App Monetization Challenges and How to Solve Them

App development is swiftly becoming one of the most lucrative fields in the digital industry. Mobile applications are experiencing an unprecedented spike in usage due to the pandemic and quarantine measures. In the US, the average adult spends 3 hours 35 minutes on mobile apps per day. Yet, despite the explosive popularity of mobile apps, 2021 poses some serious challenges for app developers. 

Mobile applications use different monetization models, but the model that dominates the digital landscape is the ad-supported or partly ad-supported apps. The Corona Crisis depleted the advertising budgets of the major brands. Now, this is where things get hard for app publishers. Despite record-breaking supply, they often cannot find appropriate demand for their inventory, face low CTRs, ill-suited ad creatives, and fraudulent SDKs.

In this article, I will review the most common challenges with app monetization and the solutions to combat them.

One of the biggest challenges for app developers in the coming year will be establishing user identity. Apple's plans to limit IDFA functionality in 2021 is going to cripple segmentation, ad targeting, attribution, and measurement. This move is expected to depreciate CPMs across the board and deprive app developers of 52% of their advertising revenue.

Another factor that will determine the fate of user-level in-app attribution is Google's adoption of opt-in tracking for Android. Google and Apple mirror each other's privacy policy, so Google may replicate Apple's move with GAID. Thus, Android app developers should also brace for impact.

Of course, Apple has not left us completely blindsided as they rolled out updates to SKAd Network, its previously dormant solution for install attribution. To prepare for the IDFA phase-out, iOS app developers must integrate with the SKAdNetwork and explore other methods of identifying users, such as IDFA and in-app IDs.

Most developers don't give enough thought to their app monetization. Usually, they pick one monetization partner, most commonly AdMob, and stick with it. This inertia is what's damaging app revenue in many cases. AdMob can provide fill rates but doesn't guarantee the highest CTRs. The app ecosystem is a market, and different SDKs offer different rates for various audience segments. Some SDKs can provide better rates for gaming apps, while others provide higher CTRs for audiences from a particular geo.

App developers shouldn’t get hung up on one SDK. Instead, they should experiment with mediation, plug-in additional SDKs, and get more diverse demand sources. Besides, they have to really know their audience, segment it, and research the market for SDKs that appraise certain segments higher. App developers should try monetizing audiences from different countries through several SDKs.

The ad-supported model is not a magic pill that guarantees the successful monetization of your app. Oftentimes, app developers don’t put too much thought into the quality of their ad slots or creatives. This is a fatal mistake; annoying and inappropriate ads can quickly deteriorate your customer base. Repetitive and irrelevant ads are the main drivers of churn of the app users. App developers should nurture their users and keep in check what kind of ads they see, filter out non-brand safe topics and content categories, etc.

First and foremost, one should examine the industry's best practices of mobile ads. Banners shouldn’t cover critical parts of the interface, and if possible, they should be native. Video ads are appropriate only during the natural breaking points in the content experience (like the next level or death in the game). Unskippable ads annoy users the most, ideally, ads should offer a bonus for watching them, like rewarded video ads. 

Furthermore, app developers should pay attention to the ad creatives. The programmatic ecosystem is filled with inappropriate ads of gambling or adult content that could damage the publishers’ brand loyalty. Obviously, you can’t manually control all the ads displayed on your app. Therefore, before contracting with an SDK, check what kind of precautions specific demand partners use against bad ads. Frequently, they partner with creative validators, which are third party providers that scan ad creatives before displaying them.

One should be aware, there are plenty of bad apples among SDKs. After being deployed, they can install malicious code that can spy on the user activity inside apps, steal personal users’ data, and even commit ad fraud. 

Last summer, a Chinese ad network Mintegral was accused of committing fraud on more than 1,200 apps with 300 million installs per month since July 2019. Mintegral engaged in what is called fake attribution or install hijacking. 

Advertisers usually pay ad networks for a successful mobile app install. Mintegral SDK spied on the user activity, and when they clicked on ads that lead to the install of other apps, it would quickly send out a fake click and “claim credit” for the app install.

Fraudulent SDKs drain ad revenue from both advertisers and publishers and could irreparably damage the trust in the app. Media buyers tend to boycott apps that were spotted in the fake attribution schemes. 

Thus, you should do a thorough background check on the SDK you are planning to partner with. Don’t trust SDKs that already have a history of dishonesty or violating data privacy regulations. 

Always check what kind of data you hand over to SDKs. Ask for justification, if for instance, the SDK is requesting geolocation data of your users. An indicator of a good app monetization platform is its partnerships with traffic quality vendors. The credible traffic quality vendors frequently used by adtech platforms include IAS, DoubleVerify, Pixalate, and Impact.

According to eMarketer, programmatic ad spending on private marketplaces (PMP) will surpass that on open exchanges. The private marketplace is a closed auction for a selected group of advertisers, where they bid on premium publisher inventory. Brands switch to PMPs due to the lack of brand-safety on the open exchanges and give preferences to deals with premium publishers.

Yet, the in-app environment is notoriously slow with adopting PMP, while it promises big gains for app publishers. Brands are looking for premium inventory and are willing to pay for it. With a coming drop in the targeted impressions, the importance of first-party data will skyrocket. PMPs continue to prove a primary source of first-party data to build more robust identity graphs and share unique audience insights for campaigns.

App developers need to partner with a credible SSP or ad exchange, that has the functionality to support PMP deals. Technical capabilities alone won’t cut it. It would be ideal if you found a partner who would offer advertisers a searchable interface or a responsive programmatic team that will line up recommendations and pre-fixed packages tailored to their needs.

The app economy is going through a turbulent time, especially for those app developers who rely on advertising for their monetization. Nevertheless, the demand for in-app impressions is still there; you just need to work harder to attract the right advertisers. Rewarded video ads were some of the few ad formats with rising eCPMs during the COVID. 

To succeed in this new digital landscape, app developers should actively seek new attribution models to prepare for the phase-out of IDFA and GAID. To maximize the app's earning potential, you need to experiment with different SDKs, create custom audience segments, and sell it through different platforms. When choosing an SSP for app monetization, it is crucial to pick one with PMP functionality and good creative validators.