Setting The Right Price to Remove In App Advertising with In App Purchase
Posted By PlacePlay on April 24, 2012
Last week, we talked about how to Increase Mobile Advertising Revenue in 5 Steps. This week, we’re going to provide a series of blog posts on simple ways to increase your overall app revenue.
The first, really simple, way to increase your overall app revenue is to provide users with an in app purchase option enabling them to remove all mobile advertising from your app.
Based on 100% anecdotal data, we believe no more than 10% (and that’s probably high) of apps that include in app advertising provide their users with an option to remove advertising. Now, you may say that only a small % of users will take this option, so why bother? Well – that’s OK, if you have 1 million users and 3% purchase the item, that’s a meaningful amount of money – especially if you have the in-app purchase option priced correctly.
In most cases we see iOS and Android app developers price the removal of ads at $.99. We have no way of knowing, but we can’t help but wonder whether they’ve identified what the optimum price is for item – because in some cases, it might not be $.99.
Let’s review how you can identify and set the optimum price for an in-app purchase item to remove mobile advertising from your app. We’ll follow a fictitious app developer, Roger Robot, as he goes through the process to identify the right amount of money he should be charging to remove in app advertising from his app.
- Roger identifies the average session time/user to be 4 minutes 25 seconds (265 total seconds)
- Roger identifies the average number of user sessions per month to be 30, for a total of 7,950 seconds per month in his app
- Roger identifies that his average user engages with his app for 3 months
- With this information Roger knows that on average, each of his users will engage with his app for 23,850 seconds in total.
Now that Roger knows how many seconds each of his user engages with his app for, he can look at the various ad formats he uses to identify how much money he will make from an average user from in app advertising alone. Roger uses banner and video advertising.
Banner Ads:
- Like most developers, Roger shows 1 mobile banner ad impression every 30 seconds. Roger listened to our recommendation to utilize singleton ad view and will show 795 banner ad impressions to each of his users.
- Roger uses PlacePlay and his average eCPM is $3.00; his life time value per user for banner advertising revenue is approximately $2.38. (795/1000 = .795 * $3 = $2.38)
Video Ads:
- Roger shows a 15 second video to each user once every 180 seconds. Based on this information, Roger knows that he will have have the opportunity to show each user 132.50 mobile video ad impressions.
- Roger makes $.025 per video impression and has a fill rate of 50%
- Roger now knows that, on average, he will show each user 66.25 video impressions for a total revenue number of $1.65.
Roger Robot can now say with relative certainty that he will will make approximately $4.03 ($2.38 + $1.65) 
from each user with in app advertising alone. Armed with this information, Roger can now make an informed decision on how to price an in app purchase option for his users to remove the in app advertising contained in his app.
Given a revenue share of 30% (in most cases), the ideal price for Roger’s in app purchase option to remove in app advertising is $5.99, which will generate $4.19 in direct revenue.
How have you priced your in app purchase items to remove in app advertising? What % of your users purchase this option? Tell us more in the comments section!
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