Basic Concepts of Commercialization

What is Commercialization?

When people hear “commercialization,” the first thought is often “making money.” That’s not wrong—turning a business, product, or traffic into revenue is indeed the core goal. However, commercialization can be understood in two perspectives: narrow and broad.

Narrow Perspective: Result-Oriented Ways to Make Money

From the most direct angle, commercialization is about converting your business directly into revenue. Some simple examples include:

• Product Sales: Selling goods or services directly generates income, e.g., e-commerce selling clothing or online platforms selling courses.
• Advertising Monetization: Earning revenue from traffic, e.g., social media or short-video platforms displaying ads while users browse content.
• Membership Fees: Users pay for a better experience or exclusive content, e.g., premium subscriptions.

This perspective is obvious: it focuses on “how to make money”, emphasizing results. The key question is how your business generates revenue from users and how to maximize short-term returns.

Broad Perspective: Systematic and Sustainable Commercialization

From a broader perspective, commercialization is not just about making money—it’s a systematic process to ensure a business can sustainably generate revenue.

This means considering not only sources of revenue but also stability and growth of revenue. The core of commercialization is optimizing three key dimensions:

1. Reducing Customer Acquisition Cost (CAC)
2. Increasing User Retention and Engagement
3. Improving Monetization Efficiency

This approach emphasizes systematic thinking and sustainability: you need to design a closed-loop process where users continuously enter your ecosystem and generate value, while ongoing optimization improves overall revenue.

Revenue and Sustainability: Not Just Making Money, but Growing Steadily

Many businesses initially focus on rapid monetization. However, chasing only short-term revenue can lead to issues like “high traffic but low profitability” or “revenue that doesn’t last.”

True commercialization considers both how much revenue you earn and whether it is stable and sustainable, ensuring the business can grow long-term. In other words, sustainability matters more than short-term gains.

A Systematic Approach: From Acquisition to Monetization to Optimization

From a systematic perspective, commercialization is a closed-loop process:

1. Acquisition: Attract target users effectively
2. Conversion & Monetization: Turn user actions into revenue
3. Optimization & Iteration: Analyze data to find ways to increase user value and reduce costs

This loop iterates continuously, making your business’s revenue-generating capability more stable and efficient with each cycle.

In summary, commercialization is both a means to make money and a systematic approach to designing business growth and profitability. Understanding this concept is the first step for any product manager, operator, or entrepreneur to establish a solid business foundation.

Three Core Dimensions of Commercialization

When viewed broadly, commercialization is not just about making money—it’s about how to make your business more efficient and sustainable. To achieve this, three core dimensions must be mastered: reducing customer acquisition cost, increasing user retention and engagement, and improving monetization efficiency.

1. Reduce Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) measures how much it costs to acquire a new user. One key to successful commercialization is getting more effective users at lower cost.

Reducing CAC has obvious benefits: higher profit margins and easier business scaling. For example, social platforms use recommendation algorithms to target potential users accurately, showing ads only to the most likely converters. With the same budget, more real users can join the platform.

2. Increase User Retention and Engagement

Acquiring users is only the first step. True commercial value comes from keeping users engaged and coming back repeatedly. Improving retention and engagement directly increases Lifetime Value (LTV)—the total revenue a user brings during their lifecycle.

Examples include membership systems and reward points. E-commerce platforms use membership tiers with points, discounts, and exclusive benefits to encourage ongoing purchases. Content platforms use personalized recommendations to give users reasons to open the app every day.

3. Improve Monetization Efficiency

Monetization efficiency refers to how to generate more revenue per user or convert more users into paying customers. Even with limited traffic, high monetization efficiency can yield significant revenue.

For example:

• Education platforms increase per-user revenue through paid courses, tutoring, or specialized training camps.
• Games or software use premium features or subscriptions to encourage users to pay for a better experience.
• Ad platforms optimize ad delivery to increase clicks or conversions per impression, boosting overall advertising revenue.

Commercialization Metrics

Once the core dimensions are clear, the next question is: how to measure if commercialization is effective? Metrics provide both performance measurement and guidance for optimization.

1. LTV (Lifetime Value)

• Definition: Total revenue a single user contributes over their lifecycle

• Significance: Reflects long-term user value and whether acquisition investment is justified

• Calculation Example:

  • LTV = ARPU × Average User Retention Period
  • E.g., an online education platform has users spending ¥50/month on average and retaining 12 months: LTV = 50 × 12 = ¥600

2. CAC (Customer Acquisition Cost)

• Definition: Average cost to acquire a new user

• Significance: Measures acquisition efficiency and guides marketing spend

• Calculation Example:

  • CAC = Total Acquisition Cost ÷ New Users
  • E.g., platform spends ¥100,000 on ads and gains 2,000 new users: CAC = 100,000 ÷ 2,000 = ¥50

3. ARPU (Average Revenue Per User)

• Definition: Average revenue generated per user in a given period

• Significance: Indicates overall monetization performance and allows comparison between user segments

• Calculation Example:

  • ARPU = Total Revenue ÷ Total Users
  • E.g., platform earns ¥500,000 from 10,000 users: ARPU = 500,000 ÷ 10,000 = ¥50

4. ROI (Return on Investment)

• Definition: Measures return relative to cost, evaluating the efficiency of commercialization efforts

• Significance: Determines whether marketing, promotions, or campaigns are worthwhile

• Calculation Example:

  • ROI = (Revenue − Cost) ÷ Cost
  • E.g., campaign costs ¥100,000 and generates ¥150,000 revenue: ROI = (150,000 − 100,000) ÷ 100,000 = 50%

5. GMV (Gross Merchandise Volume)

• Definition: Total transaction value on the platform over a period

• Significance: Measures scale and growth trends for e-commerce or transaction-based businesses

• Calculation Example:

  • Platform completes 1,000 orders totaling ¥2,000,000: GMV = ¥2,000,000

In summary, commercialization is not just a way to make money—it’s a systematic approach requiring a full closed loop from acquisition to retention to monetization.

The core goals can be summarized as: reducing CAC, increasing retention, and improving monetization efficiency. Around these goals, a proper metrics system becomes the key tool for managing and optimizing commercialization, enabling data-driven decisions for every investment.

Understanding commercialization methods and strategies for different business models will help put theory into practice and achieve sustainable growth.