How Do Mobile Ad Networks Pay Out? 5 Facts You Must Know

How Do Mobile Ad Networks Pay Out? 5 Facts You Must Know

If you are about to embark on the adventure that is called ad-based app monetization, one of the terms you will come upon quite a lot is ‘ad network’. Simply put, ad networks are platforms that connect publishers and advertisers that want to earn a steady profit by serving ads in a mobile app or a website. Their main role is to collect ad space supply from publishers and match it to advertiser demand.

Although you might already know what ad networks are, you might not be familiar with the little secrets that boost their revenue generation. Let’s take a look at five of those secrets you should take into consideration when choosing your monetization partner.

1. CPM and eCPM are opposite commitment-wise

As you may or may not know, CPM stands for “cost per mille” and refers to the fixed price paid by the advertiser for every 1,000th impression. For instance, let’s say an agreed CPM is $8. This means that the publisher will receive $8 from the advertiser for 1,000 ad impressions, $16 for 2,000 ad impressions, and so on.

In contrast, with the eCPM or “effective cost per mille” model, the advertiser is charged a variable rate for every 1,000 impressions. Unlike CPM, eCPM is not fixed. Therefore the publisher cannot have any revenue guarantee. From the advertiser’s perspective, eCPM is a complete antithesis to CPM in terms of commitment.

2. App installs drive rev-share in nearly all mobile ad networks

In mobile advertising, the publisher’s income is based on the revenue sharing model. Although ad networks call it eCPM from their point of view, the real truth is that the impressions are not the main generators of profit and the ad network’s sole obligation is reimbursing the publisher a percentage of its revenue.

More often than not – in 90% of the cases to be more precise – the main driver of rev-share is app installs. The rest 10% is driven by clicks. The logic behind this lies in the fact that nowadays the majority of ad networks’ profit is the result of performance campaigns that are focused on app installs.

In other words, a user who saw 300 ad impressions but never clicked on any generates $0, while a user who watched only one or two ads and then installed the app has generated $5.

It is important to keep this difference in mind, even more so in the process of your app revenue optimization as having as much information as possible about post-impression events will help you recognize the best user segments.

Q1 2019 MOBILE USER CHURN

3. Payout thresholds delay your payment

Most publisher agreements with ad networks include a little thing called payout threshold. Exactly as it sounds, payout thresholds are there to delay your payment until you have reached a certain amount of revenue.

This is why all app developers, especially the smaller ones, should carefully weigh their potential monetization partners. Additionally, you may want to consider using mediation platforms with a payment aggregation feature which would enable faster payment.

4. Multiple hops reduce the profit with each middleman

Most people think that only one ad network connects the publisher and the advertiser, but a lot of times the reality is very different.

Every app publisher should take upon themselves the task of investigating how many hops (ad networks) are standing between you and your advertiser partner, each taking their own cut from your potential profit.

Fewer hops equal to fewer intermediaries, which means more revenue for the publisher. It’s simple as that.

5. Net Revenue and revenue are different terms

The guaranteed rev-share does not exactly come from the ad network’s revenue but instead from its Net Revenue. A lot of publishers risk falling into a trap if they are not aware of this.

The ad network generates its revenue from the advertiser and then subtracts certain costs from that revenue to get the Net Revenue which is then shared with you, the publisher.

To illustrate, let’s take a look at this example: according to your agreement, the ad network promises to give you 70% of the Net Revenue, which means that if they charge the advertiser $10, they might deduct $3 to cover certain costs. This results in $7 and your 70% is actually $4.90 from those 10 dollars. Obviously, this is then a 49% rev-share.

Ad networks also have the freedom to adjust the Net Revenue when they feel like. This could potentially mean that they could use this trick during the test period to increase your income and entice you and consequently influence your choice of monetization partner, only to revert it later to their advantage.

If your company makes significant ad revenues, knowing the advertising revenue per user is essential. SOOMLA can help you do just that!

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