Advertising Market Size

• The estimated mobile advertising spending in the U.S. for 2019 was $87.06 billion.
• It was estimated the U.S. market size for mobile video ad spending was $15.93 billion in 2019. Since rewarded video advertising has largely been limited to gaming apps up to this point, it is likely that the market size for rewarded video is a portion of this market.
• Ad revenues for gaming apps was estimated to be $3.25 billion in the U.S. in 2019.
• There are 187 million mobile video viewers in the U.S., all who are potential advertising targets.

Rewarded Video Advertising Growth

• From the 2nd quarter 2017 to 2nd quarter 2018, rewarded video ad spending grew 139% globally.
• From the 1st quarter of 2018 to the 1st quarter of 2019, ad spending for rewarded video grew globally by 245%.
• Globally, about 25% of companies using rewarded video advertising are media companies, well over 50% of the companies are other apps, followed by smaller shares for retail, government and other verticals.

Effective Cost per Mille

• Mobile effective cost per mille (eCPM) grew 33% in the U.S. from 2018 to 2019.
• At the end of 2018, rewarded video eCPM for iOS was $13.75 and it was $12.01 on Android.

Effectiveness of Rewarded Videos

•  Seventy six percent of app users said that rewarded video ads made them like a brand more.
• One study showed that rewarded video ads had a 43% better return on investment than non-rewarded video ads. Additionally, rewarded video ads had a 45% better click through rate, and a 33% better conversion rate than non-rewarded video ads.
•  Sixty two percent of users regularly engage with rewarded video ads.

Research Strategy

Survey-Based Data on Most Effective Rewards

• Results of a consumer survey on what rewards would most cause consumers to choose to watch ads was published in mid-2018.
• Of the seven options given, the one that was found to be most effective was "discounts from favorite brand/retailer." Of those surveyed, 80% said they would be willing to watch a 15-second ad for this reward, 77% would watch a 30-second ad, and 71% would watch a 60-second ad.
• The next most popular reward for consumers was receiving a free hour of premium content on a streaming service. For this reward, 70% would watch a 15-second or 30-second ad, and 64% would watch a 60-second ad.
• The next most effective reward, excluding one related to video games, was "30 minutes of ad-free music on your favorite music service." 70% said they would be willing to watch a 15-second ad for this reward, 64% would watch a 30-second ad, and 53% would watch a 60-second ad.
• There was a significant drop in effectiveness for the remaining rewards on the list, but they are being included for completeness.
• Based only on a 15-second add, 40% would watch the ad to obtain an exclusive filter on photo apps, 39% stated "video highlights from sports game or current TV show" would cause them to watch an ad, and 39% would watch the ad for access to three free articles on a premium news site.

Effective Rewards in General

• With limited data on effective rewards specific to incentivized advertising, additional data is being provided on effective consumer rewards in general, as many of these could be adapted to the rewarded ad space. One expert writing on rewarded ads stated, "The opportunity is limited only by a publisher’s creativity."
•  Contests or sweepstakes have been shown to be very effective at driving engagement. If this reward could be tailored to the rewarded ad space, say for example, by giving consumers the opportunity to win a $100 shopping spree on a retail site in exchange for watching an ad, it could be effective in the space.
• Giving customers the VIP treatment is another popular incentive. This may be a free upgrade at a hotel or access to a personal shopper at a retail location.
• Many consumers are motivated by giving. Therefore, providing rewards that allow for donations to a favorite charity can be effective.

Key Components of Rewarded Ads

• The key to choosing effective rewards that consumers respond to is to ensure that the reward is directly related to why the consumer was visiting in the first place. For example, on a music app, a common reward would be a certain number of free listening minutes since the consumer was likely in the app to listen to music in the first place.
•  Ninety percent of people are looking for instant gratification. Therefore, rewards offered should be those that can be used immediately.
• A recent study showed that uncertainty surrounding rewards can be effective at getting people to repeat behaviors.
•  Ad placement is an important component of incentivized ads, as publishers need to ensure that core elements of the app experience are not interrupted by the ad offer.

Brave Desktop Browser

•  Brave is a desktop browser that focuses on privacy and security. Users are not tracked and the browser does not see or store the sites that are visited. Additionally, ads are blocked.
• In April 2019, Brave launched Brave Ads, where users are given control of the advertisements because they only participate and see ads by opting in. One of the keys to the ads is that they still preserve the privacy of the user.
• Users are rewarded by receiving 70% of the revenue from the ads they see, which is eventually returned to the publishers. The system is set up so users receive Basic Attention Tokens (BAT) for giving their attention to ads. Then at the end of each month, users can choose where to send their tokens, with BATs automatically going to the publishers most visited if an alternative is not chosen.
• Brave plans on expanding the program to eventually offer users other options for their BATs, which may include hotel and restaurant vouchers, as well as the option to donate to charities.
• Brave Ads creates catalogs of ads that are based on regions. Users in a given region will be offered the ads from that region and there is no other tracking to provide more targeted ads. The browser is giving the power to the users by allowing them to choose to see ads and to maintain their privacy.

