This article is part of a Gaming Insights series paid for by Facebook.

Whether you’re looking to increase revenue for a game that has only used an in-app purchase (IAP) model, or you are about to design a new game, there are a few steps you can take to test the revenue potential of in-app ads (IAP) — the first phase of transitioning to a hybrid monetization (IAP+IAA) model.

This article will help you answer the following questions:

  • How do I incorporate ads or increase ad volume in my game while managing risk?
  • How do I ensure a balanced value exchange for ads within the game economy?
  • How will I determine if the ads are successful?

Before diving in, though, you need to start by thinking about your goals. What are you aiming to achieve one month, three months, or one year from now? Maybe you are looking to increase revenue with limited impact on your current players. Or perhaps you’re looking to increase both revenue and session time.

Think about setting revenue goals — average revenue per daily user (ARPDAU) and/or eCPMs — as well as user engagement goals, user acquisition goals, and/or user retention goals.

Once you’re clear on what you want to achieve, you need to develop an action plan to get there. Ask yourself:

  • How many ad units will I need to achieve those goals?
  • What ad formats will help me achieve those goals?

Ready to increase revenue without impacting your game? Start here.

Step 1: Estimate your games’ potential daily ad revenue

To estimate the daily ad revenue potential of your game, use this equation as a guiding formula:

DAU x Ad Frequency per Day x Ad Engagement Rate / 1,000 = Subtotal

Subtotal x eCPM benchmarks = Ad Revenue Potential

In our downloadable guide, we’ve included more details on ad frequency, eCPM benchmarks, and some examples to help you compare estimated potential ad revenue to common ad-to-IAP revenue ratios.

Step 2: Design the ad into your game

The ultimate goal in designing ad entry points into your game is to generate engagement while minimizing disruption to the player. As such, your ads should match the look and feel of your game, while clearly indicating that the ad is not part of your content.

For example, if your ads are too well enmeshed with the game mechanics or too “native,” they may not intrude on the gamer experience. But, gamers may be unlikely to pay attention or engage.

Learning how to balance the game experience with your advertiser’s goals is a key point, because this is what will help achieve their goals, aka drive higher CPMs. This will also determine if more advertisers will want to run ads in your app.

Here are some best practices to think about:

  • Consider the value exchange offered by your rewarded video ad(s). It needs to offer enough value to attract clicks, but not so much value that the game becomes too easy, or discourages future spending in the game.
  • Clearly state what the reward is and what the player needs to do to get the reward. This will increase the likelihood of interaction with the ad.
  • Strive for a quality ad experience. Accidental clicks can have a bad impact on the user experience, so be sure to design ads to reduce this.

For more ideas on creative rewarded video entry points, check out Best Practices for Implementing 8 Common Rewarded Video Integrations. 

Step 3: Test ads on at least 10% of users

We recommend running the test on 10% of your users for at least 14 days, and observing the results. A small sample size allows you to pilot the impact on revenue and player engagement while managing risk. Two weeks is approximately how long it will take for the system to calibrate changes and level out.

Keep in mind: when you’re testing an ad format that you haven’t used before, it’s important to keep other variables constant over the testing period.

Step 4: Review metrics

After your test has run for at least two weeks, compare results to your goals and benchmarks from steps 1 and 2.

While it’s important to look at clickthrough rate (CTR) and eCPMs, we recommend focusing on ARPDAU.

Tilting Point is a great case in point — the mobile game publishing service is seeing up to $60 eCPMs with Audience Network. They were using IAP in all of their titles, but wanted to find new opportunities to drive incremental revenue from their users while maintaining engagement. Implementing Audience Network rewarded video ads helped the company achieve the high eCPMs that they were looking for.

“Audience Network usually outperforms other ad networks 2 to 3 times better.” said Jean-Sebastien Laverge, VP Data & Growth at Tilting Point.

Step 5: Check impact on churn

How are you measuring the impact of ads on your users? While churn from implementing ads is expected to be extremely low (e.g. 0.01%), you should still check your churn rate to be sure there’s no significant loss of users.

Additionally, you can look to recent reviews from gamers to gut check the user impact of your ad test on your game experience.

Step 6: Optimize

Assuming you’ve seen success in this initial test, you can then expand to a larger audience beyond the initial 10% sample size.

At this point, you can start testing the impact of more minor variables, like the look and feel of the ad experience on user engagement.  As you zero in on what is working, you can start testing the impact of more minor variables, such as the color of the CTA button, or your “Play Ad” icon.

Look for opportunities to continuously improve and iterate on these changes.

Step 7: Expand ads to other game titles

Now, it’s time to take your learnings and expand them to your other titles. As long as you’re selling to the same game audiences, your new knowledge on running a hybrid monetization model is fully transferable.

Dig deeper: For more insight into this step-by-step process, download Facebook Audience Network’s full guide: 7 Steps from IAP to Ads.

David Rotner is Strategic Partner Manager at Facebook Audience Network.

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