Brief:

• Mobile game developers are weaning themselves off in-app purchase (IAP) revenue as in-game advertising grows amid growing industry acceptance of paid announcements, according to a DeltaDNA study shared with Mobile Marketer. The industry's percentage of revenue from ads rose 11% and reversed a three-year decline.
• Developer hostility toward in-game advertising has softened in the past few years, per the study. The percentage of game developers that describe ads as an "important monetization opportunity" grew to 59% this year from 39% two years ago. At the same time, the portion of game developers that described ads as a "necessary evil" fell to 36% from 52% during that period. The number of games that rely on ads for at least 40% of their revenues jumped 15% this year, the study said, while games generating 81% to all of their revenue from ads leapt by nearly 30%.
• Rewarded video ads — which give players extra game points, lives or virtual goods in exchange for watching a commercial — are offered by 65% of mobile game developers, DeltaDNA found, making the format the most popular among game ad categories like banner, interstitial, playable and native.

Insight:

Game developers that were once highly dependent on download fees and in-app sales as key revenue sources are getting more sophisticated about how they work with advertisers and monetize their content. While earning money from an app store is a straightforward process of charging people to download the game, advertisers require more information about viewability, demographics and a variety of other metrics. That difference means developers and ad networks need to work more closely to unlock more transparency and share more player data with each other.  

Leading ad networks are supporting developers with more access to unique ad formats, consulting on ad placements and making more data available to optimize ads. A key component of this is access to eCPMs at a user level that help to calculate the return on ad spend (ROAS) for user acquisition campaigns. Only 30% of game developers said they were confident that they had access to all the data needed to create ROAS models. The ability to accurately forecast ad revenues will have a dramatic effect on evolving the market for in-game advertising, DeltaDNA said.

Overall, the industry culture around in-game advertising is quickly shifting, as more marketers look to deploy creative ad campaigns in fresh formats and platforms such as gaming or esports. This is seen in the broader shift from DeltaDNA study respondents' perception of in-game ads as a "necessary evil" to an "important monetization strategy." One challenge that's likely still causing some hesitancy among game marketers is fear of damaging the user experience by inundating players with marketing messages, potentially causing player churn or lower levels of enjoyment. DeltaDNA suggests that stronger data can lead to richer insights into user preferences and where and when to place ads within games.