In-App Purchase Generates Most iPhone App Revenue

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According to a report out today by Distimo (http://www.distimo.com/publications) In-App Purchases (IAP) are becoming an even more dominate way for apps to make money. Last January, IAP accounted for just over half of Apple’s app store revenue. Now, that number has jumped to over 75%.

About a year ago a heard a great presentation from some local San Diego iOS developers about their business model. They focused on “in-app consumable goods”. “What?” you say. Think of the game Pocket Frogs. In the game you raise little frogs like the iPhone equivalent of the Tomogochi craze of the ’90s. But if you want your frogs to be happy you can buy them a flower in the game. This is an in-app purchase. You make the purchase of the VIRTUAL flower with REAL money. This a great business model.

I initially ignored this business model because I thought there was no way that rational people would spend real money on virtual goods like flowers (or Instagram filters, etc.). I was sooooo wrong. Turns out people will spend millions and millions of dollars.

What makes it this model even better, is if you can get users to buy the same thing again and again and again. In the case of Pocket Frogs, the frogs have the nerve to eat your hard-bought flowers. So if you want to keep them happy you have to keep buying them flowers. This is an example of a “consumable” good.

Genius.

Anyway, if you’re developing an iPhone or iPad app today, you better think hard about how you can incorporate in-app purchase options into your app.

Julian Bryant