Mastering In-App Purchases: A Guide for Mobile App Developers

In-app purchases affect App Store and Google Play users, even though many apps are free to download. New features, game improvements, and subscription services encourage app users to spend.

The majority of mobile app revenue is in-app purchases. Studies show that 48% of mobile app earnings come from these purchases, totaling $380 billion worldwide in 2021. Marketers must position apps well to capitalize on the in-app purchase market’s growth.

However, what are in-app purchases? In what ways can brands maximize their potential? Let’s investigate in-app purchases and their effects on your brand.

What Do In-App Purchases Mean?

In-app purchases (IAPs) are acquisitions made within an application, commonly found in mobile apps on smartphones. Software vendors offer various items for purchase, including game characters, upgrades, in-game currencies, and software enhancements. These purchases allow free or inexpensive apps to generate revenue, following the freemium model. Users can access basic software for free and opt for additional features by paying.

In-app purchases strategically display items within apps, influencing impulse buying. Payment data stored on devices facilitates these purchases, predominantly in platform-specific stores like Apple’s App Store and Google Play, creating a walled garden mobile app market.

Examples of In-App purchases by industry

All verticals have in-app purchases. Look at some samples from different industries.

• Gaming: The Pokémon GO app is free to download and play. In-app currency and in-game and real-world events can be purchased via the shop.
• Social Network: TikTok’s 30-second films have captivated the world. The free program sells coins and gifts that users may give to others.
• Dating: The famous dating software Tinder is free to download and use. In-app purchases allow infinite swipes.
• Entertainment: Video-sharing service Youtube’s freemium strategy lets consumers download and use the software. Users can remove advertising by paying a monthly app subscription.

Role of In-App Purchases in Mobile App Builders

As the main source of income for mobile games that are available for free play, in-app purchases (IAPs) will continue to be important in the development of mobile apps in 2020. With this strategy, consumers can download and play programs without restriction before thinking about making optional purchases from stores like Google Play or the App Store. Non-gaming apps also used similar tactics, frequently involving memberships or in-person purchases. These non-gaming IAPs are diverse and range from buying movie tickets to registering for a meditation app.

Examples of in-app purchases in apps that are not games include the following:

• Performance improvements for the game (such as power-ups and extra lives)
• Exclusive gaming accessories (such as uncommon weaponry, avatars, etc.)
• Availability of recently announced software features
• gaining access to an app experience without ads
• unlocking a trial product’s full version
• Additional paid content

No matter what kind of goods or services are provided, IAPs are a very successful way to make money. Merely a 2% conversion rate—a feat only 0.01% of apps achieve—can make an app lucrative when developers aim for high-value, long-term customers. Furthermore, the impact of IAPs can be maximized by mixing them with other revenue streams. For example, the chance of completing a transaction increases by 4.5 times when users interact with rewarded advertising.

Furthermore, there is a large amount of money obtained from IAPs. According to a 2019 report, American iPhone users who were actively using IAPs spent an average of $79 on them. In the end, these large returns aid in justifying the expenses related to bringing in new app users.

How do in-app purchases work?

In-app purchases operate differently based on the device and platform used by developers:

iOS StoreKit Framework:

For iOS, developers configure compatibility with App Store Connect. They utilize the StoreKit framework to link in-app purchases with the App Store’s payment methods. Subscriptions undergo validation by both the app and the App Store on the developer’s server.

Types of IAPs supported on iOS devices include:

• Consumables: Items that vanish upon use and are purchasable multiple times.
• Non-consumables: Single purchases without an expiry.
• Auto-renewable subscriptions: Services renew automatically until canceled.
• Non-renewable subscriptions: Services with a limited duration, purchasable again after expiration.

Google Play Console:

For Android, apps need specific backend APIs for payment management:

Google Play Billing Library: Implements billing options.

Google Play Developer API: Manages purchase and subscription choices.

After API implementation, Android devices can support these IAP options:

• One-time products: Single, non-recurring in-app purchases.
• Rewarded products: In-app rewards for completing tasks like watching ads.
• Subscriptions: In-app purchases requiring recurring payments.

The Four Types of In-App Purchases

1. Non-Consumable In-App Purchases: Meditation app purchases are non-consumable since consumers keep them forever. Long-term access provides constant value after a single purchase.
2. Consumable In-App Purchases: Consumable in-app purchases, like a dating app “connects” for interactions, deplete with time. These products are used up, necessitating repurchase. Usually cheaper than non-consumables, they give reacquisition revenue.
3. Auto-Renewable In-App Purchases: Auto-renewable in-app purchases provide ad-free or full-app access as subscriptions. App suppliers receive constant revenue via automatic weekly, monthly, and annual billing.
4. Non-Renewing In-App Purchases: Non-renewing in-app subscriptions provide access for a month, like prepaid plans. After expiration, users must renew manually. Subscription length governs access, not “stock,” like consumables.

What are the Best Practices for In-App Purchases?

IAPs are quite simple to set up on both Android and iOS, but app developers still must successfully market them within their apps. It’s critical to implement industry-standard best practices that engage, convert, and retain valuable users in light of the abundance of competitors in the market.

For your monetization plan, bear the following points in mind:

• Make use of user segmentation and market research: Knowing your consumers’ preferences and characteristics can help you interact with them more successfully. To determine your target audience and their pricing range, do user base research. Segment these viewers further according to target KPIs, including lifetime value. 
• Run promotions: If there is extra value in the transaction, new users are more likely to finish their first IAP. Special promotions and discounted prices can increase the allure of IAPs. Additionally, a user is considerably more inclined to make another IAP if they find value in whatever they bought!
• Optimize pricing: Users will be far more likely to purchase if machine learning is used to optimize pricing at the national or even user level. There is a significant benefit to doing this because generic pricing tiers do not consider behavioral economics or make real-time modifications.
• Adjust the UI/UX: Create an interface that is simple to use and provides the shop with distinct markets. Aim to minimize the number of user actions during the checkout process—ideally, no more than two or three.
• Engage your consumers: Offering users an experience they genuinely want to invest money in is the simplest approach to turning them into paying clients. For instance, free-to-play games had to offer a rich and captivating experience that would encourage gamers to stick around and contribute over time. For instance, offering performance boosts to customers at difficult gaming times may increase their level of engagement. Just enough friction should be present to keep the game enjoyable without feeling unachievable.
• Identify and stop churn: The saying “it’s cheaper to retain an existing user than to acquire a new one” is one that’s frequently used. It’s also entirely accurate. You may lower attrition and raise the lifetime value of paying users by coming up with strategies to emphasize the benefits of your app to current users. You may also learn which people to target and how to add value at that stage of their lifecycle with the use of predictive analytics.

Conclusion

Finally, mobile app success depends on IAP mastery. Subscriptions, consumables, and non-consumables are IAP revenue streams. Understanding user behavior and market trends helps utilize them. IAPs develop, creating new opportunities.

For app builders: Builders of apps Use IAPs strategically to satisfy users and boost income. Choose the optimal model for your app by experimenting.

For customers: Find out how IAPs improve app experiences and assist developers. Keep up with mobile app IAP trends.

Use recommended resources to learn about mobile app development and IAPs. Share and ask questions to expand the discussion and increase in-app purchase possibilities.