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August 28, 2025
There are countless ways to monetize your mobile app – from in-app purchases to subscription models. That’s why finding the best strategy for your product requires careful planning and consideration.
With around 90%1 of apps on the App Store and Google Play being free-to-use, one monetization model that has proven popular is in-app advertising (IAA). Its dominance as a top form of app monetization is evident in the numbers, with nearly $155B2 spent on mobile app advertising across the US in 2023. This represents the largest portion of ad spend when compared to other channels such as television, social media, and web.
In this article, we’ll dive deep into the ins and outs of IAA, highlighting the various formats of in-app ads, the process for implementing an IAA model into your app, and the most important metrics to track.
In-app advertising is a form of mobile app monetization in which publishers are paid to display advertisements directly in their app. These ads are presented to users in a variety of formats across different touchpoints throughout the in-app journey, giving publishers and advertisers the versatility needed to target specific demographics across multiple platforms.
In-app ads can be used to promote any brand’s offers, and are not necessarily only for mobile products. However, relevance is key when it comes to IAA, meaning that showing the right ad to the right audience makes all the difference in successfully monetizing your app.
In fact, in-app advertising has grown to become one of the most widely used forms of mobile advertising, with a projected $390.04B3 being spent on IAA by the end of 2025. Taking a CAGR of 8.17% into account, it is then expected to hit about $533.92B by the end of the decade. This accelerated growth has caused major shifts in the app landscape, as most apps now tend to operate on a free-to-use model, with additional revenue coming from IAA, in-app purchases (IAP), and other forms of in-app monetization.
In-app advertising strategies involve a lot of moving parts, and typically consist of two main sides – the buying side and the selling side. Both sides of the transaction operate on a supply- and-demand model, in which publishers offer ad space on their apps (supply), and advertisers purchase the space to display their ads to broader audiences (demand).
The publisher side (or selling side) is managed by app publishers who wish to sell ad inventory within their apps through supply-side platforms (SSPs). Publishers decide how the IAA experience works on their app – from selecting the supported ad formats, placements, pricing, and capping – before selling the inventory to interested buyers.
The advertiser side (or buying side) is operated by advertisers, who bid for in-app space and present their advertisements to users. When an advertiser has created the ad content and identified their target audience, they use various means – such as the marketing tools of demand-side platforms (DSPs), or even direct deals with publishers – to bid for and purchase ad space across a number of different networks. This process ensures that their ads are displayed to the correct, targeted audience.
When selecting a target audience, advertisers can identify cohorts who are most likely to engage with their ads based on a number of factors, such as demographics (age, gender, income), behaviors (spend habits, app interactions, level of brand loyalty), and location (country, region, city).
Ad exchanges function as a digital marketplace for advertisers to bid on ad space being sold by publishers. These exchanges can be open – allowing all sellers, buyers, and ad networks to bid – or private, only allowing select parties to purchase and sell ad inventory.
Once the bidding process has been completed and ad space has been purchased, the ads are run in-app and the advertiser pays for each impression, click, or conversion it gets (depending on the type of campaign being run). These ads can also be swapped out periodically within the purchased ad space, allowing buyers to optimize their campaigns, while ensuring that their ads are properly targeting the right audiences.
IAA is a go-to monetization model for many mobile app publishers across a variety of app genres. Today, around 31%4 of all apps worldwide use IAA as a form of monetization, often being combined with other models like IAP.
Choosing in-app advertising as one of your core monetization models brings forth a number of key benefits, namely:
Given a sizable user base, in-app ads can generate steady revenue for app publishers. Streaming titan, YouTube, earned $8.92B in Q1 20255 from in-app ads alone, but even smaller apps can turn a profit from hosting such ads.
By ensuring that specific ads are targeting their intended audience, publishers can gather additional data on who their users are, what they’re interested in, and what they want more of. Likewise, by showing users the right ads that are most relevant to them, publishers reduce the risk of turning users away with intrusive or irrelevant advertising.
One of the major perks of implementing ads in your app is that it allows you to more comfortably make your app free-to-use, as the ad revenue generated can far outweigh the loss of pay-to-use revenue. This makes your app more accessible to users who aren’t willing to pay for access, which accounts for approximately 94–97.6%6 of mobile users around the globe (depending on your region).
🌟 Best practice: Try not to bombard your users with too many ads, as it will disrupt the flow of their progression, create negative experiences, and possibly lead to significant churn.
