What Is In-App Advertising? How Does In-App Advertising Work?

Brock Munro
January 8, 2021
April 8, 2024
What Is In-App Advertising? How Does In-App Advertising Work?

In-app advertising is a great strategy for app publishers to improve revenue by showing ads to users while they are using an app. While this may result in better user engagement with ads, publishers need to ensure that the ads don't disrupt the user's experience, and are relevant to the content the user is already consuming. Otherwise, app publishers could see a dip in user engagement with their apps. 

In this guide, we'll take a deep dive into in-app advertising, how it works, and the crucial trends you need to know about that drive in-app advertising. We discuss the benefits for publishers of mobile website display advertising versus in-app ads and finally the best in-app advertising networks to consider.

Make sure you check out how Publift solves the problem of finding the right balance between monetization and user interest retention through its in-app advertisement solutions.

Table of contents:

What Is In-App Advertising?

How Does In-App Advertising Work?

Why Is In-app Advertising Important?

Mobile Websites vs. Mobile Apps

Benefits of In-App Advertising

Possible Drawbacks of In-App Advertising

6 Best In-App Advertising Networks

Best In-App Pricing Models

In-App Advertising Formats and Examples

In-app Advertising Strategies Strategies

Final Thoughts

What Is In-App Advertising?

In-app advertising (IAA) is a strategy that enables developers to monetize their apps by allowing advertisers to serve ads to users. These in-app ads are served through app ad networks once developers and ad buyers agree to a deal via programmatic ad buying. When a request for an ad is raised from an app, the ad network uses algorithms to identify and deliver a high quality ad to the users in real time.

In-app ads come in different types and formats to suit the viewable space and developers can choose between various ad types to monetize their app. These include in-app display ads, native ads, interstitial display ads, rewarded videos, and more.

How Does In-App Advertising Work?

In-app advertising works by helping advertisers place ads within apps.The mobile app advertising ecosystem can be thought of as consisting of two parts—buyer and seller. Ad networks act as brokers, facilitating smooth transactions between app developers and publishers (the ad inventory sellers) and advertisers (the buyers).

Here's how in-app ads work:

  • The app on the user's smartphone sends a request to the mobile ad network or ad exchange to serve an ad.
  • The ad network or exchange takes a multitude of factors into account, including user data, and then uses an algorithm to identify the best and highest-paying ad from multiple advertisers.
  • The ad is then served to the mobile app in real time.

Why Is In-app Advertising Important? 

In-app advertising is important because it allows app developers to generate revenue, businesses to reach their target audience, and users to discover new products and services that are relevant to them. 

Here are a few reasons why it is an important aspect of mobile app monetization:

  • Revenue Generation: By showing ads to users, developers can earn money from ad clicks or impressions. This allows developers to continue developing their apps and improving user experience.
  • User Engagement: In app advertising can be used to engage users and encourage them to take action. This can help businesses to build brand awareness and drive sales.
  • Targeting: By aggregating data on user behavior and preferences, businesses can show ads that are more relevant and personalized to users. This helps ensure higher engagement and conversion rates.
  • Efficiency: In-app advertising leverages strategies such as in-app header bidding that allow for more efficient allocation of a publisher’s inventory.

For app developers, in-app advertising can be a crucial source of revenue. By integrating ads into their app, developers can generate income without charging users directly. This is especially important for free apps, which rely on advertising as their primary means of monetization.

For advertisers, in-app advertising provides a targeted and highly engaged audience. In-app ads can be customized to reach specific demographics, behaviors, and interests. In-app advertising can also be cost-effective, as advertisers only pay for impressions or clicks, and can set their own budget.

Finally, for users, in-app advertising can offer a range of benefits. Relevant ads can provide users with information about products, services, or events they are interested in. In some cases, ads can even offer discounts, promotions, or other incentives. 

‍Mobile Websites vs. Mobile Apps

Mobile apps are shown to capture their audience's attention, and guide them on through the brand's marketing funnel. And while mobile websites share certain similarities with specific apps, there are some critical differences, particularly regarding digital advertising.

Whereas mobile sites track via cookies, apps (which ask users to opt-in) track via device ID, offering developers valuable audience data that is not available via cookies alone. This will be critical to publishers moving forward into a post third-party cookie digital landscape. 

