How to Calculate Your Mobile App Ad Revenue?

If you have a mobile app, monetizing it through advertising can be a great way to earn revenue. Ad revenue is the money apps generate from in-app advertising.

But how do you estimate your potential earnings from in app ads?

Calculating estimated ad revenues for a mobile app can be a complex process that depends on various factors such as your app’s user base, demographics, and ad network.

In this blog post, we’ll walk you through the steps to estimate your ad revenues for a mobile app, including how to determine your user base, select an ad network, estimate ad impressions and clicks, and calculate your estimated ad revenue.

By following these steps, you can gain valuable insights into your app’s potential earnings from ads and optimize your ad performance for maximum revenue.

How to estimate ad revenues for a mobile app?

To estimate revenues from ads for a mobile app, you can follow these steps:

1. Determine your app’s user base: To estimate ad revenue, you need to have an idea of how many users your app has. The more users you have, the more ads you can display, and the higher your potential revenue.
2. Analyze your user demographics: Advertisers are willing to pay more to target specific demographics such as age, gender, location, and interests. Understanding your user demographics will help you determine how much you can charge for ad space.
3. Select an ad network: Various ad networks can help you monetize your app. Some popular ad networks include Google AdMob, Facebook Audience Network, and Unity Ads. Each ad network has its own set of rules and payment methods, so it’s important to research and compare them to find the best fit for your app.
4. Estimate your app’s ad impressions: Ad impressions refer to the number of times ads are displayed in your app. You can estimate ad impressions by multiplying the number of app downloads or active users by the number of ads displayed per user per session.
5. Determine your ad revenue per impression: Advertisers pay based on the number of impressions or clicks their ads receive. You can estimate your ad revenue per impression by researching average CPM (cost per mille) rates for your app’s category and audience demographics.
6. Calculate your estimated ad revenue: Multiply your estimated ad impressions by your estimated ad revenue per impression to calculate your estimated ad revenue for a given period (e.g., per day, week, or month).

It’s important to keep in mind that these are estimates and actual ad revenue may vary based on factors such as user engagement, ad placement, and advertiser demand. Regularly monitoring your app’s ad performance and making adjustments as needed can help maximize your ad revenue.

Example

Here’s an example of how to estimate revenues from ads for a mobile app:

Let’s say you have a mobile game app with 50,000 downloads and 10,000 active users per month. You want to estimate your ad revenue for a month.

1. Determine your app’s user base: Your app has 10,000 active users per month.
2. Analyze your user demographics: Your app’s users are primarily between the ages of 18-34 and located in the United States.
3. Select an ad network: You choose to use Google AdMob to display ads in your app.
4. Estimate your app’s ad impressions: You estimate that each user views an average of 5 ads per session and uses the app for an average of 2 sessions per day. So the total number of ad impressions per day would be: 10,000 users x 5 ads per session x 2 sessions per day = 100,000 ad impressions per day. Multiplying that by 30 days gives us an estimated 3 million ad impressions per month.
5. Determine your ad revenue per impression: You research and find that the average CPM rate for mobile game apps in the United States is $5.00. This means you can potentially earn $5.00 per 1,000 ad impressions. So your estimated ad revenue per impression would be $0.005.
6. Calculate your estimated ad revenue: You multiply your estimated ad impressions by your estimated ad revenue per impression to get your estimated ad revenue for the month: 3,000,000 ad impressions x $0.005 per impression = $15,000 estimated ad revenue for the month.

Again, this is just an estimate and your actual ad revenue may vary based on various factors. It’s important to track and analyze your ad performance regularly to optimize your revenue.

What about revenue from ad clicks?

CTR stands for Click-Through Rate, which is the percentage of users who click on an ad after viewing it. CTR is an important metric to track because it indicates the effectiveness of your ad placement and its relevance to your users.

To estimate your ad revenue based on CTR, you can follow these steps:

1. Determine your app’s user base and ad impressions, as described in the previous example.
2. Determine your estimated CTR: CTR can vary widely depending on factors such as ad placement, ad format, and user demographics. As a rough estimate, you can assume a 1-2% CTR for mobile apps.
3. Calculate your estimated ad clicks: Multiply your estimated ad impressions by your estimated CTR to calculate your estimated ad clicks. For example, if your estimated CTR is 1%, your estimated ad clicks would be 3,000,000 ad impressions x 1% CTR = 30,000 estimated ad clicks.
4. Determine your estimated revenue per ad click: Ad networks typically pay on a CPC (Cost per Click) basis, meaning you earn money for each click on an ad. Your estimated revenue per ad click will depend on the average CPC rates for your app’s category and audience demographics. As an example, let’s assume an average CPC rate of $0.50 per click.
5. Calculate your estimated ad revenue: Multiply your estimated ad clicks by your estimated revenue per ad click to calculate your estimated ad revenue. For example, 30,000 estimated ad clicks x $0.50 per click = $15,000 estimated ad revenue.

