The In-App Advertising Business Model
Bruce PeckDec 26, 2022 · 3 min read
What is the in-app advertising business model?
Perhaps you’ve played your favorite game on your phone and seen the big full screen ads that pop up and try to tempt you into downloading another.
Or maybe you’ve been swiping through Tinder and see an ad for a local gym etc. All of these are examples of the in-app advertising model.
This particular business model of monetizing your app is perhaps how most people think apps make money.
The definition of the in-app advertising business model is this: Monetizing by showing ads to users while they use your application. And it’s no small business, for instance Google made more than 209 billion dollars last year in ad revenue presumably much of that from their ad network which serves those annoying ads.
Then apps like Spotify made 1.2 billion in just ads (not to mention how much they brought in through subscriptions to avoid the ads.)
It’s huge and it works, but only with certain types of apps and with large enough user bases. In this article we discuss your options of what kind of ads you can run, compare the pros and cons and then conclude.
Types of in app ads
In-app ads come in a variety of formats, each of these can be better or worse depending on how they suit the subject matter and form of your app:
1. Interstitial ads: These are full-screen ads that appear between screens or at natural breaks in the app. They can be either static or interactive, and are often used to promote products or services.
2. Banner ads: These are smaller ads that appear at the top or bottom of the app's screen. They can be either static or animated, and are often used to promote products or services.
3. Native ads: These are ads that are seamlessly integrated into the app's content. They are designed to blend in with the rest of the app, and are often used to promote products or services that are related to the app's content.
4. Video ads: These are ads that consist of a video that plays within the app. They can be either skippable or non-skippable, and are often used to promote products or services.
5. Rewarded video ads: These are video ads that users can choose to watch in exchange for in-app rewards, such as virtual currency or in-game items. This type of ad is popular with users because it gives them the opportunity to earn something in exchange for their time and attention.
6. Offerwall ads: These are ads that offer users the opportunity to earn rewards by completing various offers, such as signing up for a trial subscription or completing a survey. This type of ad is popular with users because it gives them the opportunity to earn something in exchange for their time and attention.
Benefits of in-app ads
One of the main benefits for the developer of putting in app ads in your app is the ease of monetization. You don’t need to ask your users for money to use your app which can cause friction, instead you just show them a few ads.
And then for you as a developer it’s generally pretty simple to implement, the different ad networks make it easy to place their content inside of your app.
You don’t have to generate your own network of advertisers either, the ad networks have thousands of advertisers ready to go as soon as you deploy it.
Which means that you have very little upfront cost to generating revenue.
Challenges of the advertising model
There are some major drawbacks though. The first is that, as we all know, ads can be pretty annoying.
They can impede the user’s experience and make the app less enjoyable to use. The second is that you need a relativity large user base if you are going to start to make money off it.
Just take AdMob’s revenue estimation tool for a case in point, it starts at 50,000 monthly active users and goes up from there.
In my experience, unless you have a really viral app or are a true start up, it‘s unlikely that you will ever see those kinds of numbers, and if you do the $15k that it offers in ad revenue is not likely to be enough to keep things afloat.
This is what presents the next challenge, either, you can create your own advertising system to increase the revenue you get for impressions (which is fairly expensive to create, and fairly expensive to gather clients) or you can modify your business model to add more ways to make money.
This is the reason why Spotify & Tinder have both ad-supported and subscription based tiers, that way they can make money on the free users and make the company viable with the subscribers.
In-app ads may be the right way to go for your business if you are developing the type of product that can attract a large audience with a large amount of impressions.
Otherwise you may be better off thinking of ads as a way to support your revenue will adding some more of the other business model elements.