While cookies offer basic user data such as shopping habits and browsing history, Device IDs offer developers information such as geo location data, types of mobile devices, OS, gender, age, and wireless carrier.

Furthermore, their resistance to ad blockers and the high amount of mobile time spent in apps, makes in-app advertising work successfully for mobile publishers across the board.

While overall growth of mobile app advertising expenditure has taken a hit due to the pandemic, ad placement numbers are gaining traction still significantly high with advertising revenue from apps projected to reach $220.8 billion in 2022 globally. . The in-app purchase market is expected to grow at a CAGR of 20.8% in the 2023-2028 period and forecast to reach $284 billion by 2026.

Providing an exemplary mobile experience has become increasingly important for all brands and businesses looking to build brand awareness,third-party user engagement.

Feature Mobile Websites Mobile Apps
Tracking Method Tracks via cookies Track via device ID
Available User Data Basic data like browsing history and shopping data Geo location data, Operating system, type of device, network provider, age, gender
Ad Blocking Vulnerable to ad blockers More immune to ad blockers
Average Daily Use in the US 23 minutes 3 hours 47 minutes

Let's take a closer look at the benefits of in-app mobile advertising.

Benefits of In-App Advertising

Now that we know what in-app advertising is, we look at some of the benefits that it brings for publishers.

1. More Monetization Opportunities

On mobile apps, advertisers and app publishers have much more freedom to monetize the app in ways they cannot monetize a mobile website.

For mobile ad publishers, in-app ads have proven to be a successful monetization strategy. These days, smartphone app developers are making money by serving ads on their mobile apps. For example, the premier online real estate business, Zillow, publishes ads for allied businesses enabling them to reach targeted users through their app.

2. Users Spend More Time on Apps

Mobile users are spending 90% of their time on apps, equivalent to more than three hours a day. This means that when it comes to mobile experiences, apps have taken the driving seat with mobile web being the distant runner-up.

3. More Engaged Audience

Unlike traditional marketing channels, the mobile app audience is by far the most captive and engaged, making them the ideal audience for display advertising, leading to higher interest, click-through rates (CTRs), and conversions and ultimately, higher ad revenue for app publishers.

4. Higher Chance of Conversion

Research on in-app advertising statistics reveals that in-app ads have a click through rate (CTR) of 0.56% compared to 0.23% for mobile web ads. In-app ads also have a customer conversion rate that is three times higher than traditional ads and a user retention rate that is four times that of traditional ads.. 

5. Accurate In-App Ad Targeting

When a mobile user is browsing websites, advertisers and publishers can only accumulate data about them using cookies which is quite limited. However, when using an application, ad publishers can collect more targeted information through device ID including age, internet provider, gender, operating system, device type, location, and more.

6. More Personalization

In-app-based mobile advertising enables ad publishers to create highly personalized and customized ads that have higher odds of engaging your audience and convincing them to click through. Also, through the app store, developers always get permission from the mobile user to collect their data prior to installation. Ad publishers are also in a better position to identify their audience giving them more control over the ad serving process.

That being said, you have to keep in mind that recent loss of data tracking across apps pushed forward by the latest iteration of iOS 14 is expected to cut down the cost per mille (CPM), making personalized advertising substantially more challenging. This will increase the value of first-party data and immersive ad units significantly.

7. Better Results

According to AppSavvy, in-app ads perform 11.4 times better as compared to banner ads on mobile websites. This is because their unique positioning within the user's journey through the app allows them to command greater engagement from the user. Banner ads, on the other hand, can simply be ignored by a user, driving little engagement.

8. No Ad Block

If a user has installed an ad blocker, it is likely they won't see banner ads. That's not a big concern for in-app advertisers because of the freemium business model which allows them to serve ads to the mobile users who can use the app without paying any price.

Possible Drawbacks of In-App Advertising

As brands and marketers continue to increase their marketing spend on both mobile web and in-app advertising, they also need to consider the drawbacks of in-app advertising.

Without conducting a cost versus benefit analysis, it can be challenging to make your in-app  ad campaign successful. Make sure there is enough time spent on programmatic planning. Some key points you need to keep in mind are as follows:

Highly Competitive Channel

Since more and more advertisers are now looking to display their ads within apps, it has become an increasingly competitive and expensive marketing platform.

Depends on Your Business Niche

If your target customer is not a savvy smartphone user or doesn't like to use app content, then mobile app ads may not be the best marketing fit for your brand. You will not get high enough click through rates.

