IAPs And Mobile App Monetization

Carlo Indrizzi
October 2, 2023
IAPs And Mobile App Monetization

Every process that leads to an app’s development must be approached with a clear choice between the ways to monetize an app, which often ends up being between IAPs and IAAs.


It goes without saying that, apart from personal satisfaction and ambition, every app developer has one goal in mind: to be able to generate revenue. In a mobile apps market that has been continuously growing for the last years, predictions for 2023 are incredibly high and, just to give an example, the revenue expected this year will surpass 900 billion dollars.

This number gives an idea of the fierce competitiveness that marks this field out, especially between mobile games, and in such competitive times, IAPs have proven to be one of the most effective sources of revenue, particularly for some categories of mobile games, generating close to 400 billion dollars worldwide.


What are IAPs?


IAP is an acronym which stands for in-app purchase. It basically represents every kind of functionality or good that can be unlocked by paying a fee inside an app, which means that it is a post-install action. IAPs can include buying coins, power-ups, items or life points, anything that the users may want to use to be able to increase their in-game capabilities.


It is important to underline the difference between these kinds of purchases and a subscription: the latter is a specific kind of IAP that allows the user to get access to something but for a limited time only, such as a month or a year, whereas the others are always accessible once paid for.


IAPs represent one of the most common ways to monetize from an app, especially the ones that are free. Free apps account for the great vast majority in app stores, going over the 90% of total apps both on iOS and Android stores. Monetization from IAPs works very well for these apps, which firstly lure the users to install them given their gratuitousness, to then engage those same users to convince them to keep using the app with new functions and upgrades, available for a specific amount.


An evaluation on the employment of IAPs

 Choosing IAPs as the way to monetize from a mobile game app brings a series of advantages which, if and once achieved, are also able to influence each other.


  • The most obvious benefit is the creation of high-quality users, who are the ones who have spent more on the app and who are most likely to continue to do so. High-quality users represent a huge source of income for those developers who rely on an IAPs model: as users keep on purchasing products inside the app, revenue keeps coming in.


  • On the same note, IAPs are incredibly useful in order to retain those users and to establish brand loyalty, especially in an industry very saturated with many similar mobile games and where being unique is very important. As a matter of fact, IAPs allow to diversify the users’ experience within the game and to decrease the chances of their departure. In order to do that, especially in the early stages of UA, it is very important to understand when it is the right time to try to engage a user in making an IAP: it would most certainly annoy a user to be shown the possibility of buying something to make progress in the game right away after the install. This is why IAPs can be used to target the user personally, with promos that can easily make him committed at the beginning of a UA campaign.


  • By creating this sort of engagement, users will less likely decide to abandon the app, which would automatically create a sort of chain of better exposure: satisfied users will try to convince their friends or leave positive reviews online, fueling a word-of-mouth sequence of installs. As a result, the app would climb high in app stores rankings, and it is very easy to understand the chain of influence aforementioned: better visibility generates users, users make IAPs, IAPs satisfy them, satisfied users promote the app. ASO (App Store Optimization) is crucial in the late stages of UA, but in the first stages as well. Apps’ developers who intend to rely on IAPs would have to invest more budget for a productive ASO, but that would likely have very good effects in the long term.


  • IAPs are also a very effective way of improving an app, as they can be used as data about what users prefer or dislike about the app, also defined as user experience. By analyzing these data, developers can see which purchases are made most often and therefore how to better target their users with offers and bundles. At the same time, developers would also see which IAPs are the least made and improve their prices on those.

How are IAAs different?


IAPs are useful and effective because they provide additional revenues for those games based on this model, which are free and rely on acquiring high-value users. Another model of app monetization mentioned at the beginning of the article is based on IAAs.


IAAs constitute a different monetization model, usually applied to those that are most commonly known as hyper-casual games, which require less effort and almost no money to be spent. These games are played in moments of relaxation and distraction, therefore the user is not interested at all in paying any kind of money.


IAA stands for In-App Advertising and relies on developers showing in-app ads to users and making money doing so. In this case, developers put advertising space to be made available inside the app and then profit for selling it.


While an IAP model mostly depends on high-quality users with a high LVT to generate revenue, an IAA model would need to maintain a fairly high retention rate, necessary in order to be able to understand and to target the users that watch a relevant number of ads.


It would be wrong to assume that the two models could not coexist into the same app. In these cases, developers would need to consult with UA platforms in order to come up with an effective strategy able to boost both IAPs and IAAs.


How Mapendo optimizes UA towards IAPs


It is normal practice for Mapendo to handle post-install campaigns based on an IAPs model.


After traffic acquisition, Mapendo gathers data like retention rate, number of IAPs, and the amount of money spent in IAPs, individual purchases included, as well as calculates the time that passes between installs and IAPs. 


Mapendo is able to target the right users and to convert them into high-quality users and increase their LTV. Along with the parameters already mentioned, Mapendo also applies several others, such as the version of operative system (iOS 16, iOS 17, etc.) of the phone on which the app is installed, the Internet service provider, and geolocation, which includes the state, the city and the zip code.


Finally, creatives play a huge role in Mapendo’s approach to users’ retention and engagement. As a matter of fact, Mapendo has developed its own ad units, made out of a combination of video ads with playable end cards, which have shown great results in terms of users’ interaction and to be much more effective than simple banners and native ads, otherwise used in IAA’s based games.