Keep in mind that CTR and CPC can vary widely depending on the ad network, ad format, and other factors. It’s important to track your app’s ad performance and experiment with different ad placements and formats to optimize your revenue.

To calculate the total revenue from in-app ads, you need to add your ad revenues from impressions and revenues from clicks.

You can use the calculator below to estimate your total in-app ad revenues.

Quiz: Estimating Revenue for Your App

Q1) I have an app with 50,000 monthly active users. If I show 10 ad impressions per user per week, how many total impressions can I expect monthly?

Ans: 50,000 x 4 (weeks) x 10 = 2,000,000 impressions Scoring: 2 points for the right calculation and answer. 1 point for the correct logic but mathematical error. 0 points otherwise.

Q2) If my app gets 1 million impressions per month, and average eCPM I can charge is $10, what’s the estimated monthly revenue?

Ans: 1 million impressions x $10 per thousand impressions = $10,000 per month Scoring: 2 points for the right formula and revenue estimate. 1 point for correct logic but math errors. 0 otherwise.

Q3) Which ONE strategy should I focus on first to optimize revenues?

a) Add mediation platforms b) Create user interest segments
c) Experiment with vertical video ad units d) Buy more ad inventory

Ans: b) Create user interest segments Scoring: 2 points for correct answer. 0 points otherwise.

Q4) True or false: Interactive native app ads generate lower revenues than banner ads.

Ans: False Scoring: 1 point for correct response. 0 points for wrong.

Q5) Which key metric should I track weekly to optimize ad performance?

a) eCPM trends b) Click-through rates c) Fill rates by ad source
d) All of the above

Ans: d) All of the above Scoring: 2 points for the correct answer. 1 point for 2 options. 0 otherwise.

Did you score 9/9?

Tips to Increase Ad Revenue

Here are some tips to help increase your ad earnings from your mobile app:

1. Optimize Ad Placement Strategically test different ad placements, like banners at the top/bottom, interstitials between screens, or native ads blended into content. Measure CTR and eCPM for each placement to determine which earns the highest revenues.
2. Segment Users For Targeted Ads Build user profiles based on demographics, interests, and in-app behaviors to create relevant audience segments. Then display targeted ads that align to each segment’s preferences. This increases click-throughs.
3. Test Ad Formats
   Experiment with different ad formats like native ads, video ads or playable ads. See which ad formats resonate best with your users to drive higher revenues.
4. Mediate Multiple Ad Networks Add mediation platforms like AdMob Mediation to connect with multiple ad networks. This maximizes fill rate, coverage, and average eCPM across each network. More ads mean more revenue.
5. Refine Over Time Continuously measure ad performance by source, placement type, format etc. Refine your app’s ad strategy based on insights from the data. Optimization drives growth in ad earnings.

Testing and optimizing your app for ad performance takes time but pays dividends through higher lifetime value from loyal users. Focus both on maximizing ad revenue as well as enhancing user experience. The two go hand-in-hand.

Case Studies

Duolingo

Duolingo generates most of its revenue from in-app ads while keeping lessons free for its over 500 million registered language learners.

Duolingo experimented with multiple ad formats over the years. Currently, text and banner ads are shown between lessons, along with video ads while users review concepts. Ads are targeted based on language and proficiency level.

Click-through rates also increased after the launch of the Duolingo mobile app, especially for native ad formats personalized to match the app’s design.

Duolingo promotes its ad inventory through programmatic exchanges as well as direct deals with brands that want to reach engaged language learners. In 2022, Duolingo had an annual revenue of $369.50M with 47.34% growth.

SmartNews

SmartNews is a news aggregation app. They hit $28.5M in revenue and 20M customers in 2023. Revenue from ads that are targeted based on user interests and reading behavior accounts for over 80% of the company’s revenue.

SmartNews displays banners and native ads within its app and news reader experience rather than disruptive interstitials. Advertisers can also sponsor specific news sections based on category or location.

Additionally, since the app does not allow videos in its stream, it Inserts video ads between articles when users finish and swipe for the next story. Video completion rates are over 95% demonstrating high engagement.