We were leaving money on the table. I knew it. My boss knew it. Our ARPDAU was $0.04 while competitors in our category averaged $0.12. But every time we added more ads, our retention tanked.
Then we ran an experiment that changed everything. Instead of forcing interstitials on users, we offered them a choice: watch a video, get an extra life. Engagement didn't just improve—it tripled. And for the first time, users actually thanked us in reviews for showing them ads.
Rewarded video isn't about extracting value from users. It's about giving them value—and getting paid for it.
Why Rewarded Videos Work
Unlike interstitials that interrupt users, rewarded videos offer a value exchange: users choose to watch an ad in return for in-app benefits. This opt-in model creates higher engagement rates and user satisfaction.
Key Stats
- 79% of players prefer rewarded ads to paid alternatives
- 4x higher completion rates vs. non-rewarded video
- 62% of users have a more positive view of apps with rewarded ads
Optimal Placement Strategies
1. After Failure Moments
When users fail a level or run out of resources, offer a rewarded video to continue. This is the highest-converting placement because users have clear motivation.
2. Before High-Value Actions
Offer bonus rewards before important gameplay moments—double coins before a boss fight, extra time before a timed challenge. Users value these boosts.
3. Daily Reward Multipliers
Let users watch a video to multiply their daily login bonus. This drives daily active user retention while monetizing engaged players.
4. Currency Shops
Include a "Watch Ad" option in your in-game store alongside paid options. This provides a free path for non-payers while maintaining IAP revenue.
Reward Design Principles
- Valuable but not game-breaking: Rewards should help, not trivialize the experience
- Clear value proposition: Users should instantly understand what they'll get
- Appropriate for ad length: 30-second ads deserve meaningful rewards
- Progressive value: Consider increasing rewards for consecutive views
Frequency Capping
Don't let users burn out on ads. Implement smart caps:
- Per-session limits (5-10 ads typically)
- Cooldown periods between views (5-15 minutes)
- Daily caps for specific reward types
- Diminishing returns for repeated viewing
Technical Implementation
Preloading
Always preload ads in advance. Nothing kills conversion like a loading spinner when a user wants to watch. Load the next ad immediately after each view.
Fallback Networks
Use mediation to ensure ads are always available. If your primary network has no fill, fall back to alternatives. A 0% fill rate means lost revenue.
Error Handling
Handle ad failures gracefully. If an ad fails to load, either offer the reward anyway (for retention) or clearly communicate the issue without frustrating users.
Measuring Success
Track these KPIs to optimize your rewarded video strategy:
- Engagement rate: % of users who watch at least one video
- Views per DAU: Average videos watched per daily active user
- Completion rate: % of started videos watched to completion
- eCPM: Effective cost per thousand impressions
- ARPDAU: Average revenue per daily active user
Balancing IAP and Ads
Rewarded videos shouldn't cannibalize in-app purchases. Strategies to maintain balance:
- Cap rewards below IAP-equivalent values
- Offer exclusive content only through IAP
- Use ads for soft currency, IAP for premium currency
- Segment users and adjust ad frequency based on purchase behavior
Conclusion
Rewarded video ads, when implemented thoughtfully, create a win-win: users get value, and you generate revenue without harming the experience. Start with proven placements, test continuously, and always prioritize user experience over short-term revenue.