In-app advertising
In-app advertising lets an app earn from users who never pay. For a subscription app it is a second revenue stream with a real cost: every ad competes with the paywall for the user’s patience.
Updated
The term covers two sides of the same trade. Publishers show ads inside their apps and get paid by advertisers, usually through ad networks and mediation platforms. Advertisers, including many app marketers running user acquisition, buy those placements to reach people while they use other apps.
How in-app advertising works
The app integrates an ad SDK and defines placements: where and when an ad may appear. When a placement is triggered, the SDK requests an ad from one or more demand sources. Mediation or bidding picks the best-paying ad, it is shown, and the publisher is credited. Publishers track yield with eCPM, the revenue earned per 1,000 impressions.
Common in-app ad formats
| Format | What it looks like | Trade-off |
|---|---|---|
| Banner | A strip at the top or bottom of the screen | Low disruption, low revenue per impression |
| Interstitial | A full-screen ad between screens or levels | Higher yield, more disruptive |
| Rewarded video | A video the user chooses to watch for a reward, such as extra content or a feature unlock | Opt-in, usually well tolerated |
| Native | An ad styled to match the app’s own content, labeled as sponsored | Blends in; must stay clearly marked |
Interstitials have their own design and frequency rules that deserve a separate discussion; the key point here is that full-screen formats earn more and interrupt more. Rewarded formats are often the easiest fit for subscription apps because the user decides when to watch.
In-app ads and subscriptions: hybrid monetization
Most users of a subscription app never pay. Hybrid monetization shows ads to that group while keeping the subscription as the main business. Common patterns include:
- Ads for free users, removed for subscribers, which makes “no ads” part of the paid offer.
- Rewarded ads that unlock a premium feature for a limited time, giving free users a taste of what the subscription includes.
- Ads shown only after a user has declined the paywall or let a trial lapse, so they do not compete with the first purchase decision.
The risk runs the other way too. Ads can lower retention and trial starts, especially if they appear early in onboarding or before the first paywall view. If the ad revenue per user is smaller than the subscription revenue it displaces, the app is worse off.
How to tell whether ads help revenue
- Compare cohorts: users who see ads against users who do not, over the same period.
- Measure total revenue per user in each cohort: ad revenue plus subscription revenue.
- Check the funnel: trial starts, trial conversion and early retention in each group.
- Keep the decision tied to the acquisition channel. A user bought through paid search has a known cost, and ads should raise, not lower, the return on that spend.
Buying in-app ads as an advertiser
For UA managers, in-app inventory is a large source of reach, bought through ad networks or DSPs. Its traffic is interruptive rather than intent-driven, so it usually converts differently from App Store search. Judge it on cost per trial, cost per subscription and cohort revenue, not on installs alone.