In-app Purchase (IAP)

Beatrice Bursese
February 17, 2023
In-app Purchase (IAP)

An in-app purchase is an extra content or service that allows users to make purchases directly within the app on a mobile device.


Definition of in-app purchase

In-app purchases typically offer additional functionality, features, or content that can be unlocked by paying a fee. For example, a gaming app may allow users to purchase additional levels, power-ups, or special items that can help them progress more quickly through the game. A productivity app, instead, may offer a premium version that unlocks more advanced features and tools.

IAPs are usually made using a digital payment method, such as a credit card or mobile payment systems like Apple Pay or Google Pay. In-app purchases usually exchange money for consumable items, non-consumable items, and subscriptions. Since there are many free apps, app developers rely on in-app purchases to increase their revenue, thus they typically take a percentage of each purchase as revenue.

Therefore, an in-app purchase can be a valuable source of income for app developers, but it is important for users to be aware of the potential costs and to manage their spending carefully. Many apps provide controls to limit in-app purchases or require authentication for each purchase to prevent accidental or unauthorized charges.

Overall, there are four types of IAPs:

-          Consumables

These products, very common in games, can be used only once and then repurchased multiple times. There is also a wide use of consumables in dating apps to buy extra swipes or unlock extra features. A purchase of a physical item via an e-commerce app is also considered a consumable item.

-          Non-consumables

You can purchase non-consumable products only once, but they do not have an expiry date, remaining always available within your app. They are typical of gaming apps in which you can unlock a new level or buy specific features. Ebooks and workout videos on a fitness app are other examples of non-consumable products.  

-          Auto-renewal subscriptions

The payment for these products is recurring: Spotify, Amazon Prime, and Netflix are examples of auto-renewal subscriptions. Many app developers prefer to use this kind of model to guarantee a constant income for their apps.   

-          Non-auto-renewal subscriptions

These subscriptions are for a fixed and longer period of time, and they could require a user to manually renew the subscription. However, they are considered a very useful tool for content providers because they offer a fixed subscription for a specific period.   


Importance of in-app purchases

There is a strong relationship between engagement and in-app purchases, so every app developer who is looking to increase its purchases needs to first look at engagement. Taking into consideration highly engaged users, they will probably have more chances of investing their money in the app. That means a great engagement can lead to the development of revenues.

There are plenty of metrics that help to measure the engagement and boost revenues, such as DAU (Daily Active Users) and MAU (Monthly Active Users), which help you understand the number of users that usually engage with your app. ARPDAU is another important metric that stands for average revenue per daily active user. In gaming apps, this metric can help to understand how users react to different campaigns or creatives and the effect on daily revenue.

Moreover, most apps are trying to increase IAPs to boost their revenue. To follow this strategy, they offer rewards to increase the engagement of the user while using rich in-app events such as level achievement, social shares, or tutorial completion. App developers can also try to personalize their content to attract more users and increase their interest.  


Guidelines for strategic solutions for in-app purchases 

  • An in-app purchase is an additional service that occurs within an app used to help publishers monetize their apps;

  • They are usually made using a digital payment method such as mobile payment or credit card;

  • There are four types of IAPs: consumables, non-consumables, auto-renewal subscriptions, and non-auto-renewal subscriptions;

  • Engagement has a strong connection with in-app purchases, thus highly engaged users are essential for boosting the app’s revenues.