Today, rewarded ads have become the gold standard for player-friendly monetization and have quickly become one of the biggest trends in mobile gaming. After all, they let players engage with the game on their terms. If you’re curious to know what they are, these ads offer in-game perks in exchange for watching ads—without disrupting the user experience.
Studies claim that 71% of players prefer in-game video ads, with 54% favoring rewarded videos. Game developers and advertisers also prefer this format. These ads drive engagement, retention, and revenue and work across various game genres. In this blog, we’ll explain why rewarded video ads are so effective and how you can use them to monetize your game successfully.
What are Rewarded Ads?
Picture this: you’re playing a mobile game and are about to create a high score, but your character just dies! Usually, you’d have to restart the game or wait for a cooldown timer to continue.
But here’s exactly where rewarded ads come into play:
This user-friendly ad format offers in-app rewards in exchange for ad engagement. The best part about them is that they are entirely optional. Hence, users choose to watch them in return for benefits like extra lives and in-game currency, among others.
Also read: Must try ad formats to boost revenue.
How do Rewarded Ads Work?
Rewarded ads put users in control by allowing them to opt in voluntarily, which makes them a hit. This creates a positive user experience and garners lots of engagement and revenue.
76% of U.S. mobile gamers prefer opt-in rewarded ads, making them a top choice for monetization. Publishers can customize reward values based on different ad units. Plus, users receive rewards simply by engaging—no downloads required.
These ads follow a four-step funnel:
- Ad Prompt – The user is rewarded for watching an ad.
- Opt-in – The user voluntarily chooses to watch.
- Ad Reward – The user completes the ad and receives a reward.
- Item Used – The reward enhances the app experience.
Rewarded ads are widely used in freemium games and entertainment apps.
For example, Subway Surfers offers in-game rewards like boosters or extra lives. By placing these rewarded ads, users can progress in the game.
Besides, it’s a free promotion for the game, making it a win-win for both advertisers and players.
4 Reasons Rewarded Ads Deliver More Engagement and Revenue
Rewarded ads offer a win-win for both users and publishers, and we’ll explore how it has cracked the code while explaining the benefits in detail below.
1. Enhanced User Experience
In the end, everything is about your user base/target audience.
Rewarded ads offer a user-friendly experience, allowing users to choose when to watch. This feature eliminates disruptive autoplay and creates a positive interaction, as users engage willingly, driven by appealing rewards.
Over time, many discover they genuinely enjoy the advertised apps. This cycle of discovery and reward keeps users returning, leading to longer sessions and sustained engagement.
2. Improved User Retention and IAPs
Rewarded ads offer amazing in-app incentives, encouraging players to stay engaged longer. One classic example would be CookApps. By offering valuable rewards, CookApps saw an 86% increase in ad revenue while maintaining IAP revenue.
These ads provide a smooth way for users to access premium content without immediately breaking the bank. This approach keeps you active and increases the likelihood of converting non-paying users into paying customers. By experiencing premium features through rewards, users become more inclined to make in-app purchases (IAPs), leading to a more effective hybrid monetization model.
3. High ROAS
Rewarded ads drive exceptional return on ad spend (ROAS) by attracting high-quality, motivated users. The opt-in model ensures engagement from users genuinely interested in the rewards. This leads to higher conversion rates and long-term retention.
As a result, you get quality users who are likely to make in-app purchases, maximizing revenue. Compared to other ad formats, rewarded ads create a positive brand experience, making them highly effective for user acquisition and sustained app growth.
4. Boosting Downloads with Rewarded Ads
For publishers with free apps, rewarded ads provide a powerful revenue stream by encouraging more downloads. The promise of valuable in-app rewards attracts users, increasing install rates while keeping engagement high. As more users download and interact with the app, publishers benefit from higher ad revenue.
3 Key Challenges of Rewarded Ads
While rewarded ads offer great benefits, they also come with challenges that can impact user experience and revenue. We’ll dive into these challenges in detail below.
1. Higher Initial Costs
Acquiring users through rewarded ads comes at a higher cost than standard video ad networks. However, note this isn’t just about paying more—it’s about paying wisely.
With models like Cost Per Engagement (CPE) and Cost Per Action (CPA), advertisers only spend on completed actions. So, they get away with wasted impressions or clicks.
The challenge? Justifying the upfront investment. The reward? High-intent users, stronger conversions, and better long-term returns.
2. In-App Purchase Cannibalization
One of the biggest risks with rewarded video ads is cannibalizing in-app purchases (IAPs). Users may rely on ads instead of spending money if rewards are too generous, hurting the IAP economy.
You also must understand that offering too little may fail to drive engagement. Hence, you need to find that perfect balance.
Publishers must fine-tune their reward structure through A/B testing to ensure ads complement, rather than replace, in-app purchases.
3. Low-Quality Traffic & User Engagement
Rewarded ads attract high engagement, but not all users become loyal customers. Some may watch ads solely for the reward without genuine interest in the advertised content. This leads to lower-quality traffic and weaker post-ad engagement.
If your ad lacks proper targeting, it may not reach users who are likely to take action. To overcome this, advertisers must:
- Refine audience targeting
- Optimize ad creatives and
- Track post-engagement behavior
This ensures that rewarded ads drive both high-quality traffic and long-term user retention.
Curious to try out this ad format? YieldMonk can help you run and optimise for these ad types.
