What is Ad Revenue?

Ad revenue (advertising revenue) is the income generated by displaying ads to users within an app or on a website. Advertisers pay app developers or website owners to display their ads to a target audience, and the revenue generated is shared between the advertiser and the app developer or website owner.

How Does Ad Revenue Work?

Ad revenue is generated through various types of advertising, such as display ads, video ads, native ads, Apple Search Ads paid advertising and more. Advertisers typically use a cost-per-click (CPC) or cost-per-impression (CPM) pricing model to pay app developers or website owners for displaying their ads.

1. In a CPC model, advertisers pay the app developer or website owner every time a user clicks on their ad.
2. In a CPM model, advertisers pay for every 1,000 impressions or views of their ad.

Why is Ad Revenue Important for Mobile App Developers?

Ad revenue is a crucial source of income for many mobile app developers. In fact, in 2023 mobile ad revenue  accounted for more than 65% of total digital ad spending (and will grow to 70% by 2026). The benefits of ad revenue for mobile app developers include:

1. Increased revenue: Displaying ads within an app can significantly increase revenue for the app developer, especially if the app has a large user base.
2. Free app downloads: Many apps offer a free version that displays ads, which can help increase downloads and user engagement.
3. User engagement: Ads can provide users with relevant and valuable information, which can help increase engagement and retention.

How to Calculate Ad Revenue?

To calculate the revenue generated by your ads, you need to take into account several key metrics, such as the number of ad impressions, click-through rate (CTR), cost per click (CPC), and effective cost per mile (eCPM). Here’s how you can calculate your ad revenue:

1. Determine your CTR: Divide the number of clicks on your ads by the number of impressions, and then multiply the result by 100 to get your CTR percentage.
2. Determine your CPC: Divide the total cost of your ads by the number of clicks to get your CPC.
3. Determine your eCPM: Multiply your CTR by your CPC, and then multiply the result by 1,000 to get your eCPM.
4. Determine your Ad Revenue: Multiply your eCPM by the number of impressions divided by 1,000 to get your total ad revenue.

Ad Revenue Formula

Ad Revenue = Number of Impressions × CPM / 1000

Suppose your app displays an ad 50,000 times (50,000 impressions) and the CPM is $5.00.

Ad Revenue = 50,000 × $5.00 / 1000 = $250