Rewarded Video Ads

Rewarded video ads are a user-initiated advertising format where players voluntarily watch video advertisements in exchange for in-game rewards such as virtual currency, extra lives, power-ups, or premium content ¹. This monetization strategy has emerged as one of the most effective hybrid approaches in free-to-play gaming, bridging the gap between traditional advertising and in-app purchases ¹. The primary purpose of rewarded video ads is to generate revenue while maintaining positive user experience and engagement, as players perceive value in the exchange rather than viewing ads as intrusive interruptions ¹. This format matters significantly in the gaming industry because it addresses the fundamental challenge of monetizing non-paying users while simultaneously enhancing retention and engagement metrics across the entire player base ¹.

Overview

Rewarded video ads emerged as a response to the growing tension between monetization needs and player experience in the free-to-play gaming ecosystem ³. As mobile gaming matured, developers faced the fundamental challenge of generating sustainable revenue from predominantly non-paying user bases without resorting to intrusive advertising that degraded gameplay quality ³. Traditional banner ads and interstitial advertisements created friction and negative sentiment, while relying solely on in-app purchases left the majority of players unmonetized ².

The rewarded video format evolved from behavioral economics principles, particularly the concept of perceived value and voluntary participation ¹. Research indicates that players demonstrate significantly higher tolerance and even preference for advertising when they receive compensation, transforming what might otherwise be considered a negative experience into a positive gameplay mechanic ¹. The practice has evolved from simple implementations offering static rewards to sophisticated systems employing dynamic reward structures, player segmentation, and machine learning optimization ¹. Contemporary implementations demonstrate that properly balanced rewarded videos can actually increase in-app purchase conversion by allowing non-paying players to experience premium content or resources, creating desire for more permanent access ².

Key Concepts

Value Exchange Model

The value exchange model represents the fundamental principle underlying rewarded video ads, where both the player and developer benefit from a transparent transaction: players receive tangible in-game benefits while developers earn advertising revenue, typically measured in eCPM (effective cost per mille, or cost per thousand impressions) ¹. Unlike interstitial or banner ads that interrupt gameplay, rewarded videos operate on a consent-based framework where players actively choose when and whether to engage with advertising content ¹.

Example: In the puzzle game "Homescapes," when a player runs out of moves three tiles away from completing a challenging level, the game presents a clear option: "Watch a 30-second video to receive 5 extra moves." The player sees the exact benefit, makes an informed decision, and upon completion receives the promised moves with visual confirmation. The developer earns approximately $0.02-0.05 per completed view depending on geographic location, while the player progresses without spending money.

Ad Mediation Platform

The ad mediation platform serves as the technical infrastructure connecting game developers with multiple ad networks, optimizing fill rates and eCPM through waterfall or bidding mechanisms ¹. Major mediation platforms include ironSource, AppLovin MAX, and Google AdMob, each offering different optimization algorithms and network partnerships ¹.

Example: A mid-sized mobile game studio implements AppLovin MAX as their mediation platform, connecting to twelve different ad networks including Unity Ads, Vungle, and AdColony. When a player in Germany requests a rewarded video, MAX's bidding system queries all networks simultaneously, receives bids ranging from $0.015 to $0.038, and serves the highest-paying advertisement. This automated optimization increases the studio's average eCPM from $8.50 to $12.30 compared to their previous single-network implementation.

Placement Strategy

Placement strategy determines where and when rewarded video opportunities appear within the game experience ¹. Common placement types include natural gates (when players run out of resources), optional boosts (before challenging levels), and discovery placements (menu-based options) ¹. Each placement type serves different player motivations and generates varying engagement rates ¹.

Example: The strategy game "Clash of Clans" implements multiple placement types: a natural gate placement appears when players' builders are all occupied, offering to speed up construction by 1 hour; an optional boost placement before attacking another player's base offers a temporary troop strength increase; and a discovery placement in the shop menu allows players to earn 100 gems daily. Analytics reveal that natural gate placements achieve 45% engagement rates, optional boosts reach 28%, while discovery placements maintain steady 15% daily engagement from dedicated players.

Reward Calibration

Reward calibration involves carefully balancing the value of rewards offered for watching advertisements to ensure they motivate engagement without cannibalizing in-app purchase revenue or destabilizing the game economy ¹. Rewards typically fall into categories: consumable resources (coins, gems, energy), progression accelerators (time skips, bonus XP), gameplay advantages (extra lives, continues, power-ups), or access rewards (unlocking content, removing temporary restrictions) ¹.

