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Monetization on Mobile Platforms: Balancing in‐App Advertising and User Base Growth

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  • Yonghua Ji
  • Ruibing Wang
  • Qinglong Gou

Abstract

Monetizing the growth of mobile platforms is increasingly important as more and more users adopt mobile platforms such as the Google’s Android OS and the Apple’s iOS. In this study, we use a differential game theoretical model to study the problem of joint advertising investment and in‐app advertising adoption decisions by platform owners and app developers on a mobile platform. A key finding is that a platform owner may delay or even not offer an in‐app advertising program if the revenue from such a program is low, which could explain the termination of Apple’s iAd in‐app advertising program. One unexpected result is that when determining advertising effort or the timing of an in‐app advertising program, a platform owner does not need to consider the app developer’s advertising effectiveness. Another interesting result is that an app developer acts strategically with an increase in ease of app searching: he either follows the platform owner to increase advertising or decreases it to take a free ride, depending on the effectiveness of his advertising effort. Finally, our analysis shows that in order to coordinate the mobile platform system, a central planner should adopt a mixed transfer payment scheme that includes both revenue sharing and advertising cost sharing, regardless of whether competition exists.

Suggested Citation

  • Yonghua Ji & Ruibing Wang & Qinglong Gou, 2019. "Monetization on Mobile Platforms: Balancing in‐App Advertising and User Base Growth," Production and Operations Management, Production and Operations Management Society, vol. 28(9), pages 2202-2220, September.
    • Handle: RePEc:bla:popmgt:v:28:y:2019:i:9:p:2202-2220
    DOI: 10.1111/poms.13035
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    Cited by:

    1. Lin, Xuxun & Wang, Haiyan, 2022. "Dynamic pricing for online information services considering service duration and quality level," Omega, Elsevier, vol. 109(C).
    2. Can Sun & Yonghua Ji, 2022. "For Better or For Worse: Impacts of IoT Technology in e‐Commerce Channel," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1353-1371, March.
    3. Sulin Ba & Shu He & Shun‐Yang Lee, 2022. "Mobile App Adoption and Its Differential Impact on Consumer Shopping Behavior," Production and Operations Management, Production and Operations Management Society, vol. 31(2), pages 764-780, February.
    4. Gou, Qinglong & Shao, Jing & Wang, Xin & Yu, Lili, 2020. "Co-op supply chains with a local media company: Models and analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 136(C).
    5. Haoyu Liu & Shulin Liu, 2019. "Considering In-App Advertising Mode, Platform-App Channel Coordination by a Sustainable Cooperative Advertising Mechanism," Sustainability, MDPI, vol. 12(1), pages 1-28, December.
    6. Chernonog, Tatyana & Levy, Priel, 2023. "Co-creation of mobile app quality in a two-platform supply chain when platforms are asymmetric," European Journal of Operational Research, Elsevier, vol. 308(1), pages 183-200.
    7. Numminen, Emil & Sällberg, Henrik & Wang, Shujun, 2022. "The impact of app revenue model choices for app revenues: A study of apps since their initial App Store launch," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 325-336.
    8. Haoyu Liu & Shulin Liu, 2021. "Optimal decisions and coordination of live streaming selling under revenue‐sharing contracts," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 1022-1036, June.
    9. Haoyu Liu & Shulin Liu, 2020. "Research on Advertising and Quality of Paid Apps, Considering the Effects of Reference Price and Goodwill," Mathematics, MDPI, vol. 8(5), pages 1-23, May.
    10. Charpin, Remi & Lee, Min Kyung & Wu, Ting, 2021. "Mobile procurement platforms: Bridging the online and offline worlds in China's restaurant industry," International Journal of Production Economics, Elsevier, vol. 241(C).

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