Is it possible to monetize apps? Many individuals considering app-based businesses in Japan might ask this question.

Apps can handle growing demand, and they can generate ongoing revenue when properly designed. On the other hand, the monetization method and business model—and timing of revenue generation—can significantly impact the speed and sustainability of a business’s growth.

Furthermore, in Japan, business owners must make decisions based on platform rules, the competitive environment, and recent legal developments, such as the Smartphone Act.

In this article, we outline the characteristics of the app business in Japan and introduce some major monetization methods.

What’s in this article?

• Characteristics of the app business in Japan
  
• App monetization methods in Japan
  
• Why is out-of-app billing gaining attention?
  
• Key points for successful app monetization
  
• Cautions when monetizing an app
  
• How Stripe Checkout can help
  

Characteristics of the app business in Japan

The following characteristics are frequently seen in the app business. Before considering monetization strategies, it is important to first understand the underlying structure.

Excellent ability to grow

In the app business, there is no need to maintain physical inventory. This characteristic makes it relatively easy to keep additional costs low, even as the number of customers increases.

Once a system is built, it can be deployed to a large number of customers. This facilitates designing with business expansion in mind, making apps widely used across industries—from startups to large corporations.

Assumption of ongoing use

Apps are designed with the expectation of continuous use, not one-time purchases or single-use scenarios. Therefore, metrics—such as active user count, usage frequency, and usage duration—significantly impact the results of the business.

Given this structure, apps tend to adopt business models that anticipate medium-term to long-term revenue, such as subscriptions and tiered pricing.

Platform dependency

Many apps are available through the App Store for iOS and Google Play for Android. Therefore, monetization methods and payment mechanisms must be designed with platform dependency in mind.

However, in recent years, Japan has enacted the Smartphone Software Competition Promotion Act (i.e., the Smartphone Act) as a way to reform the competitive environment surrounding apps. The Smartphone Act has been enforced since December 2025, potentially bringing changes to how apps are provided and monetized in the future.

Understanding these characteristics, the background described above, and revenue generation is important to success in the app business.

App monetization methods in Japan

There is no single approach to monetizing apps. The optimal method varies depending on the business model, target audience, and value proposition. Here are the business models commonly used for apps.

Free apps

Free apps have the advantage of lowering the barrier to download since customers can use them without paying fees.

In this business model, the general approach is to generate revenue indirectly, based on the premise of acquiring as many customers as possible.

The following are typical monetization methods for free apps:

• Display in-app ads
  
• Partner with specific companies or brands
  
• Funnel customers to services offered by the app or other companies
  

Free apps are characterized by relatively easy acquisition of customers, but monetization is difficult until the app reaches a certain level. This means putting effort into increasing downloads—and customers—is important.

Paid apps

With paid apps, customers pay directly when they download or start using the app.

Because the app’s value is clear, this model is well-suited for services and tool-based apps that are fully complete after a single purchase. The revenue structure is simple and does not need to rely on advertising or other similar sources.

Generally, the basic model is a one-time purchase where customers buy and download the app. However, there are also monetization methods that combine subscriptions to access additional features and ongoing support.

Freemium apps

Freemium apps provide basic features for free and charge for additional or advanced features. Because the initial download is free, it is easy for customers to try the product, and monetization can be implemented incrementally based on usage patterns. However, the key point is whether the app can provide compelling features or services that will make customers want to pay to use it more.

The freemium model has been adopted by many apps, and they commonly use one or more of the following monetization methods:

• Encourage customers to purchase additional features, items, and content within the app
  
• Provide features that are restricted in the free version and can be accessed by paying
  
• Allow customers to purchase additional usage credits or storage capacity when necessary
  

However, it is important to keep in mind that if the boundary between free and paid features is poorly designed, customers might conclude that the product is not worth paying for.

Paymium apps

In the paymium model, there is a charge for the initial download of the app. If customers want to access additional functionality beyond the basics included with the purchase, they must pay additional charges.

To build revenue with this kind of paid model, it is important to implement regular enhancements to functionality and provide specialized content to increase customer satisfaction.

Why is out-of-app billing gaining attention?

In the past, app monetization was assumed to be primarily based on in-app purchases. However, there has been a growing trend to reexamine this assumption.

The reasons are simple. First, it has become increasingly difficult to achieve a complete revenue design solely within the app. When billing through an app store, it is impossible to avoid restrictions such as app fees and distribution rules. As revenue increases, so does the cost burden, and limitations emerge in the freedom to design pricing and subscription plans.

By using out-of-app billing, businesses can design flexible pricing structures and more easily accommodate subscriptions, multiple plans, and future service expansions.

In Japan, the full implementation of the Smartphone Act has accelerated efforts to promote competition in the app and smartphone sector and prevent market monopolization by specific companies. Against this backdrop, more businesses will likely position apps as touchpoints and pathways for customer engagement, while choosing to pursue monetization outside the app itself.

Key points for successful app monetization

Incorporate a monetization model from the beginning

During the app planning phase, discussions about features and user interface (UI) tend to take up the most time. However, it’s important to also discuss the revenue model. If a business develops an app without determining when and how revenue will be generated, it might need to force monetization features into the product later. This can distort the customer experience and user flow. Monetization shouldn’t be an added element or an afterthought; instead, it should be part of the design from the start.

Analyze the numbers and make improvements

Apps have the advantage of capturing customer behavior as data. Businesses can ensure profitability by reviewing billing points and customer pathways based on data such as drop-off rates and conversion rates.

Choose a sustainable model

If a business wants to generate short-term revenue with an app, it’s possible to implement an aggressive monetization strategy. However, if this undermines ongoing use or customer trust, the business could suffer. Design and operation focused on customer lifetime value (LTV) can be considered a realistic approach that leads to stable monetization.

Cautions when monetizing an app

When monetizing an app, it is important to keep the following points in mind.

Limit in-app ads

In-app advertising is a relatively easy monetization method to implement—especially for free apps—but it can backfire if done poorly. Displaying ads too frequently or having them pop up with every action can significantly degrade the customer experience. This could result in reduced ongoing use and lower ratings.

Be aware of trends

There are certain app monetization methods that are more readily accepted than others, and it often depends on when the app was released. For example, in fields where subscriptions are commonplace, proposing a one-time purchase model can lead to a mismatch with customer expectations. On the other hand, if the app uses a flat-rate subscription model for services that aren’t used frequently, customers could perceive the app as overpriced and hesitate to use it.

A revenue model should be incorporated into the design from the outset. However, it is also important to periodically review whether it aligns with the market and customer sentiment.

How Stripe Checkout can help

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