Example: A match-3 puzzle game conducts A/B testing across 50,000 players, testing three reward values for watching videos: 50 coins, 100 coins, and 200 coins. The 50-coin reward generates only 12% engagement with minimal revenue impact on IAP. The 200-coin reward achieves 58% engagement but reduces coin purchase revenue by 23%. The 100-coin reward strikes optimal balance with 42% engagement and only 8% IAP reduction, while the equivalent dollar value ($0.25 worth of coins) remains below the $0.99 smallest purchase pack, preserving incentive for paying players.

Frequency Management

Frequency management controls how often players can access rewarded videos, balancing revenue opportunity with player experience ¹. Common approaches include cooldown timers between views, daily caps on available rewards, or dynamic availability based on player progression and engagement patterns ¹.

Example: A casual endless runner game implements a tiered frequency system: new players (days 1-7) can watch up to 10 rewarded videos daily with no cooldown to encourage engagement and retention; established players (days 8-30) face a 15-minute cooldown between videos with an 8-video daily cap; veteran players (day 31+) who have made purchases receive only 3 daily opportunities to preserve their premium experience. This segmented approach increases day-7 retention by 18% while maintaining healthy IAP conversion rates among paying users.

Server-Side Verification

Server-side verification ensures reward delivery integrity by confirming ad completion through backend systems rather than relying solely on client-side callbacks ¹. This prevents fraud and ensures players receive promised rewards even if the app crashes or connectivity issues occur during the final moments of video playback ¹.

Example: A mobile RPG implements server-side verification through their mediation platform's callback system. When a player completes a rewarded video for 500 gold coins, the ad network sends a secure callback to the game's server with a unique transaction ID and player identifier. The server validates the callback signature, checks for duplicate transactions, and credits the reward to the player's account in the database. When the player's device reconnects after a brief network interruption during ad playback, the client syncs with the server and displays the reward confirmation, preventing the frustration of watching an ad without receiving compensation.

ARPDAU (Average Revenue Per Daily Active User)

ARPDAU measures the monetization efficiency of rewarded video implementation by calculating total daily revenue divided by the number of daily active users ¹. This metric enables developers to assess how rewarded videos contribute to overall monetization strategy and compare performance across different player segments, geographic regions, and time periods ¹.

Example: A hyper-casual game with 100,000 daily active users generates $1,200 from rewarded videos and $800 from in-app purchases on a typical day, yielding an ARPDAU of $0.02. After optimizing placement strategy and reward values, rewarded video revenue increases to $2,100 while IAP remains stable at $850, raising ARPDAU to $0.0295—a 47.5% improvement. The development team segments this data further, discovering that Android users in tier-2 countries (Brazil, Mexico, India) generate $0.018 ARPDAU primarily from rewarded videos, while iOS users in tier-1 countries (US, UK, Japan) generate $0.065 ARPDAU with a 70/30 split favoring IAP.

Applications in Mobile Game Development

Hyper-Casual Game Monetization

Hyper-casual games rely heavily on rewarded videos as their primary monetization mechanism, with some titles generating 80-90% of revenue from advertising ¹. These games feature simple mechanics, short session lengths, and broad appeal, making them ideal candidates for ad-heavy monetization strategies that would feel intrusive in more complex games.

In a typical hyper-casual implementation, a game like "Helix Jump" offers players the opportunity to continue from their current position after failing rather than restarting from the beginning. The rewarded video appears at the moment of maximum engagement—when players have achieved their personal best score and desperately want to continue. This placement achieves completion rates exceeding 70% because the value proposition is immediately clear and emotionally compelling. The game also implements rewarded videos to unlock new ball skins, providing cosmetic progression that enhances retention without requiring complex economy systems.

Mid-Core Strategy Game Supplementation

Mid-core strategy games use rewarded videos to supplement IAP revenue while providing free players with meaningful progression paths ¹. Games like "Clash Royale" demonstrate that hybrid monetization models generate higher overall revenue than single-strategy approaches ¹.

