Hybrid monetization 101: A guide for app publishers

A few years ago, hybrid monetization was just a buzzword to describe a new trend in mobile game monetization. Today, it’s a standard practice in mobile game development.

For this reason, every game developer should be familiar with the ins and outs of this monetization strategy. Let’s go over everything you need to know about hybrid monetization – from how it works, to its pros and cons, and best practices. 

👀 Related reading: From models to metrics: A publisher’s guide to mobile game monetization

What is hybrid monetization

Hybrid monetization means combining more than one revenue model in a single game instead of relying on just one. Most developers land on one of these combinations:

• Ads + in-app purchases 
• Ads + in-app purchases + subscriptions 
• Ads + subscriptions

Why combine mobile game monetization strategies?

The biggest reason to go hybrid with your game monetization? You reach more players.

By relying on ads alone, you're limited to users willing to sit through them for free access. Rely on IAP alone, and your revenue depends on the small slice of players who actually spend. Combine mobile app monetization strategies like these, and you cast a wider net, unlocking revenue from both spenders and non-spenders alike.

The benefits of a hybrid monetization model

The potential of monetizing a large pool of players is the primary and most obvious strength of hybrid monetization. But, there are more advantages beyond that: 

• Boosts player engagement by offering various ways to interact with the game
• Helps with user retention by providing extra incentives for players to come back to the game 
• Delivers a superior ROI compared to other monetization models, reported by 1 in 4 developers (Walnut Unlimited)
• Maximizes player lifetime value (LTV), allowing developers to generate higher value from each player over their entire in-game journey
• Ensures a steady revenue stream by decreasing dependency on a single source of revenue, resulting in higher financial stability 

How to build your mobile app monetization strategy

Before you go ahead and add a new revenue stream to your game, note this: 

Hybrid monetization comes in many different shapes and forms, and it’s important that the combination you use makes sense for your game.

Here are some things to consider.

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1. Balance your monetization models

Many developers fear that including an additional monetization model will cannibalize the existing one. For example, there’s a misconception that including ads will negatively affect IAP spending. 

Research by Facebook Audience Network has shown that 86% of developers who included both ads and IAPs in their games reported that purchasing levels remained the same or even increased. 

So, as long as you carefully balance these monetization models, there’s no need to worry about them negatively affecting each other. To achieve this balance, it’s important to take on hybrid monetization from a game design perspective. 

Would you remove or replace features that clutter the UI and annoy your users? Well, you should adopt the same mindset when designing your monetization strategy.

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2. Choose the right ad formats for mobile ad monetization

If you’re about to include ads in your monetization strategy, it’s important to be tactical about the ad formats you’ll be using. Should you go with interstitial ads, rewarded video ads, offerwalls, native ads, or banner ads? 

In a hybrid monetization model, some formats perform better than others. Being aware of this can help you make better decisions and unlock higher revenues. The best-performing ad formats in a hybrid model are offerwalls and rewarded video ads.

According to ironSource, players who watch rewarded video ads are 6x more likely to make IAPs. Offerwalls, on the other hand, account for an average of 33% of ad revenue in games that use a hybrid model (Unity). 

These ad formats work so well in hybrid monetization because they give players a taste of in-game rewards. Thanks to this, players get a glimpse of a premium in-game experience, resulting in increased loyalty and a higher probability of making in-app purchases. 

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3. Segment your users

Avoid developing a one-size-fits-all hybrid monetization strategy. Instead, adopt an approach that recognizes different types of players who play your game and group them by common characteristics. For example:

• Spenders vs. non-spenders
• Long-term vs. new users 
• Occasional vs. regular players
• Players who engage with ads vs. players who don’t engage with ads

Once you know your groups, tailor your approach. Show more ads to players unlikely to ever spend. For your regulars and spenders – your most valuable users – cut back on ad frequency and serve up personalized IAP offers instead.

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4. Test before you scale

By A/B testing changes to your monetization strategy, you can make data-driven decisions, improve performance and reduce risk. 

If you’re unsure how this process should look like, here are some tips for effective A/B testing in a hybrid monetization strategy:

• Conduct tests on a group of users for a limited amount of time (e.g. 10% of users over two weeks)
• Regularly monitor your ARPU (average revenue per daily active user)
• Analyze and refine different ad variables (e.g., ad frequency, ad creatives, user engagement)
• Monitor churn rates for different ad types

‍Why hybrid monetization is on the rise

A few forces are driving developers toward hybrid app monetization models faster than ever.

1. Hybrid-casual games are having a moment. Many hypercasual studios have shifted from simple, ad-only titles to hybrid-casual games – and their monetization strategies have shifted right along with them.
2. Platform rules keep changing. Apple's privacy updates and Google's restrictions on intrusive ads are just the latest examples. With regulations evolving across markets, leaning on a single revenue source is a riskier bet than it used to be.
3. The toolkit keeps expanding. Between classic ad formats, IAP mechanics, subscriptions, and newer additions like audio ads, you now have more ways than ever to build a monetization mix that fits your game and your players.

‍Ready to boost your game's revenue with hybrid monetization?

Hybrid monetization isn't going anywhere – and as new ad formats like offerwalls continue to gain ground, it's only going to get more central to how games make money.

Let's talk about how Mistplay can help you build a mobile game monetization strategy that works for your players and your bottom line.