Private Marketplace and Programmatic Deals

Customized programmatic deals, like those offered by Publift, ensure in-app advertising campaigns are optimized to deliver the maximum viewable mobile ad impressions to highly specific audiences at the right mobile moment. By offering high-quality inventory, in all the main ad formats, programmatic deals allow publishers on a supply-side platform to partner with advertisers on a demand-side platform to maximize ad revenue for ads in all app categories.

‍6 Best In-App Advertising Networks

If you are an ad publisher searching for top mobile app networks, here are some of the leading ad networks that you can consider using:

1. Publift

Publift

Publift is a programmatic ad platform that has been helping publishers increase their ad revenue by up to 55% since 2015. It provides app publishers access to 10+ app advertising demand partners, enabling both real-time server side header bidding auction and full-stack Google open bidding. The result—maximum utilization of in-app ad inventory with premium quality ads leading to higher revenues.

An award-winning platform built by engineers and data scientists, Publift is a Google Certified Publishing Partner (GCCP) that has a deep understanding of the app advertising landscape. It not only helps publishers with their advertising needs, but also goes a step further in helping them with driving more traffic, acquiring more customers, providing detailed analytics related to every aspect of their app, and providing  world-class support. 

2. Instagram / Facebook

Instagram / Facebook

These social media giants are some of the best ad networks to reach your target audience through a robust and programmatic advertising campaign,within which you can include different ad formats.

With its enormous reach, Facebook’s revenue in 2022 hit $116.6 billion. It has the potential to accumulate hundreds of thousands of impressions and thousands of conversions with an effective in-app marketing strategy.

Moreover, both Instagram and Facebook's platforms allow you to be flexible when it comes to audience, timing, and advertising budget. Ad publishers can target audiences based on age, location data, relationship status, gender, job role, and likes and dislikes.

3. AdMob

AdMob

Owned by Google, AdMob is the mobile variant of Google AdSense. It is an effective ad network for marketers who are just starting out as it is easy to use and quite intuitive. Marketers can use video, images, text, or interactive media to serve their programmatic ad campaign. They also have the option to choose from formats including interstitial, video, banner, native and reward ads.

4. Smaato

Smaato

With over 90,000 advertisers, Smaato is a great mobile ad network for those looking to publish ads. Smaato's large advertiser base means publishers have a high probability of selling ad space. You can also make the most of real-time bidding with SPX, the Smaato Publisher Platform.

5. Unity

Unity

If you are targeting gamers, then you can't go wrong with Unity, which has been especially created to display video ad content to monetize mobile gaming apps. The ad network is compatible with both mobile operating systems including iOS and Android and supports all game engines including Corona, Marmalade, and Adobe Air.

Advertisers can also use this one-stop shop network to include in-app shopping which lets gamers search and purchase products without ever leaving the game.

6. InMobi

InMobi

One of the leading independent mobile ad networks, InMobi is capable of handling both mobile web and apps so you can run different types of advertising campaigns using a single platform. The network supports both iOS and Android and provides ad campaigns in CPI and CPC models. Rich media, interstitial, video, banner, and native are the available ad formats.

Best In-App Pricing Models

There are several in-app pricing models that have different pros and cons for publishers and advertisers. Listed below are the different pricing models along with their benefits and drawbacks. 

1. Cost Per Mille (CPM)

In CPM, advertisers pay publishers whenever an ad receives 1,000 impressions and works best for marketers looking to improve brand visibility.

Pros

  • For advertisers: Cheapest in-app pricing model.
  • For publishers: Displaying ads is enough to receive payment.

Cons

  • For advertisers: Simply showing the ad doesn't guarantee conversions or clicks.
  • For publishers: Low payout compared to other pricing models.

2. Cost Per Click (CPC)

In this model, the publisher is paid for every ad click. CPC is a great model if you're looking to increase traffic to your page and have a fixed budget for doing so.

Pros

  • For advertisers: Only pay for clicks, which indicate user interest. 
  • For publishers: Can demand high price per click based on the advertiser and campaign objectives.

Cons

  • For advertisers: Pay for every click, even if some are unintentional or accidental and don't generate any revenue.
  • For publishers: Requires more effort as you might have to serve more impressions to achieve your targets.