By knowing which type of ads best suit the structure of your mobile app, the standards of the industry you’re in, and your users’ behavior, you can maximize the potential of IAA in your products.
There are many kinds of effective mobile ads, each suited for different purposes. Selecting the right ad type for your app depends on several factors, such as your target audience, industry standards, and how well the app integrates within the flow of your ecosystem.
Banner ads are small rectangular ads that occupy part of the app interface, typically at the top or bottom of the screen. They are often clickable, and will redirect users to the product or service being advertised. While banner ads tend to display static images and text, they can also support video for a more eye-catching experience.
This type of ad has remained popular since the beginning of the digital age, and is still commonly used thanks to its simplicity, versatility, and effectiveness.
Interstitial ads are a type of ad that takes up the entire screen space, usually at natural transition points in the app journey. They can be either static images, videos, or even playable ads, and users often have the option to close the ad after a certain viewing period.
These ads are consistently used in mobile gaming, where they appear at particular points, like between game levels and checkpoints. Their playable nature allows audiences to demo other games being advertised, which can lead to conversion – making them a popular option in the industry.
Native ads are an ad format that blends seamlessly into the design and function of the app it appears in, creating a more organic experience that is less likely to disrupt users. These ads can involve static images and videos for greater versatility in both web and app landscapes.
Oftentimes, native ads are used across different platforms – especially on social media, as they can be placed directly in users’ feeds. In fact, native ads are the second-best performing channel for campaigns, having reached a value of over $400B7 in 2025.
Video ads are short, playable clips that appear in-app. They are used across a number of mobile industries thanks to their flexibility, and regularly show up on social media and in mobile games.
Video ads are often more engaging than static ads thanks to their motion, sound, and storytelling – leaving a stronger imprint on viewers. Their popularity has been growing steadily due to their high ROI and engagement levels, now accounting for around 75%8 of total mobile ad spend.
Rewarded ads are a type of ad that gives users an in-app reward in exchange for their engagement. These ads often take the form of short videos, which users can watch – either partially or in their entirety – to earn their promised reward.
It’s no surprise then that rewarded ads are most commonly used in mobile gaming, since users will deliberately choose to watch an ad in exchange for extra lives, in-game items, or gameplay bonuses. Thanks to the strong incentive for players to watch these ads, they are a profitable choice for gaming publishers to use.
Offerwalls are a more unique form of IAA, in which users are incentivized to take a specific action, such as completing a survey, watching a video ad, or making an in-app purchase. These actions will reward users with in-app benefits, similarly making them popular in mobile gaming.
Offerwall ads typically operate on a cost-per-action (CPA) basis, in which publishers are paid by advertisers when a user takes the desired action on their ad.
Playable ads are used almost exclusively in mobile gaming, as they enable users to demo an often simplified version of the game being advertised. These demos typically have a time limit or progression cap, prompting the user to download the game once the limit has been reached.
💡 Did you know? Playable ads can have conversion rates up to 3x greater9 than regular video ads, making them a highly sought after format for mobile game marketers.
👀 Related reading: Clicks to coins: Your guide to in-app advertising for mobile game monetization
In-app advertising can be seen across all mobile industries, such as social media, gaming, and even health and fitness. Although strategies may vary across different sectors, IAA is an undeniably important part of any app monetization strategy.
Streaming platforms like YouTube or Prime Video tend to favor video ads, which play before and/or during the viewing of their video content. Multiple ads can be shown in succession, with the option to skip the rest of an ad after a certain watchtime is attained.
This style of advertising mimics the way ads have typically been shown on television, making their placement on streaming apps feel more natural for audiences who are already accustomed to this delivery method.
As mentioned earlier, mobile games utilize a few different formats of in-app ads, with the main type being rewarded advertising. Rewarded ads are most often videos that the user will deliberately choose to watch in exchange for rewards, like extra in-game currency, new items, or exclusive bonuses.
Interstitial ads are also often used in mobile gaming, as they can be integrated at natural checkpoints – such as between levels – so that they do not disrupt the flow of the game. The use of interstitial ads allows many mobile games to operate on a free-to-play model, foregoing an outright cost to download the app in exchange for a free app with ads and in-app purchases. It’s been shown that mobile games operating on a freemium model have generated upwards of $117.72B in revenue10 from various forms of monetization, including IAA, IAP, and subscriptions.