A tower defense strategy game implements rewarded videos at multiple strategic points: players can watch videos to instantly complete the final 10% of building construction timers (reducing 30-minute waits to zero), earn bonus resources after successful mission completion (doubling rewards), or unlock temporary hero abilities for challenging campaign levels. This implementation carefully avoids making rewarded videos feel mandatory by ensuring all content remains accessible through normal gameplay, but the videos provide meaningful acceleration that reduces frustration at difficulty spikes. Analytics reveal that 65% of non-paying players engage with rewarded videos at least once daily, generating substantial revenue from a segment that would otherwise contribute nothing, while 40% of these engaged users eventually convert to paying customers after experiencing the benefits of premium resources.

Narrative and Puzzle Game Content Unlocking

Narrative games implement rewarded videos to unlock story chapters or character customization options, maintaining immersion while monetizing engaged audiences ¹. This application requires particular sensitivity to pacing and player experience, as poorly implemented ads can break narrative flow and diminish emotional impact.

An episodic mystery game offers players two paths to unlock new chapters: purchase the chapter for $1.99 or watch three rewarded videos over a 24-hour period (one immediately available, two unlocking after 8-hour intervals). This approach respects player choice while creating a time-based value proposition—impatient players pay for immediate access, while budget-conscious players invest time instead of money. The staggered video availability prevents binge-watching all content for free while maintaining engagement across multiple sessions. The game also offers cosmetic rewards (character outfits, investigation tools) exclusively through rewarded videos, creating a distinct progression path that doesn't compete with story purchases.

Retention and Re-Engagement Mechanics

Rewarded videos provide progression assistance that reduces frustration-based churn, particularly at difficulty spikes where players might otherwise abandon the game ¹. By offering a free alternative to purchasing continues or resources, developers extend session length and increase daily active user counts ¹.

A match-3 puzzle game identifies through analytics that 35% of players abandon the game permanently after failing the same level five times. The development team implements a progressive assistance system: after the third failure, a rewarded video option appears offering a helpful power-up; after the fifth failure, the reward increases to multiple power-ups plus five extra moves. This intervention reduces abandonment at difficult levels by 42% and increases overall day-30 retention by 12%. The system tracks individual player frustration signals (rapid replays, decreasing session length) and dynamically adjusts reward availability and value, providing more generous assistance to players showing churn risk while maintaining standard offerings for engaged players.

Best Practices

Align Rewards with Player Motivation

Position rewarded video opportunities at moments when players genuinely need or desire the offered reward, maximizing engagement rates by aligning ad opportunities with intrinsic player motivation ¹. The rationale behind this principle is that players perceive greater value and demonstrate higher completion rates when rewards address immediate gameplay needs rather than offering generic benefits disconnected from current context ¹.

Implementation Example: A racing game analyzes player behavior and discovers that 78% of rewarded video engagement occurs when players are one upgrade away from unlocking the next vehicle tier. The development team redesigns their placement strategy to prominently display rewarded video options specifically when players are within 10% of upgrade thresholds, using contextual messaging like "Watch video to earn the 500 coins you need for the Turbo Engine upgrade." This targeted approach increases engagement rates from 31% to 54% and improves player sentiment scores, as the ads feel helpful rather than opportunistic.

Implement Clear, Benefit-Focused Messaging

Use clear, benefit-focused language that explicitly states what players will receive, as this outperforms generic prompts and increases completion rates ¹. Effective implementations use messaging like "Watch video for 100 coins" rather than "Advertisement available," ensuring players make informed decisions about the value exchange ¹.

Implementation Example: A city-building game A/B tests three different button designs and messaging approaches across 60,000 players. Version A uses a small banner stating "Ad Available" with a generic play icon. Version B displays "Free Coins" with a coin icon. Version C shows "Watch 30-sec video → Get 200 coins" with both a video icon and coin stack visual. Version C achieves 47% higher click-through rates and 23% better completion rates than Version A, demonstrating that transparency about both the ask (30-second time investment) and the benefit (specific coin amount) builds trust and increases engagement.

Balance Frequency to Prevent Fatigue

Start with conservative frequency limits (3-5 videos per day or 1-2 hour cooldowns) and adjust based on engagement data and player feedback to prevent reward farming while maintaining consistent monetization opportunities ¹. The rationale is that unlimited access leads to economic imbalance and devalues rewards, while overly restrictive caps frustrate engaged players and limit revenue potential ¹.

