Mobile App Monetisation – How to calculate mobile app advertisement revenue

Mobile advertising is one of the most common mobile app monetization strategy used by mobile application developers worldwide. Mobile app ad revenue constitute major component of global advertisement revenue earned by developers. Mobile app developers use mix of following methods to monetise their apps:

1. Paid apps
2. In app advertising
3. Freemium (using In app purchases for monetisation)
4. Incentivised advertising

 

In app advertising (50.3% Interstitial and 40.8% Banner Ads) followed by Freemium model (49.7%) is the most preferred monetisation model used by app developers as can be seen in the following report:

Further, Ad Networks were most preferred channel for selling in app ads followed by Meditation Platforms, Direct Sale to advertisers and Inventory sell through ad agencies. Real Time Bidding is the latest channel being used by publishers for selling their in app ads.

In this blog, we will mainly discuss mobile app monetisation by advertisements in an app. Revenue in mobile advertising is mainly influenced by following factors:

1. eCPM – effective revenue per thousands ad impressions
2. Number of Ad Impressions shown to the user (N)

Based on the above, total revenue to the publishers can be calculated as:

Total Revenue = N X eCPM/1000

Further, Total Number of ad impression mainly depends on total number of sessions, which further depends on the number of active users (MAU or DAU). Thus, total number of ad impressions depend on some combination of following factors:

1. Number of active users – For this MAU (Monthly Active User) or DAU (Daily Active User) can be used.
2. Number of session per active user
3. Average session duration
4. Screen/Session
5. Refresh rate of Banner Ads – Refresh rate determines frequency of ad impression being generated on a mobile app. Publishers can choose “No Refresh” option or refresh ads every 30 to 120 seconds. The default value of Refresh rate is “No Refresh” and the publisher can set this value to some value between 30 and 120 second. Google recommends to persist an ad for 60 second or longer.
6. Number of interstitial ads per session

 

The calculation for total revenue changes based on the refresh rate set by the publisher and the frequency of ad request being made by the app. Generally app makes ad request to DFP only once for each screen view. But, app can increase the frequency of the ad request by making multiple ad request to DFP after some time interval.

We have divided this calculation for 2 scenario of refresh rate and the scenario when the app is making only 1 ad request to DFP for each screen view.

“No Refresh”
Refresh rate other than “No Refresh”
Further, we have made following assumption for our sample calculation:

Input Data
Active Users(MAU)	10000
Sessions per active Users	5
Screen/Session	6
Fill Rate	100%
Number of interstitial ads per session	1
eCPM-Banner (in $)	1
eCPM-Interstitial (in $)	4

We have used MAU as the measure of engagement, although DAU is also used for this purpose. Further, total number of sessions is the beginning point to calculate total revenue in either of scenario. At the same time, it is to be noted that Google analytics provides for total number of session and it does not provide for sessions per active users, although there is a linear relationship between active users and sessions per active users.

Scenario 1 (No Refresh Rate)

In case of refresh rate set as “No Refresh”, there is only one ad request made to DFP for each screen view. Consequently, there is only one ad in one screen view. In this scenario, the ad revenue can be calculated as follow:

Input Data
Active Users(MAU or DAU)	10000
Sessions per active Users	6
Total Number of Session	60000
Screen/Session	6
Total Number of Screen Views	360000
Total Number of Ad Request Made	360000
Fill Rate	100%
Total Number of Impressions	360000
Revenue Calculation
Number of interstitial ads per session	1
Number of Banner ads served	360000
Number of Interstitials ads served	60000
eCPM-Banner (in $)	1
eCPM-Interstitial (in $)	4
Earning from Banner ads (in $)	360
Earning from Interstitial ads (in $)	240
Total Earning (in $)	600

In this scenario, there is “No Refresh” option selected and app does not make more than 1 call for each screen view, total number of screen view rather than total time spent inside the app decides total revenue for the app. Thus, total number of screen views rather than total time spent inside the app has been used to calculate total revenue for the app.

Scenario 2 (Refresh Rate other than No Refresh)

In case of refresh rate other than “No Refresh” rate, there can be more than one ad shown to the users for each screen view. In this scenario, the ad revenue can be calculated as follow:

Input Data (Assumption)
Active Users(MAU or DAU)	10000
Sessions per active Users	6
Total Number of Session	60000
Average Session Duration (in Minutes)	2
Refresh Rate of ads (in Seconds)	30
Total Number of Ad Request Made	240000
Fill Rate	100%
Total Number of Impressions	240000
Revenue Calculation
Number of interstitial ads per session	1
Number of Banner ads served	240000
Number of Interstitials ads served	60000
eCPM-Banner (in $)	1
eCPM-Interstitial (in $)	4
Earning from Banner ads (in $)	240
Earning from Interstitial ads (in $)	240
Total Earning (in $)	480

In this scenario,  publisher has set a Refresh rate other than “No Refresh”, app can make more than 1 call for each screen view, total time spent inside the app rather than total number of screen view decides total revenue for the app. Thus, total time spent inside the app has been used to calculate total revenue for the app.