Many health and fitness apps, such as MyFitnessPal, use IAA as a key form of monetization. This app – which allows users to count calories, plan diets, and log workouts – uses interstitial ads between workout sets or after logging recent health information. Alternatively, users can purchase a monthly or yearly subscription if they wish to go ad-free, removing all ads from the app in exchange for their spend.
IAA is used in education apps in a similar way to mobile gaming, thanks in part to the gamified features that education apps often use. Think of language-learning apps like Duolingo that show video and interstitial ads between lessons, or after hitting certain checkpoints. Rewarded ads are also used to grant players extra bonuses or in-app perks, which elevates their experience.
Remember, it’s important to know your audience, as publishers of educational apps aimed at younger users must be cautious when integrating IAA. This is because there are much stricter regulations when it comes to advertising toward children.
👀 Related reading: Rewarded advertising: The complete guide for mobile marketers
There are a number of important metrics to track when it comes to analyzing the performance of IAA. From calculating the revenue generated by ads, to seeing how many users you can reach, it is crucial to monitor how your campaign runs in order to iterate, refine, and maximize potential ad placements.
1. Effective cost per mille (eCPM): The average cost paid by an advertiser per 1000 impressions on their ad.
Formula: eCPM = (total ad revenue / number of impressions) x 1000
Why it matters: eCPM is a focused metric that allows mobile publishers to track revenue generated by ad interactions on their products.
2. Ad ARPU (Average Revenue Per User): The average ad revenue that an individual user generates.
Formula: Ad ARPU = (total ad revenue in time period X) / (number of users who engaged with the ad in time period X)
Why it matters: Tracking ad ARPU helps publishers understand how much revenue they are generating from each user, allowing them to refine monetization strategies and improve targeting.
3. Click-through rate (CTR): The rate at which users who see an ad click on it to follow through to the product or service.
Formula: CTR = total number of clicks / total number of impressions
Why it matters: CTR is an important metric to track for publishers who are paid by advertisers when a user takes a specific action on their ad, as it directly impacts revenue, user engagement, and advertiser satisfaction.
4. Fill rate: The rate at which an ad network fulfills a publisher’s advertising request.
Formula: Fill rate = ad impressions / ad requests from ad networks
Why it matters: A high fill rate can directly correspond to more in-app advertising revenue for publishers, as it means more ads are being served to users. It can also help mitigate blank ad spaces or irrelevant ads, making the user experience smoother.
5. Ads per user session: The number of ad impressions served to a user during a single app session.
Formula: Ads per user session = total number of ad impressions / total number of app sessions
Why it matters: Keeping track of the ads served to a user per session gives publishers an idea of the overall user experience with ads on their app. Too many ads may turn users away, so finding the correct balance is crucial to maximize ad revenue potential.
Determining how much your app can make from in-app ads depends on several factors, namely the type of ads being implemented, the audience being targeted, and the country you’re based in.
Consider the following tables*, which illustrate the average eCPM on both Android and iOS across four key regions:
Android
iOS
*Data taken from How do apps make money? Choose the best monetization model for your needs4, Synd/Code. All figures listed are in USD.
Despite their lower average eCPM, banner ads hold the largest in-app advertising revenue share of any format at 37.6%11 in 2024. When it comes to the highest performing region, APAC leads with 35.18%11 of market share – with China being the largest contributor.
This gives publishers a rough idea of how much they can make using IAA, and which type of ads can be most profitable. But these numbers may vary depending on the ad network used, the size of your user base, and the type of app they’re being run on.
For publishers to truly maximize their revenue potential with IAA, it’s important to test, review, and iterate when it comes to selecting ad placements and ad formats. A/B testing is a great way to compare different placements and formats to see which ones perform better, so that app publishers can optimize their IAA strategies.
Integrating an IAA strategy into your mobile app can be a great avenue for monetization, if done properly. From generating a steady stream of revenue, to collecting valuable user insights, it’s no surprise that in-app advertising has remained one of the most popular forms of mobile app monetization.
To ensure that campaigns in your app run smoothly, it’s important to keep the following in mind:
Are you an app publisher looking to integrate a loyalty-driven monetization solution to your product? Look no further than LoyaltyPlay – our new gaming reward hub that will help you foster long-term loyalty with the power of play-and-earn.
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