The market value of the subscription economy globally will grow to $275B in 2022 according to Juniper Research. That said, competition to be in the top 100 app revenue earners is stiff. That’s why building a comprehensive monetization strategy is more important than ever to see long-term success. One of the ways to get above your competition is to start monetizing with ads.
Let’s dive into the 5 most important things you should consider when designing and optimizing your ad strategy:
1. Master the LTV model to track your revenue over time
Due to the nature of subscription apps, you may not see profit for months or years after install, so it’s important to focus on the long term value of users and their probability to convert to subscribers over their lifetime in your app. The lifetime value (LTV) model is a powerful way to keep track of how much a user is worth to your app, giving you a comprehensive view into your app’s monetary performance.
For example, by comparing LTV to the cost of acquisition, you can determine the most suitable UA budget and optimize your business decisions for more profit - the last thing you want to do is pay more for a user than their lifetime value. LTV also helps you identify when you should be “breaking even” - using the model, taking into account your margin, and looking at overall cash flow and buying strategy, you can determine the exact day you should be breaking even.
To develop your LTV model, start by plotting out your ARPU (average revenue per user) curve by calculating the accumulated revenue generated by a segment of users in the days after install. Next, you place a trendline over the ARPU curve, filing in the revenue predictions to the end of the lifetime of the user and creating the full LTV model. ironSource has found that a power curve fits over the ARPU the most accurately for subscription apps. Why? Subscription revenue is not dependent on engagement and subscriptions app’s utility usually stands the test of time, creating a gradual, steady increase.
For apps that have a hybrid monetization model, such as ads or in-app purchases alongside subscriptions, it’s best to separate the curves and use different trendlines for each.
To build a winning monetization strategy and ensure you’re making profit driven decisions for your app, it’s important to be aware of how much revenue each user will bring to your app throughout their lifetime. With this level of awareness of your revenue, you have more knowledge to spend on tools that boost performance, such as A/B tests.
Learn more about how to master your LTV model.
2. Run strong A/B tests to optimize growth
Running strong A/B tests gives you statistical confidence in knowing what improves your revenue, allowing you to optimize your monetization strategy and eliminate any guesswork. Despite having the same revenue model or perhaps being in the same category, there will always be fundamental differences between your app and others. This is why running A/B tests is the most surefire way to bring value to your monetization strategy.
Start by testing the content behind the subscription wall. The goal is to offer enough free content to improve subscription rates without pushing loyal users out of your app. You should also test the types of ads you show and where in the funnel you show them to improve revenue and increase LTV. For example, a prominent lifestyle app found that implementing interstitials alongside rewarded ads increased their ARPDAU and eCPM significantly.
With remote configuration, you can even test your pricing model without releasing a new app update. This means you can adjust subscription prices and time frames as often as you want to see which model brings in the most revenue. A big part of this is having the ability to test the impact of a free trial on a limited audience.
Pro tip: Run efficient A/B tests in one click and control app behavior with remote configuration using ironSource’s A/B testing tool.
A/B testing reduces the uncertainty behind your monetization strategy, especially within a monetization model marked by imitation. One such test you can run is testing whether implementing ads through a mediation platform improves performance.
Learn more about how to A/B test your strategy.
3. Work with a mediation platform that’s easy to use
It’s crucial to not underplay the importance of powerful mediation management. Your mediation platform should make it easy for you to manage your ad monetization, such as:
- Integrating the SDK
- Adding and managing new networks
- A/B testing every part of your monetization strategy
- Customizing the ad flow for user segments
- Managing your ad placements
- Reporting and analyzing performance
“A major highlight of working with ironSource has been how easy it was to integrate their SDK, and since then we’ve had no technical issues” according to Dave Edwards, VP of Revenue at Audiomack.
In addition to ease of use, it’s also important that your mediation gives you visibility over the ads you show so you can ensure a positive user experience and brand safety. The best way to get transparency into your ad flow is to have access to a gallery view of the creatives you show.
