Will in-app purchases eliminate the number of free apps?

Sun, Jun 21, 2009

Analysis, News

From a developers perspective, one of the more important and sought-after features in the new iPhone OS 3.0 SDK is the ability include in-app purchases from within applications.  Notably, this capability is limited to paid apps.  As Apple likes to proclaim, “Free apps remain free.”

That said, Marco.org writes:

Free apps will move in droves to $0.99 so they can start using in-app purchase. And many paid apps will drop from higher prices to $0.99, hoping to drive up sales volume and sell additional features later, possibly by subscription, from within the app.

I bet, by next summer’s iPhone launch, nearly every major app and game will cost $0.99.

I gotta respectfully disagree for 3 reasons.

1) Call me naive, but I think in-app purchases will largely become a self-regulated feature.  In other words, if I pay $.99 for an gaming app that’s kind of okay, and then I’m prompted to purchase a few extra levels, I’m not going to click “accept.”  It makes sense that the only applications that will successfully be able to obtain extra cash from consumers will be those that are already a pleasure to use.  $1 more for 5 extra levels of Rolando?  Sure, sign me up.  $1 more for 300 extra levels for a crappy game?  No thanks.

In other words, I think that most developers will quickly realize whether or not in-app purchases will be a viable option, and the feature won’t end up dictating the price developers choose to price their apps at.

2) If a free app is willing to jump up in price in order to sell in-app purchases, why wouldn’t it already be priced at $.99?  Assuming that all iPhone developers are as $ hungry as Marco implies, then why do developers even make their apps free in the first place?  I sincerely doubt that any apps will move up in price solely to make use of in-app purchases.

Similarly, it seems extremely unlikely that developers would lower their prices to drive up sales volume merely on the hope that they might be able to make a few in-app sales.

3) Some apps simply aren’t tailored for in-app purchases in the first place.

What do you guys think?  How will in-app purchases affect developer pricing habits, if at all?


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