Unlocking Ad-Free Viewing Time on OTT Media

• Media services can utilize rewarded advertising to give viewers the ability to earn so many minutes or hours of ad free viewing.
• An example of a company using this type of advertising is Hulu. When a viewer is watching a program on Hulu, they may be given the choice to watch 2-3 minutes of advertisements before the show begins, or, alternatively, to see several shorter ads throughout the show. When customers choose the up front video, they are rewarded with a longer stretch of commercial free viewing.
• Although this option is available on the Hulu app, it is also available to viewers watching Hulu through Roku or some other OTT service.
• Hulu is also giving viewers some choice in the ads they see through the Ad Selector. Although this does not completely allow the viewer to opt out of ads, it does allow them to choose which ad they would like to see. Because there is no specific reward tied to watching the ad, it isn't a true example of reward-based advertising.

Monetizing a Website

• Websites can be monetized with rewarded ads by offering visitors the opportunity to earn virtual coins that can be spent on real merchandise.
• Two major benefits of publishers using rewarded ads are increased revenue from the ads, and improved user retention. When visitors are being given incentives, they are more likely to stick around or come back.
• Publishers should first determine if the rewards offered will be one time rewards or cumulative. With cumulative rewards, visitors are able to save rewards from visits and use them all together sometime in the future.
• Once the type of reward is determined, ad placement needs to be considered. If the rewards offered are discounts on purchases, it makes sense to place the ads on the product description page or possibly in the shopping cart.
• Our research did not find any examples of companies or websites that are currently doing this with their advertising.

Additional Helpful Findings

•  Webnovel is an app that allows users to read books for free. Often, the only way to read the final chapters of the book are to first watch ads. Although this is currently happening in an app, it is being included because of the possibility of these types of ads being expanded to other platforms. For example, many e-readers currently are ad supported and it is very easy for readers to simply ignore them. However, if consumers could choose to watch ads to obtain free books or book excerpts, this could be a use of the technology.
• Many news sites offer limited free articles, with the majority of the content only being available to premium subscribers. The Wall Street Journal is an example of a site with this model. One use for rewarded ads that was suggested by the International Advertising Bureau (IAB) was to allow users to access premium content for watching ads. Although this could happen on an app, it would also be possible to set it up on websites.
• The IAB also published a document with several case studies of companies using rewarded advertising. The companies included HP on Pandora, NBC on YouTube/Google, KitKat with ActivisionBlizzard, Snickers with Electronic Arts, Asphalt 8 with Gameloft, and Chick-Fil-A with Pandora. Unfortunately, all of these examples were using apps and were not relevant to this request.

Brands Buying Rewards-Based Ads

• In 2018, IAB published case study examples of brands that had successfully utilized rewarded ads. The brands included were HP, NBC, Kit Kat, Snickers, Asphalt 8, Chick-Fil-A, 20th Century Fox, and Aarki. There was also a case study included for a luxury auto manufacturer that was not named.
• These case studies show that the types of brands buying rewarded ads cross a wide variety of sectors. HP is in the computers/electronics sector; Kit Kat and Snickers are in the grocery sector; Asphalt 8 is a video game; Chick-Fil-A is in the restaurant industry; NBC and 20th Century Fox are both in the entertainment sector; and Aarki helps brands with in-app marketing.
• Media brands account for about 25% of all spending on rewarded ads, while retail spending is somewhere around 10% (as determined from the graph). Well over 50% of spending on the format comes from apps.

Cost of Rewarded Ads

•  eCPM stands for effective cost per mille. This represents the cost to advertisers for every 1,000 impressions.
• It was reported in early 2019 that the average eCPM for Android was $2 while the average eCPM for iOS was $5.
• As of the end of 2018, average eCPM for iOS in the U.S. was $13.75. The rate for Android was $12.01.
• A 2019 report found that the average eCPM in the U.S. for iOS was $15.18 and it was $12.68 for Android.
• This report from Appodeal appears to have detailed information relevant to this request. Because the full report could only be accessed by providing contact information, the link is being included in case further details are desired.

Consumer Statistics on Rewarded Ads

• App user retention was over 300% better for users that engaged with at least one rewarded ad in the first week after installing the app, compared with those that did not engage with any. Additionally, the improvement was more than 450% for app users that engaged with 7 or more rewarded apps
• App users who engaged with a rewarded ad were found to be 4.5 times more likely to make an in-app purchase than users that did not engage with the ads.
• App spend increased an average of 326% for users who engaged with an ad.

• Publishers ranked rewarded ads as offering the best user experience compared to other types of video ads.