Pro tip: Gain full transparency into the ads in your app with ironSource Ad Quality
Rewarded video ads are one such ad unit you can implement with a mediation platform, ensuring you're monetizing every user across their lifetime in your app.
4. Implement rewarded video ads
Many users cancel a free trial in the first 24 hours, and only a few trials convert to subscriptions. So, it’s important to diversify your app’s monetization strategy and ensure you’re properly monetizing all users throughout their lifetime in your app. One way to do so is by implementing rewarded ads.
In fact, implementing rewarded ads is a powerful way to monetize, engage, and retain users. Considering rewarded video is user-initiated and offers users new, premium features, they are likely to engage with the ad unit and keep coming back for more. Rewarded video is also a surefire way to convert more users to subscribers. This is because if users have already experienced your app’s premium features, they’re likely to not want to let that go and subscribe. Users who view a few rewarded videos have a significantly higher likelihood of subscribing.
The ARPDAU graph shows that as you serve more rewarded video impressions, your revenue will increase. The retention graph shows that as you serve more rewarded video impressions, your D3 retention will increase.
To get started, think about the rewards you’ll offer. The best way to do this is to segment your audience and test your most popular features by putting those behind the subscription wall. Then, offer the most used features for that segment as a reward for completing a video.
Pro tip: Define dynamic user groups and build custom ad flows to drive higher engagement and ARPDAU with ironSource’s segmentation tool.
You can even customize the capping, pacing, placement, and network for multiple audiences. It’s best to place ads at natural pauses in the user flow and build off of features within your app that have high engagement. For example, you can show users a rewarded video when they go to save a photo to their camera roll after they’re finished editing.
Whether you’re only running on a subscription model or have started to implement banner ads, interstitials, etc., it’s important to not forget about the power of rewarded video for your monetization strategy. When it comes down to measuring performance, ensure you are getting a granular, full picture approach to your data.
Learn more about how to maximize user value with rewarded video.
5. Get granular insight into your KPIs
Data is one of the most valuable assets an app business can have today, and it’s more important than ever to get granular performance insights to maximize revenue and conversions. That’s why you want to be looking at the right metrics, in the right way to give you a full picture of your monetary performance. After all, your revenue deserves your undivided, meticulous attention.
Here are the key KPIs you should be analyzing:
Trial conversion rate is the percentage of users that convert to becoming a paid subscriber from a free trial. This metric allows you to measure the impact of free trials on your conversions.
Subscription retention rate is the percentage of users who remain subscribers, which allows you to analyze the features of your subscription that keep users around.
Subscription churn rate is the percentage of users who end their subscription with your app, which allows you to analyze the features of your subscription that don’t bring value to users in the long term.
Monthly recurring revenue (MRR) is a measure of an app’s expected revenue each month. This metric allows you to predict your future cash flow from subscribers.
Pro tip: Gain key insights on your core app performance with ironSource App Analytics.
Aware of the key KPIs, you also want to ensure you’re analyzing performance in a way that makes sense for your app. Comparing and correlating multiple metrics at once is the next step to maximize revenue, user retention, and growth.
First, look at your key metrics over time to track your app’s core trends. If you notice that revenue is particularly low on Tuesdays at 4PM, you know not to be frightened the next time you see a steep decline during that period. On the other hand, if you start to see a drop in revenue at a time when revenue is usually stable, you should compare this metric against another, such as ARPDAU, to see what could be responsible for the decrease. Ultimately, being aware of why your performance is changing is important to improving your monetization strategy.
Pro tip: Measures and compare different time periods in real time with ironSource real time pivot reports
Without deep insight into your app’s performance, you’ll never be able to fully understand and improve your monetization strategy. After all, your LTV model, A/B tests and rewarded video strategy all rely on performance metrics that give you a clear idea of what’s working and what isn’t.
Subscription apps are not going anywhere, which is why you want to be active about building a winning monetization strategy today, so you are prepared for whatever competition enters the market tomorrow. While there are tons of ways to optimize your strategy in particular areas, mastering the LTV model, A/B testing, implementing RV, and getting granular into data are some key areas of focus when looking at your strategy.