Implementation Example: An idle game initially launches with unlimited rewarded video access, allowing players to watch ads continuously. Within two weeks, the development team observes problematic patterns: 8% of players watch 40+ videos daily, earning so many resources that they never consider purchases, while average players watch 2-3 videos and express frustration at the perceived "grindiness" of ad-watching. The team implements a 5-video daily cap with 30-minute cooldowns, reducing exploitation while maintaining accessibility. Revenue per user increases by 34% as the scarcity makes each video opportunity more valuable, and IAP conversion improves by 18% as heavy ad users begin making small purchases when they exhaust daily video limits.

Ensure Technical Reliability with Robust Error Handling

Implement comprehensive error handling for network timeouts, fill rate failures, and playback interruptions, with server-side verification to guarantee reward delivery even when technical issues occur ¹. This practice is critical because failing to deliver promised rewards after players invest time watching advertisements creates severe negative sentiment and erodes trust ¹.

Implementation Example: A puzzle game implements a multi-layered reliability system: client-side caching pre-loads ads during gameplay to minimize loading times; timeout handling displays clear messaging if ads fail to load within 10 seconds, offering players the option to retry or cancel; server-side verification ensures rewards are credited even if the app crashes during playback; and a customer support dashboard allows players to report missing rewards, which are automatically credited after verification. This system reduces reward delivery failures from 8% to 0.3%, and player support tickets related to rewarded videos decrease by 91%, significantly improving user satisfaction scores.

Implementation Considerations

Platform-Specific Optimization

iOS users typically demonstrate lower rewarded video engagement but higher IAP conversion compared to Android users, suggesting different optimal monetization mixes across platforms ¹. Geographic variations in eCPM rates also significantly impact implementation strategy, with tier-1 countries like the US, UK, and Japan commanding significantly higher rates than tier-2 and tier-3 regions ¹.

Example: A global mobile game analyzes performance across platforms and regions, discovering that iOS users in the United States generate an average eCPM of $18.50 for rewarded videos but watch only 1.2 videos per day, while Android users in India generate $3.20 eCPM but watch 4.8 videos daily. The development team creates platform-specific configurations: iOS builds emphasize IAP with subtle rewarded video placements offering premium rewards, while Android builds feature more prominent video opportunities with higher frequency caps. Regional reward calibration adjusts values based on local eCPM—US players receive smaller coin rewards (matching the higher ad value) while Indian players receive larger rewards (compensating for lower eCPM) to maintain consistent engagement incentives.

Player Segmentation and Dynamic Adjustment

Advanced implementations use machine learning to predict individual player receptivity and optimize placement timing and reward values dynamically based on spending behavior, engagement level, and progression stage ¹. Non-paying players might see more frequent rewarded video opportunities with higher reward values, while paying players receive fewer, more targeted placements to avoid disrupting their premium experience ¹.

Example: A role-playing game implements a segmentation system that classifies players into five categories based on 30-day behavior: whales (spent $50+), dolphins ($5-50), minnows ($0.01-5), engaged non-payers (0 spend, 20+ sessions), and casual non-payers (0 spend, <20 sessions). Whales see no rewarded video placements to preserve their premium experience. Dolphins receive occasional high-value opportunities (rare items not available for purchase) to maintain engagement without competing with IAP. Minnows see standard implementations encouraging progression. Engaged non-payers receive enhanced frequency and rewards, maximizing ad revenue from this committed segment. Casual non-payers see aggressive placements with generous rewards designed to improve retention and session length, as this group shows the highest churn risk.

Analytics Infrastructure and KPI Tracking

Essential KPIs include rewarded video engagement rate (percentage of DAU watching at least one video), average videos per engaged user, completion rate, impact on retention curves, and correlation with IAP conversion ¹. Tools like Unity Analytics, GameAnalytics, or custom data pipelines provide necessary measurement capabilities ¹.

Example: A development studio builds a comprehensive analytics dashboard tracking rewarded video performance across multiple dimensions. The system monitors real-time metrics including fill rate by network and geography, completion rate by placement type, revenue per impression trending, and player lifetime value segmented by engagement level. Weekly automated reports highlight anomalies—such as a sudden 15% drop in completion rates for a specific ad network, indicating creative quality issues—enabling rapid response. Cohort analysis reveals that players who watch their first rewarded video within the first three days demonstrate 28% higher day-30 retention and 2.3x higher lifetime value, leading the team to implement onboarding tutorials that introduce the rewarded video system earlier in the player journey.

