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Rewarded Video Ads: The Ticket to Higher Retention and Revenue

Shivkumar M Shivkumar M has over 20 years of experience shaping technology product and GTM strategy. With B2B SaaS expertise across industries, he leads product launches, adoption, and GTM as Director of Product Marketing.
Rewarded Video Ads: The Ticket to Higher Retention and Revenue

Imagine this: your app displays a video ad pop up… and instead of complaining, your users are actually excited to watch. 
In-app ads get a bad rap for disrupting or detracting from your ideal user experience. Enter incentivized advertising. 
Rewarded videos can increase your app’s revenue by 20-40%* — while enhancing the user experience and improving retention rates.  
How do rewarded video ads work? Are they the right choice for monetizing your app? Keep reading to learn how incentivized advertising can fit into a smart mobile marketing strategy. 

What Are Rewarded Video Ads

To start, what is rewarded video
Rewarded ads are full-screen interstitial videos that users choose to watch in exchange for some type of incentive — like an ad-free session, discount code, extended free trial, virtual currency, or other reward. 

Rewarded video is just one of many ways to monetize your app. But according to the latest stats, it may be the most effective.* Here’s why: 

Rewarded video is famously popular with game developers, with apps like Candy Crush and Bejeweled offering players extra lives or game boosters in exchange for watching a video
But this type of in-app advertising isn’t just for mobile games
A few rewarded video examples: Amazon currently holds a patent that enables an item’s price to drop when customers watch a video ad.* 
Spotify lets free users watch rewarded video to access uninterrupted music. 
Duolingo users can watch rewarded video to advance to the next language level. 
Messaging app Kik even lets users exchange points earned from watching rewarded video for stickers, emojis, and gift cards. 

Why Use Rewarded Video? 

To be successful, mobile brands must make user engagement and retention their #1 priority. And that means finding harmony between monetizing users and providing them with the best possible user experience. 
It’s a tricky balancing act. And that’s the beauty of video reward ads: they’re an easy way to integrate ads into your app while benefiting both your bottom line and your end user. 

The Benefits of Rewarded Video 

Benefits for users: 

  • They get to choose whether to watch an ad — it’s not forced on them. In fact, Google studies show 50% of users would be less satisfied with their app experience if rewarded ads were removed.*
  • They get an immediate reward (hooray, instant gratification!) that enhances their user experience and keeps them engaged with the app. User sessions increase an average 34% after engaging with a rewarded ad.* 
  • They get an alternative to in-app purchases. Users can choose to “buy” premium features and upgrades with their time and attention instead of their money. 

Benefits for app businesses: 

  • Higher retention rates. Users are more likely to stay engaged with the app when they have access to exclusive content, features, shortcuts, or upgrades through rewarded video. Apps see a major jump — 3 to 5%! — in 30-day retention.* 
  • Up to 80% of users opt-in to rewarded video ads. Higher video completion rates mean higher ad earnings, making rewarded video just as lucrative as in-app purchases.*
  • More downloads. By monetizing your app with incentivized ads, you can afford to offer the app for free — attracting a larger user base to monetize with a mix of rewarded video, in-app purchases, and other monetization models
  • Increased in-app purchases and upgrades. Rewarded video advertising can nudge users to make an in-app purchase by giving them a taste of premium features they’re missing out on. In fact, users who watch rewarded video ads are 6x more likely to make an in-app purchase.*

Best Practices for Incentivized Ads

Now before you go dropping rewarded video ads at every key point in your app, you should know some best practices for using them successfully.

