We are happy to report some interesting data points we recently looked at. The goal was to understand how concentrated ad revenue really is. Everybody knows already that the 80/20 law applies in IAP – at least 80% of the revenue is driven by the top 20% of purchasers. There is plenty of research showing how concentrated IAP revenue is. Ad revenue, however, is still a mystery for most publishers and very few companies actually have the data on how concentrated the revenue is. If you take the naive approach and believe all the users contribute revenue based on the average eCPM you might think that the ad revenue concentration chart will be flat. The reality however, is very different.
Comparing Concentration in Ad Revenue vs IAP Revenue
In the image below you can see a comparison of the revenue concentration between ad based monetization and IAP based monetization. These charts are based on data from 28 days of activity in a Match-3 game where most of the monetization comes from interstitials. The revenue model behind the ad monetization is CPC in this case.
On the left side, the IAP revenue is highly concentrated and 80% of the revenue is generated by the top 20% of the users. The top user generated more than $300 in revenues for the app.
On the right side, we see that the ad revenue is also highly concentrated. The top 20% are contributing more than 50% of the revenue here and the top user generates $2.5 while there are users who only contribute a few cents.
Ad Revenue Concentration with Reward Ads
One of the hot trends of 2015 and 2016 was the adoption of rewarded video ads by many game publishers. We wanted to look at the ad revenue concentration in rewarded video as well. The chart below does exactly that.
The data here is from a single day so obviously more concentrated than information aggregated over an entire month. The game here is an mid-core action game and the monetization is done with both rewarded videos and an offer wall.
The ad revenue concentration is much higher in this data set. The top 20% of the users are contributing 90% of the revenue and the top user is contributing more than $15.
Who are the users contributing high amounts of ad revenue
Once you realize that the ad revenue is concentrated almost as much as IAP revenue, your next question is likely to be: “who are these users”. On a high level, these users are typically the users who download many apps as indicated by a Comscore Report highlighted in this article.