How to Calculate Mobile App Ad Revenue

Advertising revenue is one of the best monetization sources for mobile app owners, and it’s a relevant income stream especially for those who have high user counts in their app.

This blog is made for you to estimate how much ad revenue you could generate with your app – whether you’re considering mobile app monetization models for a new app, or introducing ads to your existing app.

Let’s dig right into the revenue calculations.

In-app advertising revenue calculation

Here’s how you will get your expected revenue in a given time period:

• Calculate the total ad impressions per month:
  • Calculate the total sessions during the timeframe
  • Multiply it by ads per minute
• Multiply the ad impressions with revenue
  • Multiply the ad impressions with Revenue Per Mille (per thousand)
  • Divide the number by 1000 (adjusting to thousands of views)

Calculate Total Ad Impressions for Your Mobile App

Here’s a formula for calculating total ad impressions per month:

• Users x Average Sessions x Average Time Spent Per Session
• x Ads per minute
  
  = Ad impressions per month

An example:

10 000 Users

x 3 Sessions Per Month on Average 

x 3 Minutes Spent Per Session

= 90 000 Minutes = Total time spent in the app

x 4 Ads Per Minute

= 360 000 Ad Impressions Per Month

Calculate Total In-app Ad Revenue for Your Mobile App

Now that we have calculated the total number of ads, we can multiply it with the RPM number. To get the correct amount, divide it with 1000:

360 000 Ad impressions x $5 RPM / 1000

= $1800 ad revenue per month

That’s it! You can use our App Monetization & ROI calculator to make more detailed calculations in an easy way.

How to get the app metrics for these calculations

Your predictions will be more accurate if you already have an app up and running, and have a substantial user base engaging with it.

Still, you can make educated guesses in the case where you’re planning to build a brand new app.

Let’s see where to get these numbers.

If you’re considering building an app, check out Choicely. With our app builder, you can launch an app in a fraction of the time and cost.

Estimating RPM (Revenue Per Mille) for Mobile Apps

Revenue Per Mille (RPM) describes the earnings the app owner – or ad seller – has gained from 1000 ad impressions.

For example, if the app owner earned $500 from ads during one month, and there were 50 000 ad impressions, the Revenue Per Mille is:

$500 / (50 000 / 1000) = $10

If you’re familiar with Cost Per Mille (CPM) that describes ad costs for the buyer, RPM is a similar concept on the seller’s side. It isn’t the same number as ad platforms take their own share of the ad revenue.

Typically about 70–85% of the CPM goes to the ad seller, although this percentage varies a lot based on many factors, and it's ultimately decided by the pricing of each ad platform.

Also, CPM usually describes a metric for one campaign, whereas RPM is calculated for the whole app – earnings per day per thousand.

For CPM costs, Business of Apps has a great post comparing costs by different factors. For example, in the US and UK markets CPM costs vary between:

• $6.1 and $12.6 for Rewarded Video Ads
• $5 and $10 for Interstitials
• $0.20 and $0.56 for Banner ads

As you can see, there’s a lot of variance between ad costs by ad types depending on the ad visibility, and the degree of attention they get from the user.

On top of the ad type, Revenue Per Mille varies largely based on the market, the user base, the ad platform, user volumes, available targeting options, what is known about the users, and the device type.

According to AdSense, a popular ad platform, a typical RPM is roughly $0.2 to $2.5. However, it can hike to $10 and even over in certain circumstances. You can also make an easy estimation of your ad earnings with AdSense on their website.

How to calculate mobile app ad impressions, user counts, sessions and session durations

If you have an existing mobile app and a user base there, you’ll get user counts, session amounts and durations easily from your Google Firebase / Google Analytics accounts, given that you have them set up.

Ads per minute depends largely on the type of ads you’re planning to run. You can only have so many full screen video ads or interstitials per minute, whereas banner ads can be spread a bit more frequently across your app screens.

In the end, the amount of ads you want to show in your app is up to you. Make sure to keep offering a great experience for users and don’t overwhelm them with ads, so you’ll keep them as engaged users (and ad viewers 😉) in the long run.

If you’re planning out launching a mobile app, estimations will be more rough. As a starting point, you can estimate you’ll convert a certain fraction of your current audience into app users because typically apps are dedicated especially for the most engaged part of your audience.

For which audience, it depends on the nature of your business and customers. For some businesses their core audience is their social media followers, for others it’s their website visitors, paying customers, or event attendees.

In rare cases businesses manage to convert over 100% of their core audience to app users, if the app is more vital for engaging with their business than the rest of their digital channels.

Other businesses might convert just a few percent to app users – and it's still a good result – for example if they have a huge social media following, and the app is designed to be more of an exclusive “superfan experience”.

You could make a few user count estimates: low, medium and high. For example, you could estimate that you might convert 2%, 10% or 20% of your following in your top social media channel – and then you’d calculate different scenarios using those numbers.

Also session counts per user, and session durations depend largely on the context: what is the app used for, how often does it have new content, et cetera. In general, Choicely’s customers typically have session counts per user between 1.5 and 4 per month (28 days), and session durations between 1 and 4 minutes.

During the most active periods, like during sports tournaments or when a TV show season is on, the engagement can grow to completely new heights.

Set your own goals for user counts and engagement, and keep in mind that constant app marketing and user engagement are the keys to reaching them.

Conclusion

Advertising is one of the most effective and straightforward ways to monetize your app. You can also combine it with other app monetization models and gain new revenue streams for your business.

Use our app monetization calculator to make useful estimations for investing and budgeting for mobile apps, the free Google Sheet also includes templates for app cost, ROI and profit calculations.