If you are into mobile game development or app development you definitely know that you can earn money by showing ads to users.

But how does that work exactly?

For quite a long time, I was earning money through ads but I didn’t understand the whole logic.

So, here I am explaining it in a practical way.

Ads come in all shapes and sizes. But I'll not go into details of that as it is not relevant over here.

Now, generally, when you show ads to players, the ad provider pays you money based on eCPM (Cost per 1000 impressions. In short, the money you make by showing 1000 of that kind of ad)

Now to clarify it with an example, consider

If an advertiser says, the eCPM for Rewarded videos Is \$2, then you will be paid \$2 for every 1000 video ads viewed by your players.

(The actual calculation is complicated than this, but for my example simplification will be easy to understand)

So, the math becomes very simple.

You can earn more money by showing as many ads as possible.

You show 1000 ads - you earn \$2.

You show 10,000 ads - you earn \$20.

Easy? Right.

Wait!

It’s not that easy.

>There are two options

1. You can show many ads to one user or

2. You can have many users and you can show a limited amount of ads per user

You know the risk with the first option.

If you show too many ads to a user, he will get frustrated and he will uninstall your game/ app.

Now coming to the second option, lets first understand the concept of DAU.

The players who are playing your game on a particular day are called DAU (Daily Active Users)

For e.g.

If you have 10,000 DAU today and you are showing a single ad to everyone.

Earning: (10,000/ 1000) x\$2 (eCPM) = \$10

If you can show 2 ads to every user

Earning: (20,000/ 1000) x\$2 (eCPM) = \$20

If I want to generalize it, the earning equation can be generalized as follows:

DAU x Number Of Ads Shown Per User x eCPM

If you want to increase your earning, you have to optimize any of these 3 factors

DAU

Number of ads shown per user

eCPM

Now, not all three factors have equal weight.

If you ask me, DAU is the most important factor.

Having said that,

If you can optimize one factor, you have the chance to earn good money.

If you can optimize two of them, you would be mostly rich (especially if one of the factors is DAU)

If you can optimize all three of them, you would be super rich. Please be my friend :D

Optimizing DAU is a big thing in itself.

http://www.theappguruz.com/blog/how-to-balance-a-game-between-simplicity-and-complexity

http://www.theappguruz.com/blog/how-big-games-use-appointment-mechanics-to-get-gamers-keep-coming-back

http://www.theappguruz.com/blog/loss-aversion-awesome-psychological-trick-to-keep-your-gamers-engaged

http://www.theappguruz.com/blog/secrets-revealed-how-truly-engaging-games-are-built

http://www.theappguruz.com/blog/psychological-tricks-that-make-millions-from-free-to-play-games

http://www.theappguruz.com/blog/the-secrets-behind-insanely-successful-mobile-games

Google the word 'mobile retention' and you will have a lot of results to look forward to.

I hope this little post would have helped you understand the ‘making money from ads’ way better.