Do In-App Purchases Benefit All Developers?

by Holly Shoemaker

In-app purchases continue to make headlines as being one of the best ways for developers to generate revenue. IHS Screen Digest Mobile Media Intelligence Service (IHS) reports that over the next few years in-app purchases will continue to connect with consumers.

What is an In-App Purchase?

In app purchases use a “freemium” business model. Developers provide an application as a free one. Users then decide if they want to purchase additional content or features – this is the in-app purchase part. Developers then profit if users decide to proceed with an in-app purchase for that additional content.

IHS Numbers at a Glance

• In-app purchases will make up 64 percent of market revenue for apps in 2015. In 2011, in-app purchases accounted for 39 percent of the total market revenue.
• Revenue for in-app purchases is expected to increase to $5.6 billion in 2015. In 2011, in-app purchase revenue totaled $970 million.

Data Shows Game Apps Benefit the Most

This approach makes the most sense for mobile game apps. IHS reported that in 2011 most in-app purchases involved buying virtual currencies. The second most popular purchase last year involved upgrading game functionalities.

Concluding Thoughts

IHS says app developers will need to follow this approach to achieve more profits. I still maintain that the ability to offer a free app depends on your audience and how many consumers you expect to reach. For medical mobile app developers, virtual currency and some other features will not apply. It makes sense for companies and individuals who develop entertainment apps. If consumers like a game, they will likely want to purchase additional features. Medical mobile apps have a more narrow focus. Medical app developers will need to analyze if they have the ability to provide an app for free and expect the medical community to purchase additional features. While in-app purchases provide a good way to keep an app in the spotlight, this approach makes the most sense when you want to reach a large client base.