Beyond Banner Ads: Part 1

In this new series, monetization expert and AdInMo Advisor Tiffany Keller gives a masterclass in monetization theory with insightful use cases how in-game formats drive player engagement   

I’ll be honest: banners used to be the signal of a game with low retention- these games needed to profit off players before they churned out in the first hour of gameplay. Today’s game industry, however, benefits from advanced ad tech and player friendly ad design that rewards players for accepting certain levels of friction. The growth of the hybrid casual market has shown that players will choose to play games with ads based economies and still pay for power progression- but the ad format and design you choose makes all the difference when it comes to impact on player engagement.

To banner or not to banner

The most important consideration of ‘to banner or not banner’ is your game genre and audience, because your player engagement will react to higher ad load based on their available “substitutes”. This is called the Substitution Effect in economics, which is that consumer demand for a product reacts to price changes relative to similar products, or substitutes. In the case of ad design for games, the “price” you are asking your player to pay is their attention, or how many ads they will see while playing or to earn rewards to accelerate progression. 

What are protections against the Substitution Effect?

If your game has a “lack of available substitutes” because it’s paving the way in a relatively blue ocean subgenre, like the first match 3D games in the subgenre (creatively named Match 3D by 1Up Games), then it’s easy to add banners as there are not many other games players could switch to for the same experience. It could also be hard to switch to other games due to a principle we call Switching Costs, such as losing your progress in a game you have played for years or needing to purchase a premium game substitute up front. Another protection against substitution is called the Network Effect, where social engagement hooks increase the flywheel for cooperative or competitive games that make smaller substitute games less appealing- this is something Fortnite and Roblox have mastered, or that games bundled together such as the XBOX Game Pass hold. Brand loyalty is another holdout against substitution, and a key protector of gaming platform exclusives on Playstation or XBOX. Mobile game companies can also employ brand loyalty, such as EA sports franchises like MADDEN or IP driven games like Pokemon Go where substitutes have struggled to gain market share. All of these protections against the substitution effect essentially increase the cost of switching to another game, so increasing your players “attention cost” for your game by upping ad load is less likely to impact engagement.

Players switch to other games when the cost of their attention for viewing ads is too expensive relative to direct competitor games. You can lower this cost by enhancing your ad experience relative to the quality bar of existing competitor games to keep your attention cost lower

What if you have no protections against substitution?

Most mobile games operate in a hyper competitive red ocean, where there are thousands of free to play games in each sub-genre so it’s difficult to build network effects, brand loyalty or incur switching costs. Don’t worry- if you are conscious of your game’s “available substitutes’” monetization strategy, then you can still win over your players while earning a great return on ad spend (ROAS). 

According to Appsflyer, ad monetization is one of the best ways to recoup ROAS quickly, as In App Advertising (IAA) games typically earn back their CPI 30% faster than IAP-only games. When we consider the Substitution Effect, your product’s demand only suffers when it is priced too high relative to your available substitute games in a similar genre targeting the same audience. So if your competitors include ad monetization and banners, you are missing out on that revenue without benefiting most of your players because they don’t mind playing games that include banners. This doesn’t just apply to the binary question of adding banners to your game or not, but importantly how many banners and what kind of formats you add without harming engagement. 

86% of all mobile games contain some form of ad monetization per Appsflyer’s State of Game Marketing 2024 report, and this holds true for a majority of games inside every genre including midcore and core. For hybrid casual and casual genres, banners are almost certainly expected by players. For other midcore and core genres such as RPG, starting with rewarded video ads and then experimenting with contextual and immersive formats, such as intrinsic in-game ads, could be useful to judge your players’ tendency to switch to other substitute games. Genre is a good starting category to understand how easy it can be to integrate banners or in-game ads successfully, but even within each genre there is a wide range of how “casual” your audience could be. I often take a proxy using LTV, D60 retention, and minutes played per day- the larger any of these are relative to your direct competitors, the more care you should take increasing overall ad impressions.

In part 2 I’ll be taking a deep dive into the monetization strategy of Hexa Sort- Applovin’s Lion Studios’ breakout hybrid-casual hit to explore the impact of adding in-game ads into the mix.

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