Originally published at thinktank.personagraph.com.

App monetization is the main goal for any professional app developer. No matter what the original intention of creating an app is, in the end all developers hope to make some money from all the effort they have put into creating the app.

When stories like the one of Dong Nguyen’s wildly successful app Flappy Bird – generating close to $50,000 a day in revenue – make the rounds, it makes app monetization sound like a walk in the park. But make no mistake, making money from an app has become an enormous challenge to all publishers, from huge studios to indie developers. Studies show that close to 60% of developers today live below the app poverty line of $500 per month. It is a harsh reality that developing a successful revenue generating app is a feat very few are able to achieve nowadays.

It is recommended that app developers think of a monetization strategy very early into the app development process as that dictates the app content and flow in general. Choosing a suitable business model is as important as the technical performance of your app. While there are many ways to monetize an app, the most common revenue models are: contract work, in-app purchases, paid apps, in-app ads, and freemium apps.

When an app developer concludes that a monetization strategy based on in-app advertising will most likely be most suited for his or her app, decisions will need to be made about what mobile ad format will be most fitting and profitable.

What different types of ad formats are available?

Even though the mobile marketing industry is still in its nascent stages, there is already a plethora of mobile ad formats available. Here is a list of the most common types of ad formats to help you get started with planning your monetization strategy:

1. Interstitials are full screen ads that appear intermittently in the app. These types of ads take over the entire screen of a mobile phone and thus gain the undivided attention of the mobile users. Interstitials have the best chance of attracting the most attention from the users since they fully utilize the limited screen size available in mobile. These ads give users the option of exiting the ad and returning back to the original screen they were on, enabling a seamless user experience. Interstitials are generally liked by both advertisers and publishers but are not suited for every app category. Games often provide natural moments to pause or transition which is where interstitial ads are displayed. Interstitials is an ad format in itself as a static full screen ad but is also a method of presenting other ad formats such as rich media, video and list and panel ads.
2. Native: Native ads are meant to blend in completely with the user experience of the app. This way a user is naturally introduced to the advertisement and in an unobtrusive manner. There exists a delicate balance between getting an ad noticed and not being obtrusive. An ad that is too much skewed to either side of this spectrum will suffer in terms of CTR and financial performance. Also, for advertisers it is essential to make clear that their brand is communicated properly. Since there are countless apps, native ads do not come in a “one size fits all” format. Social media apps often use embedded posts that look just like original user generated content, so called in-stream advertising. News apps and other content apps are increasingly utilizing sponsored content to generate revenues. Some apps show ads among notifications and others lets users trigger ads by tapping on certain navigation buttons (activity triggered ads). Mobile ad network InMobi offers several predesigned native ad formats and lets you create your own custom format as well. However you decide to design your native ads, just keep the above mentioned balance in mind. Because when done properly, native ads can outperform other formats. As with interstitials, native advertising is both an ad format in itself as a method of presenting other ad formats.
3. Banner: Banner ads have been used extensively in both desktop and mobile and are perhaps the most widely used ad format. Just like in websites, banner ads appear on the top of the app screen in mobile. They are facile to implement however they tend to disrupt the UX and are generally considered to be an exasperation by users. Not surprisingly, banner ads show the worst financial performance of all ad formats. Flappy Bird had over 50 million downloads. So just because that app could make money with banner ads doesn’t mean it works for every app. In fact, Dong Nguyen could have probably made a lot more using interstitial ads.
4. Video: In-app video advertising works similar to interstitial ads. They usually take over the entire screen to display the ad. Advertisers love this type of advertising because they are said to provide the highest eCPM in app advertising and publishers benefit from the high click through rate. This category is especially interesting financially for the industry as a whole because it can steal away advertising budgets for TV (which are massive). Major consumer brands are looking to connect with their audiences in a personal way. The smartphone is perfectly suited for this if done correctly. Given the resemblance to TV ads, in-app video ads created high expectations among industry professionals about its future importance. However, video advertising, like interstitials, are not suitable for every type of app.
5. Rich Media: Similar as to native ads, rich media ads are highly customizable and can therefore come in many different forms. They can look like videos, they can be interactive, can pop up like interstitials, can grow in size when tapped, and can even be in the form of miniature games. The creative freedom that rich media ads give attracts top quality advertisers because they can convey the exact brand image they want. A proper rich media ad can even entertain a user which enhances user engagement, thereby increasing CTR and revenues for publishers and conversion rates for advertisers. Needless to say, rich media is a format to consider for your app but stay aware of the effects on the UX. Since rich media comes with a ton of bells and whistles they can be flashy which can rub some users the wrong way. When your app is a simple note taking tool with little visual needs, an over the top rich media ad can be quite a shock to the user in terms of user experience.
6. List and Panel Ads:List and panel ads utilize the power of numbers. By showing not one but several ads at a time, the chances of displaying an ad that a user taps increases immensely. Also called offer walls, these ads most often show “recommendations” to download other apps and games. Since a list or several panels take quite some room on a smartphone screen, these ads are usually in the interstitial format.

More types of ads: Each of these ad formats can also exist in different underlying varieties. As mentioned above, app install ads have become commonplace. In fact, app install ads have become a booming business in recent years, not the least because Facebook started offering them. However, more types are emerging. Reward ads give app users some sort of reward when they perform a certain action in an app. For example, a user is offered to download a free song when they have completed a level in a game, sponsored by an advertiser. Or watching or engaging with an ad is rewarded with in-app currency. This sort of incentivized app downloading and ad consumption has received mixed criticisms. Some describe it as a win-win situation, others say users only click for the reward but are generally uninterested in the advertised offering. More types of ads are bound to arise and an early bird catches the worm, so keep up with industry news.

Just as there is no “rule of thumb” for choosing the best business model, choosing the right ad format is a matter of mixing and matching and trial and error. It is essential to test and compare the performances of every implemented ad format. Your app’s UX is arguably the most important factor to keep in consideration. Also, starting with some prior knowledge about your users can be highly beneficial. Personagraph allows you to gain valuable insights about your audience so you can make accurate conclusions and predictions on how they will respond to different ad formats.