What you Need to Know about IAPs (In-App Purchases)

By Imraj Pasricha
3 Dec '13

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Today, ninety percent of all iOS apps available in the App Store are free purchases, according to Flurry Analytics data reported by Wired last month.  With over 800 000 apps populating the Google Play store for Android and App Store for iOS apiece, that’s a lot of free.

So how do “free app” developers make money?

With the IAP: In-App Purchase.

An IAP is any monetary transaction that occurs within the context of an application, typically used to purchase virtual goods or additional content.  App Advice contributor A.T. Faust calls the IAP “a viable and necessary business model for where the mobile market is right now.”

App developers would agree; a new study from Distimo reports, seventy-six percent of all iOS app revenue comes from IAPs.  

The widespread adoption of IAPs attributes to how IAP integration maintains the quality of the “free” app model. Once a user downloads the free app and engages with its content and navigation system, the IAP simply provides additional options for a more robust and convenient app experience.

IAPs: A Win-Win For Developers and Users Alike.

As Faust says:

“In most cases, IAPs represent nothing more than an easy way to upgrade from a free, limited app to a paid, unlimited one.”

But his summary comes with a warning:

“The strategy does require a certain level of tact and responsibility from developers in order to make sure the public doesn’t lose sight of the actual product on offer.”

In other words, developers need to be able to show why an IAP deserves to be an IAP.  Without that, users won’t be on board to make the purchase.

Create IAPs With Benefits Your Users Believe In

Want some ideas for integrating an IAP into your next Android or iOS project? Here are six revenue-boosting IAPs users love:

  • IAPs for unlocking new game levels and expansion packs.
  • IAPs for in-game currencies. Faust calls this “the most commonly used way to extract ongoing developer-end returns from any given title.”
  • IAPS for blocking advertisements.  This idea is an especially popular IAP in the gaming market.
  • IAPs for additional utility features.  Perfect for software developers hoping to hook users with a free, limited version, and compel them to purchase the full-featured version at a monetary cost.
  • IAPs for subscription services.
  • IAPs for access to premium features and personalized content.

With so many ways to engage users and increase app revenue with IAPs, the app market is ripe with the potential for even higher growth.  Back in January, researchers predicted 2013 the year “freemium gaming models (and in conjunction, the availability of in-app purchases) would become the norm,” and indeed, consumers have made right on that forecast.

How will you increase app revenue with IAPs?

With IAPs leading the way for app market revenue, it’s never been a better time to get on board. Update your current app development project, or turn your next venture into a profitable solution your users love.

Chat with the mobile app experts at Webilize to get started today!






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