Brief:

• Mobile application users who engage with rewarded ads — which ask users to participate with ads, videos or surveys in exchange for a reward within the app — are 4.5x more likely to make an in-app purchase than those who don’t, according to a study by Tapjoy, which connects mobile advertisers with game developers.

• Tapjoy studied eight apps with a high volume of daily active users, and found that seven apps had higher in-app purchase (IAP) conversion rates among users who engaged with ads. Two of the apps that saw an increase found users were 9x more likely to make an in-app purchase after they engaged with a rewarded ad.

• App users are also likely to spend more than 4x times as much on in-app purchases after engaging with a rewarded ad, the study found. The average number of daily sessions per user increased 34% among people who completed at least one rewarded ad.

Insight:

Marketers are still trying to determine the best ways to reach mobile users with ads, given that the use case for smartphones is so unique. The Tapjoy report is the latest indication that rewarded ads may be particularly well suited for mobile, given that playing games are a popular activity. Rewarded ads are often offer gamers free content in exchange for watching an ad. Another, less-used version involves rewarding users interested in streaming a movie, music or other content free mobile data. 

It makes sense that people who are willing to engage with rewarded ads are also more likely to perform other in-app actions like making purchases. The findings may assuage app developers who are concerned that rewarded ads detract from other in-app purchases, making rewarded ads undesirable. However, if rewarded ads work well, they can provide an additional source of revenue for app developers.

According to another survey, advertising makes up 55% of total mobile publisher revenue. A big slice of that is from video ads, which generate about 33% of revenue for top mobile publishers, AdColony said in a report. Top game apps generate most of their sales from in-app purchases, such as buying virtual currency to use in the game. Forty-three percent of gaming apps' revenue comes from in-app purchases, versus 31% from video ads, according to AdColony.