A system dynamics approach to sustainable monetization in digital platforms: balancing advertising and user retention in mobile gaming

Abstract The rapid growth of digital platforms, particularly in mobile gaming, has created a fundamental business dilemma: how to balance advertising-based monetization with the preservation of long-term user engagement. This study employs a system dynamics simulation, calibrated against industry benchmark dynamic patterns and integrated with the Bass diffusion model, to simulate and analyze the impact of different advertising integration policies on platform sustainability. The model captures the complex, nonlinear relationships between user adoption segments, product quality features, and the timing of monetization interventions. Our findings reveal that advertising frequency is less critical than its strategic integration; high-quality reward mechanics can transform advertising from a disruptive element into an engagement catalyst. Contrary to prevailing industry practices that prioritize immediate revenue, the results demonstrate that delaying advertising implementation until core user habits are established significantly enhances customer lifetime value. This research offers business managers, platform operators, and policymakers a validated simulation tool for evaluating monetization strategies, providing evidence-based insights for transitioning from aggressive short-term tactics toward sustainable business models in the digital economy.