Hybrid monetization is inevitable

On May 11, 2026, Royal Match started showing (testing) ads. One of the most polished, IAP-successful studios in the industry crossed a line. It's worth asking why.

The answer isn't as simple as "they wanted more money." Several things are at play, and understanding them matters. I'd argue that there are 6 main things to consider:

1. Mature markets changed the growth question

Tier 1 geographies have plateaued on downloads. The charts increasingly belong to evergreen, IP-style titles that hold their positions for years rather than months, and there's simply less room for explosive install-led growth than there was five years ago.

There aren’t “new users” in these markets, and studies show that people “discover” less apps over time. When smartphones were first introduced, people would constantly explore to see what was new. Now, most people have a steady roster of apps they use and only rarely do they wander.

There might be (some) growth left in Tier 3 markets, but if we’re talking IAP focused apps, then the challenge is both different and obvious.

When growth can't be led by downloads, revenue per user becomes the next best lever. And that's where the IAP-only model shows its structural weakness: according to Unity's Mobile Growth and Monetization Report, only 1.83% of mobile gamers ever make an in-app purchase. And revenue concentrates even further within that paying sliver — a small minority of high spenders drives the large majority of IAP revenue.

An IAP-only studio is, by construction, monetizing a small fraction of the audience it paid to acquire. That was tolerable when acquiring users was cheap and precise. It no longer is.

2. Rising CPMs disproportionately hurt IAP centric apps

CPMs have trended up over time (excluding an iOS blip when SKAD is announced). I looked at some data from Business of Apps, Bidlogic, Tenjin and they all seem to indicate the same thing; over a long (5 yr) frame, CPMs have been consistently rising. Part of this has to do with a growth in hybrid apps (IAP users command a higher CPM, so more hybrid means more hybrid supply), and some of this results from more demand.

If you monetize with ads, higher CPMs mean your advertising revenue rises with your UA costs. Blended acquisition costs across the industry are up roughly 60% over five years. The two sides of your P&L move directionally "together". This isn't perfect of course. Data seems to indicate that especially over the past 2 years CPIs outpace CPMs, and this is true even as technology to target users getes better (worse targeting could explain the gap). As Josh Chandley hints, this would seem to coincide with networks that print increasing margin without growing there share of wallet. It seems that they're not interested in sharing the fruits of improved targeting.

If you monetize exclusively through IAP, you pay the higher prices on the acquisition side and capture none of the upside on the monetization side. Scaling becomes progressively harder.

This will get worse before it gets better. The largest ad networks in the world (AppLovin most visibly) are actively courting ecommerce and web demand for their next phase of growth. That means more advertiser budgets competing for a relatively fixed pool of in-app supply. A crowding-out mechanic starts to take place: gaming advertisers get outbid by advertisers with different unit economics.

It’s ironic to realize that by introducing ads to recover their revenue, app developers are also (i) adding supply to the market and (to some extent) restoring prior balance; and (ii) giving Applovin and its peers even more signals to further improve targeting (and pocket the difference?).

3. Cannibalization fears died an empirical death

The historical objection to hybrid monetization was always cannibalization: ads suppress IAP conversion, damage premium brand perception, and drive away paying users.

That seems to be over.

Dream Games added ads to Royal Kingdom in March 2026. Within one month, the game reportedly generated ~20% incremental revenue — roughly $185,000 per day in ad revenue on top of $1–1.3 million per day in existing IAP. Two months later, ads arrived in Royal Match itself.

Playrix's Township added rewarded video and saw monthly eCPM rise 35% and overall monthly revenue increase more than 28%.

These are just some examples though. For those in the industry, the evidence "feels" intuitive.

Roughly 60% of top-grossing mobile games now run rewarded ads. Players who engage with them are 4x more likely to make a purchase, and users who interact with rewarded ads during their first sessions are 5x more likely to later convert via IAP. Surveys consistently find around three quarters of US mobile gamers are comfortable watching short video ads in exchange for in-game rewards.

The caveat matters: these results come mostly from studios where ads are implemented correctly: rewarded formats first, interstitials gated by payer status and session behavior, frequency controls, and careful protection of high-value cohorts. Ads done badly probably cannibalize.

4. Tooling finally caught up

This is the enabling condition behind the point above. Running ads "surgically" used to require a dedicated ad monetization team and months of custom work. That organizational cost was a genuine reason for IAP studios to stay out.

That barrier is gone. The infrastructure to implement smart, segmented ad monetization now exists, and deploying it no longer requires heavy headcount. When the advertising experience isn’t designed for the “average” user and applied throughout, studios can suddenly start being mindful of when they expose which users to what ad formats delivered by who. Yes, it’s a lot, but it’s also surprisingly easy to implement through loomit.

What changed the industry's mind wasn't that ad formats got less annoying. The formats are largely the same. What changed is that studios can now prove, cohort by cohort, that ads don't hurt — and act on that proof automatically.

This isn't just Rewarded Video by the way. Loomit allows clients to set the advertising strategy at the user level. If there is a segment of users where it makes sense to consider interstitials, then that is easy to set up. Ads are (should be) at the service of LTV. With enough data and the right infrastructure, clients can start to find their "optimal" setup.

5. The distribution unlock: Blended ROAS

There's a strategic dimension beyond revenue that makes this shift self-reinforcing: adding an ad layer grants access to Blended ROAS campaigns — UA campaigns that optimize against combined ad and IAP revenue rather than IAP alone.

For Royal Kingdom, the ad layer reportedly enabled Blended ROAS campaigns that pushed the game past 500,000 downloads per day. Read that carefully: ads didn't just add a revenue line, they unlocked a distribution channel that IAP-only titles cannot access.

Again, this is actually easy to set up with loomit. We can actually change ad pressure over time as conversion probability goes down, maxxing hybrid campaign ROAS.

Adding ads, in this sense, is as much about distribution as it is about monetization.

6. The capital environment removed the luxury of purity

All of this takes place in a constrained capital environment. In 2021, VCs were spreading money across the industry and studios could afford philosophical positions about monetization. Today's investor environment is far less enthusiastic, profitability is non-negotiable, and business leaders can't afford to leave revenue on the table.

The pattern extends beyond gaming. Netflix, a company that spent fifteen years insisting it would never show ads, launched its ad tier in 2022 and reported over 250 million monthly ad-supported viewers by mid-2026, up from 94 million a year earlier. Disney counts 164 million ad-supported viewers across its streaming properties. When subscription businesses at that scale conclude the non-paying (or price-sensitive) audience must be monetized with advertising, mobile studios are unlikely to reach a different conclusion.

There's a final point I want to make:

An element of musical chairs is coming into play. As the world's leading IAP studios add advertising for incremental revenue, it becomes hard for every other studio to explain why ads would be bad for their titles. The philosophical cover is gone; the premium studios you pointed to as proof that "serious games don't run ads" now run ads.

More importantly, the competitive math has shifted. Studios compete with each other for the "same" installs, in the same auctions. A studio with a hybrid model now has one more way to win on LTV.. and a higher LTV means they can afford a higher CPI.

Every month an IAP-only studio waits, it competes for users against rivals who monetize 100% of the audience while it monetizes 2%.

Those who continue to fight with a hand behind their back are poised for some rough times ahead. The good news: unlike most structural disadvantages in this industry, this one can be fixed in weeks, not years.

Call us.

Sources: Gamigion, Felix Braberg, Anatolii Andriushchenko , Adapty, Unity, AppsFlyer and AppSamurai. And of course Claude :) doing the heavy research lifting, apologies for any oversight / error.