Placing Ads

Don’t go overboard
Showing users too many rewarded ads lowers the value of the reward — which can negatively impact the user experience. 
Imagine Hulu gave you the option to watch a longer commercial for an ad-free session every single time you launched. You’d be annoyed when it wasn’t an option instead of pleasantly surprised when it was. 
Be smart about where you place ads.
Avoid interrupting core experiences in your app or distracting users from completing a milestone. Keep a close eye on your app analytics to make sure ads aren’t disrupting your key metrics or in-app conversions. 
One way to decide where to place ads: look at your funnel analysis to see where most users are getting stuck at essential points in your app. Offer rewarded video as a means to usher them through and provide incentive to complete the process — whether that’s after they search for a product or travel destination, add an item to their cart, or start streaming content. 
Use rewarded video ads to complement your ideal user experience.
You don’t want users feeling like your app is simply a marketing tool built around advertisements. If you decide to monetize your app with in-app advertising, mix up your strategy to include rewarded video, interstitial ads, banner ads, etc. 
Clearly explain the requirement and reward.
How long is the incentivized ad they’re agreeing to watch? Is it a straightforward mobile video, or an interactive ad, survey, quiz, or game? 
“Watch a 2-minute video and get 30 minutes of ad-free music” is clearer than “Watch an ad for a free premium listening session.” 
Part of what makes rewarded ads successful is users choosing to participate — so help them make an informed choice by being straightforward and honest. 

Offering the Right Rewards

Segment users to offer personalized rewards at the right time. 
For instance, create a segment for users who don’t regularly open your app. Then set up a campaign where you use incentivized ads to hook these users with bigger rewards. This will entice them to either prolong their session or come back to your app to redeem their reward. 
Another strategy: create a campaign that gives users exactly what they need at a key moment.  Some examples of this include a free upgrade to express shipping right after they’ve added an item to their cart, an extra week added to their trial on the day it’s set to expire, or an hour of ad-free viewing when they start streaming a TV series.
Vary app rewards to include an element of surprise. 
Novelty is a powerful motivator. Nir Eyal calls this the Variable Reward — a way to hook users into engaging with your app even more. Not to mention it adds a highly engaging element of fun to the user experience
Let users spin a wheel for a certain percent discount, or unlock a mystery box with a free bonus product, sample, or upgrade. Think about what your users care about and find a way to include that in your rewards strategy as a way to surprise and delight your customers.
Use rewards to draw users deeper into the app experience. 
Avoid showing users that have made in-app purchases rewarded video ads for items they’ve already paid for. (Talk about frustrating!) 
Instead, use incentivized ad rewards as an opportunity to showcase upsell features and premium content. Give users a taste of what else your app has to offer! 
Think of rewards as breadcrumbs leading users down the path of deeper engagement and enjoyment of your app. 
Spotify used this tactic to great success, giving free users a taste of the Premium ad-free experience through Sponsored Sessions. Since debuting Sponsored Sessions in 2014, Spotify has increased its premium subscribers from 18 million to more than 100 million.*

Make rewards easy to find, activate, and apply
Some rewards will be given immediately, like ad-free sessions. 
For other types of rewards, use in-app notifications or an app inbox to remind users of their collected points, discounts, or virtual currency and provide details on how to redeem. The last thing you want is for users to feel like rewards are a bait-and-switch to trick them into more marketing. 

Rewarded Video Ads: Not Just for Gaming Apps

Mobile games may have popularized rewarded video, but that doesn’t mean this strategy only works for gamers. All types of apps can benefit from incentivized ads as long as marketers spend the time to build an intelligent strategy. 
Be creative! Do what mobile marketers do best: think about what users want from your app. 
What perks and bonuses can you use to enhance their experience? By using rewarded video as a tool to provide even more value to your users, you’ll be able to boost engagement, retention, and revenue.
Once you’re up and running, you’ll need the right tools to track and analyze your campaign results. 
CleverTap can help you quickly identify your most successful campaigns and pinpoint creatives that aren’t working as well. A/B test campaign elements, automatically segment your user base, and track user cohorts to assess and perfect your marketing initiatives. 

See how today’s top brands use CleverTap to drive long-term growth and retention

Schedule a Demo Now!

Last updated on March 29, 2024