August 10, 2023
Try as you might to create the most entertaining and engaging advertisements possible, if users have to watch them, they may not be all that receptive to your message. But if the choice is theirs – with a desirable reward to compensate them for their time and attention – they’re more likely to enjoy engaging with your message. That’s the ground-floor proposition for rewarded advertising.
Rewarded advertising has stood the test of time as a standby for mobile app advertisers, but how and why does it work? Why did it pick up a negative connotation in some corners of the mobile space, and what modern processes make the best of it while steering clear of opaque or otherwise ineffective business practices? Great questions. Let’s start with a definition.
Rewarded advertising is a form of advertising that encourages users to engage with it in order to receive certain benefits that are teased ahead of time. In a mobile game, the rewards may be given out in the form of bonus currency, while a music streaming app may reward users with half an hour of commercial-free listening. Here are three of the most common types of rewarded advertisements across mobile:
👀 Related reading: 5 essential elements of effective mobile game loyalty programs
Since rewarded advertisements involve at least three interested parties (the user, the app publisher, and the advertiser), a reliable framework for communication between the three is essential. This ensures the user receives their reward, the app publisher receives its payment, and the advertiser is confident the user engagement occurred as desired.
This is accomplished through app-to-app communication. In the common example of a rewarded video advertisement, the publisher of the app integrates a supported video unit from an ad network, likely using the network’s SDK. Then it configures its own servers to listen for an event from the advertiser that is sent out upon completion of an advertisement. This typically includes the user’s ID, the reward they’re entitled to, and a unique ID for the event itself. It may also be encrypted using a private key to prevent users from attempting to spoof the system as a shortcut to rewards.
The above is an example of a typical, one-time rewarded advertisement using post-back events and attribution data. However, these types of systems can also be applied in broader ways to provide continuous rewards based on milestones and actions; for instance, an event signaling a player reached a certain level in a game, or spent a certain amount of money on IAP, could also be used to track longer-term engagement.
Rewarded advertising has been a staple of revenue generation for mobile publishers and brand-building for advertisers for more than a decade, as this TechCrunch article1 shows. Its basic proposition, which presents a clear value for both the advertiser and the user, has remained consistent. Sadly, some obfuscated and less-than-ethical business models based around rewarded advertising emerged not long after that, and they contributed to a somewhat diminished reputation for the entire approach.
An AppsFlyer article2 from 2017 noted that long lists of offers may drive users into behaviors that inflate metrics without truly elevating engagement: They download a new app, use it long enough to get the reward they’re seeking, then never touch it again. Apple’s App Store policies also prohibit showing a selection of third-party apps to install from within an app, and its large-scale crackdown on the practice in 2019 cost developers thousands in revenue, as reported by PocketGamer.biz3.
Fortunately, it’s possible to capitalize on the engagement potential of rewarded advertising with transparent and reliable business methods. A recent resurgence in the advertising strategy has helped advertisers drive deeper value and installs while building loyalty, all while shaking off the unsavory reputation that previously dragged down the entire medium.
What does rewarded advertising mean for publishers? The full list of benefits is extensive, but here are three highlights to start with:
Each of these benefits points back to the functional advantages that rewarded advertising holds over its more traditional counterparts.
At its most fundamental level, rewarded advertising works because it puts users in control of the ads they see and gives them a direct reward for their engagement. Rather than interrupting the flow with an unwanted interstitial break, users opt-in to watching a video or interacting with content when it suits them.
While many users can abstractly appreciate the fact that advertisements are necessary for their favorite games to remain in operation, they’d still prefer they weren’t there. However, according to Google’s internal studies7, 50% of users would be less satisfied with their app experience if rewarded ads were removed. Furthermore, nearly four in five mobile gamers prefer rewarded video ads that they opt into over mandatory ads, according to a Tapjoy study reported on by PocketGamer.biz8.
Rewarded advertisements perform synergistically with a variety of different ad formats. As shared by Business of Apps9, rewarded playable ads had a 37% lower CPI and a 2.5% increase in ROAS when compared to non-rewarded ad inventory used for app-to-app promotion. Clearly, users are eager to discover new favorite apps, and they’re all the more likely to stick with them when concrete rewards are in the picture.
When combined with proven practices to build loyalty, the engagement potential of rewarded advertising truly takes off. If you’d like to learn more about how these principles can help your app find more users who stay engaged for longer, reach out to our experts today.