3. Cost Per Action (CPA)

CPA model sees the publisher being paid after the target audience engages in a desired action, such as a sale or registration. It's best for advertisers looking to achieve a specific result or action.

Pros

  • For advertisers: It's a low-risk pricing model that ensures targets and budgets are aligned.
  • For publishers: Good results can quickly lead to higher rates.

Cons

  • For advertisers: Focusing on revenue outcomes might obscure an ad's brand awareness potential.
  • For publishers: No guaranteed income unless the customer performs the desired action.

4. Cost Per Install (CPI)

In the CPI model, publishers are paid each time the app is installed by the customer. This is ideal for advertisers looking to increase install numbers.

Pros

  • For advertisers: Only pay for users interested in using your app.
  • For publishers: High-paying pricing model that allows for a premium price.

Cons

  • For advertisers: Paid user installs don't guarantee long-term user interest.
  • For publishers: Needs persistence and optimized campaigns that require continuous monitoring.

In-App Advertising Formats and Examples

When it comes to displaying third party mobile ads, you need to ensure you are delivering the best content and user experience by using the right ad format for your target audience.

Popular in-app ad formats you can use include interstitial, rich media, video, rewarded video, native and banner ads.

Here's a quick guide to the different ad formats available:

1. Interstitial Ads

This ad format consists of full-screen banner ads that appear between different game levels.

In-app advertising formats interstitial ads

2. Rich Media

These mobile in-app ads are served in the banner as well as in pop up formats using HTML, JS, CSS, and image files.

Rich Media

3. Rewarded Video Ads

This ad format, as the name suggests, offers incentives to the gamer by watching video ads.

In-app advertising formats rewarded video ads

4. Video Ads

Native video ads are served in mobile video format and may allow the users to skip in a few seconds if they are not interested. Mobile video ads can be a great tool to engage users.

In-app advertising formats video ads

5. Native Ads

These are video or textual ads that mimic the appearance of editorial content present on the website. They are non-intrusive and blend in with the design.

In-app advertising formats native ads

6. Banner Ads

These are simple and static ads that are either displayed at the top or bottom of the app. They are highly affordable and are supported universally.\

In-app advertising formats banner ads

7. Playable Ads

Playable ads are types of ads that provide a playable or gamified version of the game for improved demonstrability.

In-app advertising formats playable games

In-app Advertising Strategies Strategies 

Here are some best practices and strategies for in-app advertising:

  1. Focus on user experience: The user experience should be your top priority when integrating in-app advertising. Ads that interrupt or frustrate users will likely lead to poor retention rates and negative reviews. Instead, aim for ads that complement the user experience and provide value.
  2. Targeted advertising: Use data and user insights to target ads to specific user segments based on demographics, behavior, and interests. This will increase the relevance and effectiveness of your ads.
  3. Optimize ad placement: Experiment with different ad placements within the app to find the most effective spots. Avoid placing ads in areas that could be mistaken for buttons or other interactive elements.
  4. Frequency capping: Limit the number of ads users see within a certain timeframe to avoid overwhelming them with ads.
  5. Incentivized ads: Consider offering users rewards or in-app currency in exchange for watching an ad. This can increase engagement and provide a more positive user experience.
  6. Video ads: Video ads tend to be more engaging and memorable than other ad formats. They can also provide more information about the product or service being advertised.
  7. Ad format testing: Test different ad formats to see which ones perform the best in your app. For example, try testing interstitial ads versus native ads to see which one leads to more clicks or conversions.
  8. Transparency: Be transparent with users about the use of in-app advertising and how their data is being used. This will help build trust and improve the overall user experience.
  9. A/B testing: Test different ad creatives and messaging to see which ones resonate the most with your audience. This can help improve click-through rates and overall ad performance.

Utilizing these best practices and strategies can help improve engagement, retention, and overall app performance.

Final Thoughts

Effective in-app advertising can act as a great revenue generator for app owners.

Remember to keep an eye on where your mobile advertising is coming from, consider using interactive video ads, and ensure that you are making the most of programmatic deals and private marketplaces to make the most of your mobile advertising strategy.

Publift has been helping app developers optimize their inventory to maximize revenue since 2015. Our clients have seen their ad revenue increase by up to 55% with the help of cutting-edge programmatic advertising technology. 

If you’re making more than $2,000 in monthly ad revenue, contact us today to learn more about how Publift can help increase your ad revenue and best optimize the ad space available on your website or app.

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