Most prominently available for iPhone and Android, in-app purchases often seen as an alternative to the rising trend of in-app advertisements.
For many mobile developers and users, in-app purchases — and micro-transactions in general — are going to change mobile. We’ve highlighted some of those changes and offered up some examples already in the marketplace.
1. New Business Models
One of the most exciting aspect of in-app purchase features are the additional income streams or even alternative business models that app developers can derive from the feature.
As an example, iOS developer Smule first released Magic Piano for iPad as a paid app.
A year later, when the company released a version for the iPhone, the app itself was free, along with a few songs. Each Wednesday, additional songs are released, from popular artists like Lady Gaga, Jason Mraz and Britney Spears, that users can purchase using a type of custom currency known as Smoola.
Smoolas are sold in packs starting at $1.99 for 160 Smoolas and tracks range between 25 and 75 Smoolas each.
This type of secondary currency has already proved successful for game makers like Zynga on social web platforms. On the mobile side, one of the highest grossing games for iOS is Capcom’s Smurfs Village, despite the fact that the game itself is free.
2. Easy Access to Additional Content
Perhaps the most frequent use of in-app purchase is in adding additional content to existing applications. We frequently see this in games, where additional level packs can be added to a game and purchased by the consumer after the fact.
The net effect is that the game or app maker doesn’t need to release a brand new app just to add new levels. Plus, users get access to fresh content, prolonging the value of a game or app.
PlayFirst, Inc.’s Dash series of games for iOS takes advantage of the in-app purchase feature to add additional levels and scenarios to its games. Titles like Cooking Dash [iTunes link] sell for $2.99 and additional venues (consisting of 10 levels) sell for $0.99. These venues are added over time and keep users coming back to the game.
3. Offering Add-on Services and Features
Another frequent use of in-app purchase is the add-on services or features model. Similar to the additional content model, users can “unlock” or gain access to additional features in an app by way of in-app purchase.
This can be anything from some additional features or tools — say the ability to backup to Dropbox or better push notifications — and updates can also remove in-app annoyances, like advertising.
An “ad-free” option is frequently used by app developers that want to offer users a full-featured app experience, but still want to give users the ability to choose to opt out of advertisements, for a price.
The Iconfactory’s popular Twitterrific Twitter client for iOS uses both methods. The app itself is free and works with one Twitter account and has limited advertisements. For $4.99, users can purchase the premium version within the app which removes ads and and gives users the ability to use more than one Twitter account.
This is a great way for users to sample an app and then, if they find they need more advanced features, make the decision to enhance it using in-app purchase. Unlike the “lite” model sometimes employed by app makers, adding features and add-on services via in-app purchase doesn’t require the user to download yet another app and re-enter their settings.
4. Selling Physical Goods
Of course, mobile in-app purchase doesn’t have to be limited to digital goods. Physical purchases can be made using a mobile app, too.
Sure, traditional e-commerce sites like Amazon, NewEgg and Target all have in-app purchasing for physical items, but what about smaller developers who might only have a few items available?
The iPhone app Lifelapse is designed to take an image from your phone every 30 seconds, creating a time lapse-like effect of your entire day. The company also sells a companion physical case, called the Lifepouch to better aid Lifelapsers in capturing their images and events.
To facilitate sales of the Lifepouch within the app itself, the developers found a way to integrate their existing Shopify store into the app.
Lifelapse says that 20% of Lifepouch sales come from within the in-app store, which shows how powerful it can be. The company also blogged abut how it went about integrating the shop into their app and even provided the code on Github.