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Have you ever looked at the “top 10” lists within Apple’s App Store and noticed that over half of the apps earning the most money are free to download? How can this be possible?

Several years ago, the App Store introduced a new feature that allows developers to charge customers from directly within their applications – with the customer’s connect of course. This feature took a while to catch on, but it is now one of the top profit strategies for many developers, and here’s two strategies that have proven highly effective for developers:

Free Trials

The App Store does not directly allow free trials of games/apps to be downloaded. But with in-app purchases, developers are able to effectively offer users a demo and trial of their apps at no cost. During 2011, the App Store saw a big rise in this strategy. A game developer can offer a free download of the full version of their game with 1/10th of the levels unlocked. If the user enjoys the game, they can purchase all the other levels – right from within the app – for the original price of the game.

This has numerous benefits for the developer. Most notably, it allows them get their game in the hands of vastly more users than would otherwise be possible. Since users can download apps for free, they are more inclined to try it out, and hopefully, upgrade later.

The “Freemium” Model

Another popular strategy for in-app purchases is the “fermium” model where the app is free to everyone, but those who use the app regularly can upgrade for more features. This is widely used by developers of utilities, such as photo editors, where most effects are free, but additional filters are available for $0.99. Again, this allows many users to benefit from the app, while still earning revenue from those who use it enough to be willing to pay.

The “Currency” Model

Finally, we’ll look at perhaps the most effective in-app purchase strategy of all. This one is used primarily by developers of social and strategy-based games. Much like the above strategies, the game is free to download and play by any user, but the games offer something such as Smurf Berries (Smurf’s Village) or Magic Beans (Trade Nations) that are essentially “currency” within the game. Most games offer users ways to earn free currency, but for the users who want to progress faster or achieve more, in-app purchases of these items will enhance the game-playing experience.

For developers, the rise of in-app purchases has created more opportunities to generate substantial revenue from their work, creating more depth and quality within the app store.

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