Monetizing games with ad revenue on iOS platform

BY: April Tayson, Regional VP, INSEA

Consumers are gaining more understanding of the risk of sharing personal data, and they are now looking at privacy considerations when making purchase decisions. In a global survey conducted by PwC, 80 per cent of respondents from India say that they wish there were more companies they could trust with their data. This suggests that businesses need to increase consumer trust by being more transparent in explaining to consumers the value of sharing data in order to get relevant ads.

Recently, Apple released iOS 14.5 with privacy changes that give users more control over the data they share. Starting with iOS 14.5, app developers will no longer be able to target users that have declined to share their Identifier for Advertisers (IDFA).

According to India’s Media & Entertainment Sector 2020 report by KPMG, with over 365 million gamers, the country's online gaming market registered a 45 per cent revenue growth rate by March 2020. Adjust’s Mobile App Trends has also identified gaming apps as the top-ranking vertical, which is largely due to innovative business models like hyper-casual. In addition, KPMG also states that among all the segments, casual gaming showed a strong consumption uptake through in-app monetizations. With all forms of outdoor entertainment being halted due to the pandemic, digital consumption, user penetration and engagement skyrocketed, and advertisers and marketers are strengthening their plans to tap India's fast-growing mobile gaming audience.

As a burgeoning gaming market, the release of iOS 14.5 will have a significant impact on digital advertisers as well as mobile gaming apps in the country that rely on trackers to identify and reach their target audience. However, despite the changes introduced by iOS 14, advertising will remain vital — even without the IDFA.

How to make data-driven decisions in iOS 14?

For extremely data-driven verticals like hyper-casual games, user acquisition relies on precise campaign data so that marketers know which channels to invest their budget, and how to optimize the performance of their campaigns. They use specific KPIs such as d0/d1 retention, user Lifetime Value (LTV) or Return on Ad Spend (ROAS) to drill down into which campaigns are driving the best performance. With the rollout of iOS 14, platforms that do not have the database, methods and other resources are probably going to see a decrease in their targetable audience.

All metrics need exact data as marketers operate with gaunt Return on Investment (ROI) margins. Knowing where to invest and where to scale down is a matter of just a few percentage points. Mobile marketing has progressed substantially in recent years but with less deterministic data, marketers will rely more on models and context to understand which channels to focus on to get new users.

Press your advantage

Leveraging deterministic data is one way to keep operations stable and having a higher user consent rate is a key competitive advantage — both for maintaining the precision of measurement and maintaining the cost per mille (CPM). However, once the automatic IDFA access is gone, CPM will be heavily impacted. In the absence of identifiers, the deterministic link vanishes, and Demand Side Platforms or ad networks will need to take into account multiple parameters such as time of the day, device model and operating system, which can only indirectly tell if the user is a high spender or not. The lack of deterministic data imposes a greater risk, which will be reflected in the price. On the other hand, inventory that still has IDFA access will likely become more valuable,  and many industry players will compete for access at a premium price point.

Marketers should establish new plans to ensure high opt-in rates, and developers will need to make iterations on prompt strategies to minimize the impact of the change on their CPM and revenue once the App Tracking Transparency (ATT) rules are enforced. For example, app developers can use simple terms such as “Later” and “Next” and position them horizontally next to each other to prompt users to take affirmative action. Using the positive acceptance on the right-hand sign aligns with how people understand moving on to the next step.

Keep it on prompt

With the release of iOS 14.5, users who opt-out will not be served targeted ads, which means that the publisher will see a drop in revenue per ad. Some publishers may warn their users that opting out may mean seeing more ads. In research carried out by Adjust in 2020, hyper casuals can display more ads than gameplay within a minute and still generate profit. However, publishers must note that there are diminishing returns on displaying ads. Hyper casuals that show more than four ads per minute will hit a revenue ceiling of around $35,000 per month.

The sweet spot appears to be between two and three ads per minute, which enables hyper-casual game companies to boost their revenues by as much as 10 per cent. Publishers should find the right balance when deciding on an ad monetization strategy for iOS 14. Showing more ads to compensate for lost revenue may cause users to churn. In addition, the type of ads developers display is also an important consideration. Highly engaging formats such as video, rewarded and rich media will retain their performance levels even without the IDFA. Thus, it is highly likely that the prices of banners and mid-rectangles will drop more.

Set your KPIs

For gaming verticals that monetize via ads, a robust Cost Per Action (CPA) is key for their success. Estimating the opportunity for revenue generation within an app can help determine the CPA. When optimizing for CPA, the conditions embedded in the app allow developers to track ad impression and ad revenue counters.

Apple's attribution framework, SKAdNetwork gives media channels the ability to have a source of truth on attribution in this new privacy-centric world, and marketers can leverage more tools to understand their users better. For example, leveraging on parameters such as time of the click, time of install, and basic device information can estimate the source of an installation for a few hours after a click.

Setting up the right conversion value strategy will be key to success on SKAdNetwork. For hyper-casual game clients looking to measure ad impressions by range count, they would need to create ‘buckets’ that will categorize users based on the number of ads they view.

The changes on iOS will trigger substantial adjustments on how app marketers operate on Apple devices, but with the right strategies, marketers are primed for success in the post-IDFA world. Apple's step towards improving security measures for users is just the beginning, and many other companies will soon follow, and as platforms evolve, agile businesses are in a better position to innovate and succeed in the digital economy.