clickable and non clickable. It’s just that for brands, performance, I’d say at least not at this point – it’s not so important as for video games where you know, you have laser precision as to how much money each user is making for you and how much you paid for them, so it’s much more data focused than brands.

Shamanth: Right. So, this doesn’t even elicit clicks from users, which is understandable, given that it lies in the user experience. And, you did express the CPMs are lower, and the fill rates are lower than interstitials. So, do you also find that if a developer were to integrate native ads, is there any way that could cannibalise the interstitials or rewarded videos? Or is this just accretive on top?

Božo: So, I don’t see this as a big concern or even a concern at all. Because I feel that these are very different products and very different value propositions for everyone involved. So if you look at rewarded videos, they work in entirely different ways. First, you’re providing users a reward – and it’s user initiated. So if the user wants to interact with an ad, they have an option to do so. And they are getting a reward for that. So if they see another native ads, this will not motivate them less to watch rewarded video because they’re watching the rewarded video in order to get reward. 

With interstitials, it’s also different because for interstitials, it’s system initiated ads. We as developers, are forcing these ads to our users. So engagement rates cannot suffer because users actually saw a native ad, and the click through rates should not suffer either. And then, if we look at banners, this is where we’re getting maybe into a dangerous territory. 

So native ads shouldn’t be looked at as a substitute for banner ads. And basically, if you already have banner ads, and you want to add native ads as well, then you need to be mindful of that because these formats are much more similar than previously mentioned. And you need to add new ad placements into the game, if possible, and not replace them, if you want to actually increase your overall revenues.

Shamanth: Yeah, yeah. And I think that makes sense to think about this very differently from your other placements. And I know you did say this is still somewhat new, so people are still adopting it. So in terms of revenue opportunities for a developer that’s looking to adopt native ads, what sort of incremental revenue lift, even if it’s a ballpark, do you think they could anticipate if they started down this path?

Božo: So I’d say it’s a bit tricky to give some general guidelines – it can still be misleading, either in a positive or a negative way, just because it very much depends on your current implementation, or the format’s you’re using. 

If you’re a hyper casual game, I assume you already have interstitials, you have rewarded video, you’re super aggressive with the approach, you have incredibly high ads ARPDAU, so I would say that in that case, native ads are going to be a lot less significant new revenue stream, but again, ad revenues for these type of games are also much more important. So it might make sense for them to do it. And then if you’re a game developer who’s very mindful of the user experience, and don’t want to show interstitial ads, so you only have rewarded video, you’re not super aggressive, even with this format, then you’re not making huge amounts of money on this. And, you know, in relative percentage wise, you’re gonna see a bigger increase with native ads. 

But what I like about this format is that

It’s not all necessarily about the revenue impact, it’s also about the user experience, which is nice. Yeah, they fit nicely and basically, you know, you’re diversifying your portfolio with in-game ads that are not only gaming related, so it has some benefits to it that are not strictly about the new revenue stream. 

Shamanth: Indeed, indeed. And also I would imagine, unlike rewarded video or interstitials, they’re not taking users out of the app. It’s not hitting your retention. So I think all of that certainly makes sense, in that you shouldn’t evaluate this just from the perspective of revenue. And then what are some of the common mistakes that you’ve seen developers make around native ads?

Božo: So as we already kind of mentioned a few times, we are at early stages. So we haven’t seen so many implementations, or we haven’t seen so many mistakes. But that will certainly change and we still have a lot to learn. I would say there are still a few things that we already know – and we can avoid or we should be mindful of when thinking about native ads and moving into the implementation phase. 

First, about the partners, so different partners will be able to provide different value to you. Some of them are not even working outside of the Unity engine. So if you’re developing your game in some other engine, you need to be mindful that the partners will not be the same. Also, different partners are at different stages of SDK development, their stability, and so on. So unlike rewarded video where you have a wide range of networks with which have SDKs that are properly tested and it’s a very mature stage, here you even need to think about that: is the SDK stable enough? Is it properly tested? And about that integration piece – is it going to be easy enough for me to do it? 

Also, when it comes to the implementation inside the game, like the part that the user is facing, if the user interface needs to be done well and you need to fit those ads natively and properly into your gameplay. And if we’re talking about clickable versus non clickable,

You need to make sure that you’re implementing things the right way, so you don’t end up in a situation where there are a lot of accidental clicks if the ad is very close to the area where a user would click because he wants to play the game.

So you would need to be mindful of that. And, again, going back to the cannibalization piece, if you’re running banner ads already, just be mindful of that, so you implement it in a way that it’s gonna increase your revenue overall.

Shamanth: Right, right. Right. Certainly there are, especially since this is a somewhat new format. I think developers need to be mindful of a lot of these things. But that absolutely looks like it’s a significant incremental opportunity that a lot of app developers can and should consider.

Božo: Yeah, I mean, I can tell you that in the last few months, I’ve seen several announcements from big gaming companies that actually said, yes, we’re moving forward with native ads. So that is certainly somewhat encouraging, that we see the big gaming companies are moving in that direction. And there are several examples already where this has already been done and implemented. So it’s interesting to see those examples and get some reference as to how it can look like and if it makes sense.

Shamanth: Indeed, indeed, yeah. And I’m certainly excited to see how that shakes up and plays out in the next couple of months and years as we go forward. Božo for now, perhaps this is a good place for us to start to wrap up. Thank you again for being on the Mobile User Acquisition Show. And for our listeners, again, Božo is going to be teaching a course on ad monetization 101 on the Mobile Dev Memo Academy, we are gonna link to that. If this was interesting, if this was instructive to you guys, definitely check out his course to go much, much deeper on all things ad monetization. For now, thank you so much Božo.

Božo: Thank you for having me.

A REQUEST BEFORE YOU GO

I have a very important favor to ask, which as those of you who know me know I don’t do often. If you get any pleasure or inspiration from this episode, could you PLEASE leave a review on your favorite podcasting platform – be it iTunes, Overcast, Spotify or wherever you get your podcast fix. This podcast is very much a labor of love – and each episode takes many many hours to put together. When you write a review, it will not only be a great deal of encouragement to us, but it will also support getting the word out about the Mobile User Acquisition Show.

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Thank you – and I look forward to seeing you with the next episode!