When can incentivized advertising really excel?
Posted Aug 10, 2016
Incentivized advertising has been much-maligned among parts of the community. Arup Dey from OpenXCell offered a different view - discussing when and how incent ads can really work.
Pulling more than $70 billion annually, in-app mobile advertising is a happening industry. With so much money being poured into the space, advertisers are demanding substantial ROIs from mobile ad networks. The industry has responded to this demand in many ways. One of which is the not entirely uncontroversial incentivised ads.
Incentivized installs are app installs that give some form of non-monetary rewards such as game power-ups, additional features and other premium content for installation of an app or some other activity. On the other hand, ads for non-incentivized installs do not give any reward for installing an app.
When app discovery became the elephant in the room
Initially, banners were the only in-app ad type available for advertisement. These were mostly non-incentivized form of advertisement. Incentive-based advertising was unheard of at that time. The other form of monetization was offering the paid version of the app.
After 2011, there was a quick surge in app submission numbers. Within a couple of years, the app store hit a million mark. Between a million apps, app discovery emerged as the first priority for developers. Banners proved insufficient to market apps. With a CTR less than 0.5%, developers could not rely on them for app discovery alone. This lead to the creation of interstitials, Videos, and other forms of non-incent ads. While these generated great CTRs, incentive-based installs from networks such as Kiip and Tapjoy turned the market upside down.
Incentive based ads not only gave great CTRs but also helped apps secure top ranks within a few days.
Incentivized ads offers lot more than low cost-per-click?
Incentivized installs was one way of solving the problem of app discovery – with proper targeting derived from a myriad of variables. All this for a cost much lower than non-incentivized ads. CPC for an incentive-based ad is always less than a dollar. On the other hand, CPC for a non-incentivized ad may go to $5-$6. This is a huge difference. Considering a daily budget of $200, you can generate 40-50 clicks out of the ad inventory you set for a non-incentivized campaign. While with incentive-based ads, you may generate 4-5 clicks for every dollar. From my experience, incentive-based ads cost you 20-50 cents per click. So, for the same $200 you may generate around 1000 clicks from an incentivized campaign compared to those 50 clicks you will otherwise generate from non-incentivized ads.
The general notion about non-incentivized ads is, they attract users that are more legitimate compared to incentivized ones. It sounds logically true. In fact, non-incentivized ads do get you high-value users than incentivized ads. However, I’d argue that this ends up oversimplifying the big picture of incentive-based advertisement. And this is where the real value of incentivized installs gets lost in the noise.
The virality factor of incentivized ads is far more valuable than their low cost-per-click. And once you run a campaign, this is clearly demonstrated within the Android user base provided you make a good app.
Android is great for incentivized ad networks
Android users are peculiar in the way they consume content. Android users constitute to 80% of the total smartphone user base in the world but their contribution to the total revenue is far less. It does not mean that Android users do not want premium content. Going by the volume of cheat code Android users employ, it becomes apparent that they desire premium content. But at the same time neither they are equipped enough or willing to spend on premium content. This is the factor that is exploited by incentivized ads to drive user acquisition on Android.
Android users like premium content being given for free and promote such apps within their circles as well. While this happens for iOS too, the Android user base has an advantage of large userbase volume that is hungry for free premium content. Once you run the campaign, the app that is serving the ads get recommended through word of mouth and social sharing by the users. In other words, it acquires more users which are high value as they come through direct recommendation from close friend(s).
When you run an incentivized campaign upon an app, the quality of the app serving the ads matters a lot. A great quality app serving incentive-based ads will be quickly recommended across the user network. This is what happens in Android. Good apps plus free premium content means massive discovery and high quality referral installs.
On the other hand, if your app is not engaging enough, then you may get initial downloads but dwindle in the long run as far as retention is concerned.
The apps that are installed to obtain rewards generally have an open rate of 20% and above (Tapjoy). These apps then begin their journey and do the same promoting other apps. Hence, once opened, this app has to provide value and great user experience to get going.
The Android user base has got a number of user clusters within itself that provide lucrative target segments for a number of app categories. Therefore, when we consolidate the massive userbase, the problem of app discovery is easily solved with incentivized ads in Android.
The CTR of incentivized and non-incentivized ads
While incentivized ads are cheaper and have high CTR non-incentivized ads give you valuable users without a doubt. Hence, your inventory should have an optimal mix of incentivized and non-incentivized ads.
In general, incentivized ads may have a 5-7% CTR while non-incentivized ads may have a CTR of 1-2%. I am not considering install rates here because the intent to install is positively or negatively affected after reaching the app page to a large extent. Now, if we have to arrive at creating the right mix of these two ad types, we must look into the app category.
Incentivized installs are good when the app type is likely to be used by a mass of user across wide demographics. Apps such as games, entertainment apps that provide popular content, Shopping apps, Widgets, Utility etc can be marketed through incentivized ads. You can also run parallel non-incentivized ads targeted to specific categories to balance your overall campaign.
Non-incentivized installs are great for apps that are likely to be used by a particular audience or type of users. Hence, you need to surgically segment and target your ads. Go for channels that can provide you with sharp targeting. This is demonstrated by companies that have big data intelligence in place, and the results are awesome. Try Facebook app install ads if you want to test this fact. I have seen great quality users coming from Facebook and have always suggested my clients go for FB ads.
As far as categories are concerned, Productivity and Enterprise apps top this latter category. At the same time, a music app such as Smule may require non-incentivized ads more than incentive-based ads. On the other hand, a music app that provides high-quality downloads for popular songs may succeed through incentivized installs. In simple words, if your app appeals to a specific set of users, you need some non-incent-based ads running.
Both incentivized and non-incentivized ads create value in their own ways. While incentivized installs are best suited for apps that have generic appeal, non-incentivized ads, on the other hand, works best for apps belonging to a niche or specific cohort of users.
Developers are compelled to trigger substantial app discovery to get started and build a userbase. But at the same time acquisition of high-value users from the beginning itself is important too. While incentivized ads take care of the former, non-incentivized ads gives you high-quality users. I suggest that ad inventory of both types be created in a specific proportion and adjusted over time.
OpenXcell Technolabs is a leading app development and app marketing company. Working with industry leaders, we have developed and deployed hundreds of apps primarily for startups.