The bear market and looming global recession have many consumers pulling back on purchases. Notably, consumers in the United States are withholding several day-to-day and big-ticket expenses, so it’s no surprise that the growth of in-app purchases (IAP) is also steadily declining.
In the past, many advertisers relied on IAP revenue to meet their return on ad spend (ROAS) goals. This approach, however, often misses out on a user’s maximum revenue potential because it only optimizes for users with a high likelihood of making a purchase. As a result, these IAP campaigns tend to be unstable and spiky, relying on whale-driven performance to meet ROAS goals.
In light of slowing IAP growth and economic uncertainty, app developers and advertisers need stable, efficient ROAS campaigns to find the highest-value users more than ever. That’s why they should optimize for both IAP and in-app advertising (IAA), instead.
Contrary to the slowing IAP market, the global IAA market is expected to grow to $343.5 billion from $110.9 billion between 2021 and 2027, exhibiting a compound annual growth rate (CAGR) of 20.73%. App genres like casual and hyper-casual gaming, social, utility, and entertainment are especially well-positioned to benefit from IAA campaigns since they typically receive fewer in-app purchases.
Unfortunately, advertisers couldn’t capitalize on IAA optimization until recently. Per-impression ad revenue data was only available at the end of the month or not at all, making it impossible to use for optimization.
However, now that Liftoff has access to impression-level revenue data, advertisers can maximize ROAS using campaigns that run on an IAP, IAA, or a hybrid monetization (combined IAP and IAA) optimization strategy.
What makes IAA optimization so impactful? This new approach to ROAS optimization targets highly engaged users who are most likely to interact with your ads, allowing you to drive the highest ad engagement, increase IAA revenue, and grow in-app purchases while minimizing acquisition costs.
By driving the highest volume of ad impressions and engaged users to your app, IAA optimization produces a reliable stream of revenue that augments in-app purchases instead of being dependent on them. This holistic approach unlocks and acquires the most valuable user for any given app.
IAA optimization also accelerates your volume of in-app purchases. Research shows that users who interact with your ads are more likely to engage with your app and make a purchase. This is especially true for rewarded video ads. When combined with our proven IAP ROAS model, IAA optimization allows you to target both the highest-spending users and drive the most ad engagement to increase the quantity and quality of your in-app purchases.
In fact, Liftoff advertisers who added IAA optimization to their ROAS strategy saw significant performance gains. These early adopters saw a median 11% ROAS lift, 24% IAA revenue lift, and 22% lower CPIs.
That said, IAA optimization comes with some constraints. There are limitations to how many ads a user can view, which can impact the value of each impression. IAA optimization also requires advertisers to set up an ad revenue postback through their MMP and mediation partners. Advertisers who are unable to pass ad revenue postbacks to their marketing partners need to use proxy events that are highly correlated with IAA revenue. To do this, we recommend partnering with your Business Intelligence or Data Science teams to identify app events that are most correlated with total ad revenue.
Still, there are very few risks associated with IAA optimization, and advertisers who decide to revert to an IAP-only strategy can easily do so by disabling their IAA postbacks.
At the end of the day, IAA optimization allows advertisers to drive the highest ad engagement, increase in-app purchases, and minimize acquisition costs with little to no risk. By providing a reliable stream of revenue from highly engaged users, IAA optimization complements IAP optimization and results in a more recession-proof ROAS strategy.
Ready to maximize your ROAS with IAA optimization? Contact your account manager or email firstname.lastname@example.org to get started.