Rewarded ads incentivize user interactions such as watching 10-30 second videos (rewarded video ads) or listening to short audio clips (rewarded audio ads). Unlike other ad formats, rewarded ads are opt-in, unskippable, and compensate users via in-app bonuses like extra lives, points, aesthetic changes, or content.
From publishers and developers to users and marketers, every player in the mobile ecosystem can reap the rewards of rewarded ads. Below, with a focus on mobile marketers, we will explain how these ads can be implemented for maximum effect.
Who Uses Rewarded Ads Most Effectively?
Mobile gaming is the vertical most commonly associated with rewarded ads. They are a natural fit for the format because gamers will always be seeking in-game currency, items, lives, power-ups, and “skins”. Rewarded ads are understandably prevalent in other app categories too. A 2019 eMarketer report found that users have seen rewarded video ads across nearly all genres: gaming (65%) music (31%), social (30%), retail (22%), video (20%), and even news (14%).
This is in large part due to the gamification of non-gaming apps. Take the unicorn-status DuoLingo app which boasts upwards of 30 million active monthly users. DuoLingo’s freemium model uses a ten-tier competitive league-system and rewarded ads that grant their non-paying language learners both credits and lives.
(Left) Duolingo’s gamified league system; (center + right) how Duolingo rewards ad viewership using lives (hearts) and points (gems) Source: Screenshot by Author, Duolingo App, 2020
Non-gamified apps are also able to successfully implement rewarded ad systems. All they need to do is decide upon an appropriate incentive for their users:
- Fitness apps can offer new workouts or performance insights
- Media apps can offer otherwise exclusive content
- Retail apps can offer discounts and deals.
Where the only offerable rewards outweigh the value of the ad-viewership, developers simply need to offer points, currency, or tokens which can be saved up to purchase those rewards. Alternatively, advertisers can offer these more valuable rewards for more significant actions such as downloading a different app. But more on rewarded installs later.
The Benefits of Rewarded Mobile Ads
Rewarded ads have become one of the most prominent ad formats on mobile. They have been described as “win-win-win situations” due to their benefits for users, developers, and marketers:
- Users only receive their rewards if the ads are viewed to completion – minimizing the chances of ad skipping and maximizing ad completion rate. This also results in increased brand awareness and recall.
- By incentivizing viewership and engagement, rewarded ads achieve low-cost traffic with especially high conversion rates and excellent ROAS.
- After purchasing in-app content with their rewarded points, users often seek to purchase more with fiat currency. Advertisers using rewarded ads have reported achieving higher in-app purchase (IAP) revenue.
- Audience targeting is naturally enhanced because users are more likely to choose to view ads that interest them.
- Point accumulation systems increase user retention by incentivizing repeat usage while fostering a sense of progress.
- Increased user satisfaction due to the non-intrusive and voluntary nature of the ads.
- The reciprocal value-exchange experience means that users tend to look more favourably on the app and the advertiser. This can result in increased session length.
- Their opt-in nature combats ad fatigue – unlike pop-ups which are frequently dismissed without a second thought, rewarded ads are able to hold users’ attention for sufficient time to get their message across.
In short, their opt-in, unskippable nature enhances performance using a medium that most users want to see more of.
Rewarded ads often work best when combined with other ad formats. Non-paying Duolingo users, for example, experience a range of skippable, unskippable, and optional rewarded ads during their standard learning experience. They also have the option to watch additional rewarded ads by seeking them out in the in-app store. It is easy to envisage how this carefully crafted combination maximizes engagement on their own app and increases their ad revenue while enticing users into premium memberships.
(Left) An example of a localized rewarded ad; (center + right) examples of how Duolingo encourages additional voluntary ad viewership. Source: Screenshot by Author, Duolingo App, 2020 .
How to Prevent Users From Abusing the System
Over-emphasizing rewards runs the risk of users doing the minimum required action to receive them without truly engaging with the ads. Advertisers can counter this to ensure accurate engagement rates.
Rewarded Video and Audio Ads
After opting into a rewarded video or audio ad, users may mute their devices or change apps so that they reap unearned rewards. Technical measures can be taken to prevent this. Video ads and audio ads can be set to automatically pause if a user switches app or mutes audio. Setting up such measures for mandatory ads would likely result in user churn, but because rewarded ads are opt-in, the same does not hold true.
While users can find work-arounds for the latter, such as turning down volume to minimal levels, most users simply will not bother. By limiting the ads to a short duration (15-45 seconds), advertisers will ensure that for the vast majority of users, the circumventive action is not worth the effort.
And while it can be assumed that not all users will fully concentrate on all rewarded videos, the same is true for any advertisement, video or otherwise.
The problem is more pronounced for rewarded installs wherein users can install an app only to immediately uninstall it once their reward is received. For this reason, apps that rely heavily on incentivized traffic (especially gaming apps) have been found to have lower-than-average retention rates.
In the early days of app marketing, this was not so problematic because even low-value installs boosted app store rankings and sparked organic growth. Since 2018, however, having high abandonment rates or poor “stickiness” will actually result in an app being downgraded in the app store.
To perform well in app stores in 2020, apps require more than high install numbers, they require positive ratings, high retention rates, low crash rates, low uninstalls, and much more.
The solution for rewarded installs is two-fold:
1. Shifting the action point further down the funnel
In a game of cat and mouse with app store algorithms, the incentive system can be modified to account for these other factors. Rewarding positive reviews and ratings falls into murky legal and ethical territory and is not recommended. However, by delaying the action point by which users receive rewards from immediately after install to after a period of app usage, app store algorithms will recognise this lowered abandonment rate. If the app being advertised is well targeted and of high quality, positive rankings and ratings should follow naturally after users “give it a try”.
2. Enhancing measurement transparency
Transparency is crucial in creating quality, accurate, incentivized campaigns. Cost-per-Action (CPA) campaigns allow advertisers to choose the metrics that matter. Rather than a Cost-per-Install (CPI) model which could run foul of misleading low-value installs, CPA can measure the actions that are reflective of truly valuable new app users (e.g. first in-app purchase, premium membership registration, multiple days of app usage). Using a CPA model therefore provides much more valuable, transparent results. Users only receive rewards for meaningful actions, and publishers only pay for meaningful results.
The rewards of rewarded ads are patent. Even rewarded installs, often deemed to be the most controversial iteration of rewarded ads, can be used to great success using CPA. With mobile advertising, mobile gaming, and the app industry as a whole showing resilience and growth in spite of the pandemic, now is the perfect time to implement rewards.
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