Mediation Platform Selection and Configuration

Developers must navigate platform-specific requirements for iOS and Android, implement proper error handling for network failures, and ensure compliance with privacy regulations including GDPR and COPPA, which affect data collection and ad targeting capabilities ¹. The choice of mediation platform significantly impacts fill rates, eCPM optimization, and technical integration complexity ¹.

Example: An independent developer evaluates three mediation platforms for their casual mobile game. Google AdMob offers the simplest integration with extensive documentation but provides access to fewer premium ad networks. ironSource delivers sophisticated optimization algorithms and higher average eCPMs but requires more complex SDK integration and larger app size overhead. AppLovin MAX offers a middle ground with competitive eCPMs and moderate integration complexity. The developer selects AppLovin MAX, implements their SDK following best practices for asynchronous loading and callback handling, and configures a waterfall including eight ad networks prioritized by historical eCPM performance. They implement GDPR consent management through a certified CMP (Consent Management Platform), ensuring European users receive appropriate privacy controls while maintaining ad targeting capabilities in permissible regions.

Common Challenges and Solutions

Challenge: Reward Cannibalization of IAP Revenue

Setting rewards too generously can cannibalize in-app purchase revenue and destabilize game economy, as players who would otherwise make purchases instead rely exclusively on rewarded videos for progression ¹. This challenge manifests when developers fail to properly calibrate the equivalent dollar value of offered rewards or allow unlimited video access that provides more resources than reasonably priced purchase options ¹.

Solution:

Analyze player resource consumption patterns and calculate the equivalent dollar value of offered rewards, ensuring rewarded video compensation falls below the threshold where players would prefer watching ads to making purchases ¹. Implement A/B testing across player cohorts to empirically determine optimal reward values that maximize engagement without reducing IAP conversion ¹.

A specific implementation involves creating a reward value matrix that maps each rewarded video reward to its IAP equivalent. For example, if 100 coins can be purchased for $0.99 and the average eCPM is $12 (meaning each video view generates approximately $0.012 for the developer), offering 100 coins per video would provide players with $0.99 worth of value for generating $0.012 in revenue—an unsustainable 82:1 ratio. Instead, offering 10-15 coins per video creates a more balanced 6-8:1 ratio that feels generous to players while preserving purchase incentives. Additionally, implement daily caps (5 videos = 50-75 coins maximum) that provide meaningful free progression but remain well below the value of even the smallest purchase pack ($0.99 for 100 coins), maintaining clear value differentiation between free and paid paths.

Challenge: Low Fill Rates in Certain Regions

Ad networks may fail to fill requests in certain geographic regions or during specific times, resulting in poor player experience when rewarded video buttons appear but no ads are available ¹. This technical challenge particularly affects developers with global audiences, as tier-3 countries often experience fill rates below 60% compared to 95%+ in tier-1 markets ¹.

Solution:

Implement ad mediation platforms that connect to multiple ad networks, using waterfall or bidding mechanisms to maximize fill rates across diverse geographies ¹. Configure fallback behaviors that gracefully handle unfilled requests, such as temporarily hiding rewarded video buttons when fill rates drop below acceptable thresholds or offering alternative reward mechanisms ¹.

A practical implementation involves configuring a mediation platform with 10-12 ad networks prioritized by historical fill rate and eCPM performance for each geographic region. For tier-1 countries, the waterfall might prioritize premium networks like Unity Ads and Vungle, while tier-3 configurations prioritize networks with stronger emerging market presence. Implement client-side logic that pre-checks ad availability before displaying rewarded video buttons—if the mediation platform reports no available ads after querying the waterfall, the button remains hidden rather than presenting a frustrating "no ads available" message. For regions with chronically low fill rates (below 70%), implement a hybrid system offering alternative reward mechanisms such as social sharing, watching gameplay tutorials, or completing simple tasks, ensuring players always have access to free progression paths regardless of ad availability.

Challenge: Privacy Regulation Compliance

Privacy changes, particularly Apple's App Tracking Transparency framework, have reduced targeting capabilities and eCPM rates, requiring developers to optimize for contextual rather than behavioral targeting ¹. GDPR and COPPA regulations affect data collection and ad targeting capabilities, creating compliance complexity that varies by user location and age ¹.

