Monetization

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While app marketplaces bring significant non-monetary value to platforms, they can also be monetized directly. The most popular ways to monetize a marketplace are revenue sharing, developer membership, and sponsored apps, but there is a time and place for monetization. On this page, we'll discuss:

  • When to Monetize

  • Revenue Sharing

  • Developer Membership

  • Sponsored Apps

When to Monetize

Smaller marketplaces are rarely monetized from day one, and for good reason. When launching, your number one priority should be to generate interest among both users and developers. Note that developers can still monetize users externally during this time.

After launching, monetization can be added almost immediately (as a "fast follow"), or as the marketplace gains traction. To inform you in making this decision, take into account both current marketplace engagement and the resources available to you.

The alternative approach — monetizing from launch — is better suited to platforms with a larger audience of users and developers, or those for whom monetization is the primary goal.

Revenue Sharing

The most common way to monetize, revenue sharing is a monetization model whereby the revenue generated from paid app sales is split between you as the platform owner, and app developer.

The Shopify App Store promotes developer signups with impressive revenue sharing statistics.

It's an effective arrangement, since it ensures both the platform owner and app developers share a mutual interest in the success of apps (and consequently, the marketplace as a whole):

  • App developers create better apps and more of them, because they get to keep a large portion of the revenue for themselves.

  • You can justify spending more resources into supporting app developers, since every app offers direct financial upside for you.

Revenue sharing is also beneficial for users, since it can consolidate the administration of multiple apps. In other words, it can allow user administrators to add, remove, and update licenses for all apps in a single place. Furthermore, revenue sharing can allow for consolidated billing, which is when billing for apps is included in the user organization's existing bill or invoice with the platform owner.

This streamlined administrative experience ultimately increases the sales velocity of apps, which is why developers might choose to monetize within the app marketplace, instead of doing so externally.

For reference, most marketplaces offer a developer payout of 70% to 80% of app revenue, meaning that the platform owner keeps 20% to 30% for themselves. The costs associated with payment processors are usually subtracted from top line app revenue before it is divided, but they can also be covered by the platform owner.

Developer Membership

Developer membership involves charging developers an annual or monthly fee in exchange for various benefits in the ecosystem. It can consist of a single tier or multiple, depending on the benefits you choose to offer.

A popular approach to membership is to charge developers for the simple privilege to publish apps. Although these apps add value to your platform, they give developers valuable exposure to your user base. Additionally, if your marketplace allows paid apps, developers will be able to monetize their apps directly.

Other benefits of membership can include:

  • Additional promotion and co-marketing of the developer's apps

  • Promotion of the developer organization itself (e.g. certified partners)

  • Early access to platform updates

  • Dedicated account manager

  • 24/7 support

To publish on the Oracle Cloud Marketplace, developers must pay a $500 membership fee.

Sponsored Apps

Sponsored apps are apps which a developer pays to have promoted. They're a much less popular means of monetization, but are still effective under certain circumstances:

  • If the platform has a sizeable audience

  • If apps can generate meaningful revenue for the app developer

Apps can be promoted on various parts of an app marketplace: on the homepage, on category pages, on search results pages, or on app details pages. For the best user experience (and results), sponsored apps should be marked as such and only promoted where relevant.

The Salesforce AppExchange features sponsored apps on its homepage.

Apps can also be promoted in other areas of a platform; for example, from within the UI of the products they are built for.

What's Next?

We've discussed at when to monetize your marketplace and the most popular models for doing so. On the next page — Metrics and KPIs — we'll look at the metrics you can use to track your marketplace performance.