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What are Rewarded Video Ads?

by AppLovin on Jan 29, 2021

Rewarded video ads are a type of advertisement that provides some kind of value for the user. For example, a user can watch the rewarded video ad and receive more coins, a bonus, or unlock premium content. In the app world, they’re considered advantageous for users, developers, and advertisers.

According to AppLovin’s Director of Business Development, EMEA, Daniel Tchernahovsky, AppLovin’s VP International Business Development, points out: “Rewarded videos are optional ads, which give players the opportunity to choose to watch. It allows developers to create ad experiences that enrich the users’ interaction with the app rather than forcing ads onto them.” 

For mobile games, a survey revealed that 79 percent of players were happy with games on an ad-supported model, and more specifically, found that rewarded video ads were most useful and least disruptive.

Here’s how rewarded videos typically work:

1. A user sees an icon or is offered a reward in exchange for watching a video

2. User chooses to watch the video

3. User notified about receiving a reward

4. User returns to playing the game or app

Why use rewarded videos?

There are so many reasons why rewarded videos and mobile apps make sense. Users receive a reward that continues to engage them with the app, and developers and advertisers also benefit from the views. 

A big reason advertisers have made the move to provide rewarded video is because of the competitive app environment. Businesses are looking to make the user ad experience more engaging in order to increase revenue through in-app purchases

Rewarded ads are popular in mobile games because they can unlock an extra life or help move the player to the next level faster exactly when they need it. While rewarded video may have traditionally been trendy with mobile games, it’s quickly reached other industries that are understanding how rewarded video benefits them. 

For example, a communication app may reward a user with credits to call or text internationally, while a fitness app may ask users to watch a video to unlock new workouts or receive exclusive diet recommendations. A retail app may offer deals or points that the user can apply to their next purchase. App developers have gotten really creative when it comes to what kind of rewarded video ad to show the user and when. 

The key formula is aligning the right incentive at the right opportunity. 

Rewarded video ads revenue: What are the benefits?

As users benefit from the rewarded video, developers and advertisers benefit from the eCPM, or effective cost per mille, also called cost per thousand, refers to the cost an advertiser pays for one thousand views or clicks of an advertisement.

Rewarded video ads let mobile developers monetize in a more engaging way while maximizing opportunities for in-app purchase revenue. 

Rewarded video ad benefits include:

  • Increase your IAP: Users are more likely to make a purchase after watching rewarded video ads
  • Create a better user experience: Users can choose whether they watch the ad, which aligns with a positive overall app experience
  • Improve retention: If rewarded videos allow users to stay engaged through the app by gaining free prizes and bonuses, they may stick around longer and continue to return.

Strategies for increasing your rewarded video ad monetization revenue

When figuring out what kind of strategy you want to implement for improving engagement and in-app purchases with users, make sure to test different videos at various entry points in the app so you can see what is resonating. 

Daniel recommends A/B testing rewarded videos and review the data. “Don’t close the project just because the first iterations yield low returns. Analyze the ad viewer rate, which means the percentage of users who watch the ads, and the impressions per user in each placement.” 

He added, “Don’t forget to check the retention impact of each placement, and the impact on IAPs. Be patient because it might just take time to figure out the right placements. These types of ads are a very high-quality placement, so network bidding is crucial on the mediation side.”

In addition to A/B/ testing, you can segment users into different categories. For example, one could be for highly engaged users and the other could be for those who use your app once in a while. See if you can get the latter group to come back more frequently by offering high-value rewards while showing lower value rewards to the more engaged segment.  

While rewarded video ads are a great way to engage, it’s best to have a mix of different types of ad units throughout your app for different kinds of users. These may include non-rewarded ads such as banner ads, interstitial ads, and MRECs (medium rectangle ads). Too many rewarded video ads may backfire and negatively impact your users. 

If you’re in mobile gaming and want to create higher value within your rewarded videos, here are some ideas:

  • Give an extra life: Entice players with bonus lives when they’ve lost. This gives them the opportunity to stay engaged in the game. 
  • Offer high-quality rewards: What’s your most popular in-app purchase? See if you can give users a taste of it without completely giving it away for free. Later, when you show them the in-app purchase again, users may be more likely to make that purchase since they’ve grown accustomed to receiving that content for free. 
  • Help them progress faster: If a player is stuck on a level, offer a video in exchange for some hints.

Performance data that is precise and granular 

The app industry changes quickly and ad rewards have found wide-scale adoption in the market. Thanks to platforms like AppLovin, developers now have the ability to uncover more data on a granular level, which helps them understand the performance of each ad.

Daniel explained, “Rewarded videos allow developers to monetize their entire user base rather than the few percentages of paying users. These kinds of ads can often add 10 to 30 percent in LTV to prior IAP-only titles.” 

Rewarded video ads are just one way you can monetize your apps. Learn more about the best ways to make your app more profitable.