To monetize is to convert an asset into cash. Such an asset can be tangible, such as a piece of equipment, or intangible, such as a patent. Monetization of this kind is usually accomplished by selling or leasing an asset.
The monetization concept can also be considered the ability of a business to generate positive cash flow. For example, an entity that sells software for a high margin is considered to have an excellent monetization capability. As another example, a podcast can engage in monetization by soliciting advertisers to pay for ad spots during an episode, or by requiring listeners to pay for a subscription to the podcast, or by asking listeners for donations.
From the perspective of business management, monetization refers to an analysis of the business to determine how to generate profits from the existing asset base of the organization. Here are several examples of monetization that could be used to increase cash flows:
- Allowing advertisers to place ads on company vehicles
- Allowing third parties to sub-lease excess office space
- Allowing third parties to use the company's production lines during the third shift to manufacture private label goods
- Selling or leasing software that was originally developed solely for internal use
- Transporting third-party goods on company vehicles when they would otherwise be empty
Constant attention to monetization possibilities may be the difference between sub-standard and outstanding financial performance for a business.