One of the best strategies to convince app users to stay for the long term is to reward them with in-app currency, says Adam Ben-David, vice president of supply-side-platform Developer Solutions at ironSource. Rewarded ads have worked time and time again.

App Annie sat down with Ben-David to talk about user retention, mobile app retention strategies, ad monetization and the morphing definition of a “loyal” user.

App Annie (AA): What is one thing an app developer can do to help improve retention?

Adam Ben David (ABD): Typically, users drop off because they can’t advance without in-app currency. Rewarded ads let them stick around longer. These are user-initiated ad units that allow users to earn in-app bonuses in exchange for viewing advertising content.

As users get deeper into the game or app, they become progressively more addicted to it. Rewarded video watchers who weren’t initially prepared to make an in-app purchase (IAP) will often turn into paying users.

AA: Let’s say a developer has determined where in their app users start dropping off. What are some common scenarios where they notice churn?

ABD: Most developers see a sharp initial churn during onboarding, because the user experience is not streamlined and gripping enough. At ironSource we work with a lot of gaming apps, so we’re exposed to complex in-app economies that produce a range of drop-off points. An application that has a poor return value on its primary feedback loops (aka recursive core loops) tends to have significant drop-off, since the user won’t be engaged in the long run.

AA: What kind of things can an app developer A/B test to prevent churn and increase retention?

ABD: A/B testing the onboarding flow can greatly help developers see what it takes to create simple tutorials and intuitive registration features. To keep users interested, apps must demonstrate clear value in the first 30 seconds of the user journey.

A/B testing your ad monetization strategy is equally important. Developers can generate significant increases in retention with rewarded video, as I already mentioned. But it takes careful iterations and tons of A/B testing to get the right reward payout, the perfect timing and the best gameplay circumstances.

AA: How might app developers segment their users from a monetization perspective? What would the buckets be?

ABD: The easiest place to start is segmenting according to IAP users (i.e., spenders) and free riders. Then you can push IAPs more heavily to spenders and better understand purchase motivations to convert non-IAP users. Publishers can also segment by ad unit engagement and then optimize for maximum revenue, retention and engagement.

AA: For app developers, what is a “loyal” user? How do you segment them?

ABD: The conventional definition for a loyal user is one that opens and engages an app at least three times. But that interpretation is perhaps a bit too liberal. There are plenty of instances where a user may open an app three times and never open it again. Categorizing this segment as a loyal audience is misleading and can inflate the loyal proportion of your app base.

Loyalty as a concept differs greatly across categories. While games see very high retention, it is lower for food and beverage apps. I think a short-term user who is highly engaged for just a few days is also “loyal.” It’s still possible to monetize a short-term user, after all. By segmenting short-term users, you can adjust ad targeting and increase the rate of ads they view, for example.

AA: What are some strategies you think we’ll see emerging in the next year for keeping retention high?

ABD: Currently, push notifications and in-app messages are the most common app retention strategies. Publishers stick to these because they can better control the message. But only 27% of users “always” allow app notifications — so publishers are missing out on a large majority of users.

I think we’re going to see ad monetization become a more popular strategy for in-app retention. Letting ads run on an app doesn’t mean less control. Publishers can still cap frequency and choose points in the app flow to run an ad, and even use personalized segmentations to do it.

Since every user will come across an ad at some point in the lifecycle, we see it as a potentially more impactful user retention strategy, and a great complement to push notifications.