Rewarded ads – Benefits and drawbacks

Rewarded ads or Incentivized ads are a mainstay of the modern in-app mobile advertising experience. These types of ads are designed to reward the user once they have taken the desired action after seeing an advert. Over the years there has been an evolving relationship with this type of advertising, sparking the rise in the freemium model.

Rewarded ads - benefits & drawbacks

What are they and how do they work?

As the name suggests, Rewarded ads also known as Incentivized ads, offer mobile users a reward or incentive in exchange for their interaction with an ad. This can include installing an app, registering or subscribing to a website or service, or watching a video. This is especially prevalent in scenarios where a user wants to unlock content such as level-ups, more lives, power-ups, virtual coins, removing ads, or premium content. Unlocking content on completion of the desired action can be seen when the revenue model ‘Freemium’ is used. ‘Freemium’ offers users a free version of an app or service that either has a limited offering or that is heavily ad-supported. To remove the ads or unlock more features, a user must pay or subscribe to the app or service. 

High profile examples of this ad unit would be games such as Candy Crush, where you can unlock game features, boosters, or lives by watching a video ad, and platforms such as Spotify, where you can unlock uninterrupted music for 30 mins by listening to an ad as part of their free version, with ads completely removed if you subscribe.

Rewarded ads give users the choice of interacting with an ad or not. They are given the options by the publisher of which rewards are available for each ad unit. Often users are able to choose the ad, especially in the case of rewarded video ads to choose which ad they want to watch.

A study from Ad Colony Publishers believe Rewarded Video Ads to be their most effective type of advertising (92% score compared to 72% score for Interstitial Video Ads) with the absence of in-app purchases showing that non-gaming apps (66%) rely slightly more on ad revenue than gaming apps (63%). 

According to Google, the rewarded ads funnel has four main events that occur:

  1. Ad prompt – User is presented with the option to view an ad in exchange for a reward
  2. Opt-in – User opts-in to watch an ad
  3. Ad reward – User completes viewing an ad and receives a reward
  4. Item used – User consumes the reward and is able to continue using the app

Google offer two reward based formats directly through Google Ad Manager, these are:

  1. Rewarded Ads – User given the option to view an ad for a reward
  2. Rewarded Interstitial Ads – User not given an option to view an ad for a reward, instead the ad appears as part of the process 

Google now enables Rewarded Ads with Open Bidding or Exchange Bidding in Dynamic Allocation (EBDA), Google’s alternative to Header Bidding. This means that both ad formats are available through Programmatic Guarantee, Private auctions, and Preferred Deals. 

What are the Benefits of Rewarded Ads?

Over the years as rewarding interaction in advertising has become more accepted, a number of benefits can now be seen:

  • Better User Experience
    • They offer users more control over the advertising experience as users opt-in to view an ad or take action to gain access to the content they would otherwise have to pay for
    • Rewarded Videos are an optional, non-intrusive ad format, as users aren’t interrupted in the middle of an app event
    • Users expect to be rewarded once they opt-in or take action meaning there is constant app interaction
  • Better Monetization
    • Publishers are able to monetize a larger proportion of users that may otherwise not spend money in-app or to purchase the app
    • These ad units are highly viewable, often non-skippable and very much engaging as the user opts-in to watch potentially bringing much higher average revenues
    • Rewarded ads tend to perform better and offer higher returns for advertisers
  • Better Ecosystem
    • Advertisers get access to a better-performing form and so are willing to spend more for formats that deliver better user engagement
    • Rewarded ads are versatile enough to not only work well for gaming apps but also offer an alternative for a paywall experience, especially if the content is good enough
    • These ad units also offer publishers higher revenues with more engaging ads as an alternative to an in-app-purchase (IAP) monetization model

What are the Drawbacks?

As we have covered there are many benefits to rewarded ads, however here are a few issues to keep in mind:

  1. Genuine interaction – Traditionally the biggest argument against this ad format is that many believe some users will only interact with ads to gain an incentive. Meaning the interactions are not seen as genuine and so this traffic would be of lower quality and less valuable to advertisers due to users being less engaged. 
  2. Video ad format – do not support VPAID creatives video ad formats 
  3. In-App Only – Although they are most commonly used in apps and games, there are instances where they can be used in desktop environments also. However, these ads through Google are available in-app only.

How can I best use Rewarded Ads?

The most important consideration is to be mindful of your users. Here are a few tips:

  1. No surprises – Ensure the ad fits the flow of the app’s content. That means select an appropriate time to serve the rewarded ad and do not surprise your users!
  1. Types of video – There are different types of video ad that could be used;
    • Video ads, where a user selects from click-to-download video ads or non-skippable but closeable video ads
    • Interactive ads, where a user is served a playable ad that are click-to-download and lets the user try out a game by playing it within the ad unit context
  1. A/B Testing – Try and test different varieties of rewards, types, sizes or at different points within the content, A/B testing to determine which combination provides the best experience to users and performance for monetization.