Solution:

Implement certified Consent Management Platforms (CMP) that handle privacy compliance across different regulatory frameworks, ensuring appropriate consent collection while maintaining ad targeting capabilities in permissible regions ¹. Optimize rewarded video implementations for contextual targeting based on game genre, session context, and in-game behavior rather than relying on cross-app behavioral data ¹.

A comprehensive implementation begins with integrating a GDPR-compliant CMP that presents appropriate consent dialogs to European users, clearly explaining data usage for ad personalization and offering granular control over consent categories. For iOS users, implement ATT (App Tracking Transparency) prompts with clear value propositions explaining how personalized ads support free gameplay. Segment users by consent status and track performance differences—users who grant tracking consent typically generate 30-40% higher eCPMs due to improved targeting. For users who decline tracking, optimize for contextual signals: a racing game can still target automotive ads based on game genre without requiring personal data; a puzzle game can serve casual game install ads to players based on current gameplay context. Implement server-side configuration that adjusts reward values based on expected eCPM for each consent segment, offering slightly higher rewards to non-consenting users to compensate for lower ad revenue while maintaining engagement incentives.

Challenge: Player Perception of Mandatory Ads

When rewarded videos feel mandatory for progression rather than optional enhancements, players develop negative sentiment toward the game despite the opt-in nature of the format ¹. This perception problem occurs when game design creates artificial scarcity or difficulty spikes that effectively force players to watch ads to progress, violating the voluntary participation principle that makes rewarded videos effective ¹.

Solution:

Design games with natural integration points that feel organic rather than artificially constrained to force ad engagement, ensuring all content remains accessible through normal gameplay while rewarded videos provide meaningful acceleration ¹. Implement the optional enhancement approach where rewarded videos offer supplementary benefits that never feel mandatory for progression ¹.

A specific implementation involves conducting player journey mapping to identify natural moments of choice rather than forced gates. Instead of designing a level that's nearly impossible without power-ups (forcing players to watch ads for necessary items), design a challenging but fair level and offer rewarded videos to make it easier (providing optional assistance). Implement multiple progression paths—players can advance through skill improvement, time investment, watching rewarded videos, or making purchases—ensuring no single path feels mandatory. A/B test different implementations: Version A places rewarded video opportunities only at failure points (potentially feeling mandatory), while Version B offers them proactively before challenges as optional boosts. Player sentiment surveys reveal Version B generates 34% higher satisfaction scores despite lower engagement rates, as players appreciate the choice rather than feeling manipulated. Additionally, implement messaging that emphasizes optionality: "Want a boost?" rather than "Need help?" frames the interaction as enhancement rather than necessity.

Challenge: Technical Integration Complexity

Managing multiple ad network SDKs through mediation platforms creates technical challenges including version conflicts, app size bloat, and complex error handling requirements ¹. Developers must handle network timeouts, fill rate failures, and playback interruptions while ensuring proper callback handling and reward delivery ¹.

Solution:

Implement comprehensive logging to diagnose issues and use test modes during development to verify proper callback handling before production deployment ¹. Follow mediation platform best practices for SDK integration, including modular architecture that isolates ad functionality and graceful degradation when ad systems fail ¹.

A robust implementation begins with creating an abstraction layer that isolates ad functionality from core game code, allowing ad systems to fail without crashing the game. Implement extensive logging that tracks the complete rewarded video lifecycle: request initiation, network selection, ad loading, playback start, completion, callback receipt, and reward delivery. Use mediation platform test modes to verify behavior across different scenarios—successful completion, mid-playback interruption, network failure, and callback delays. Implement timeout handling with clear user feedback: if an ad fails to load within 10 seconds, display a message explaining the issue and offering to retry or cancel. Create a staging environment that tests new SDK versions before production deployment, catching version conflicts and integration issues early. Monitor crash analytics specifically for ad-related crashes, prioritizing fixes for issues affecting reward delivery. Implement client-side reward caching with server-side verification—when a player completes a video, the client immediately shows the reward and adds it to a pending queue, while simultaneously requesting server verification; if verification fails or times out, the server can credit the reward later, ensuring players never lose earned rewards due to technical issues.

References

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