What is an in-app purchase (IAP)?

In-app purchases (IAPs) are one of the primary models app publishers use to monetize their apps. An in-app purchase is any fee in addition to the cost to download the app on a smartphone or tablet.

An in-app purchase is exactly as the name suggests, a purchase that occurs within an app. Before installing an app, users often see the message “In-app purchases” next to the “Get” button for free apps or the app price button for paid apps. This messaging indicates that users will have the opportunity to pay for additional features, content, or services within an app. All purchases are paid to the app store.

Before a user makes an IAP, a message will appear with the purchase description. The user will have the option to make the purchase or go back to the app without making a purchase.

There are four types of in-app purchases. App publishers often use more than one type of IAP within an app to generate revenue.

1. Auto-renewable subscriptions

   In this model, users are charged on a recurring basis for access to content, services, or additional features within an app. Users are automatically charged every pay period until they cancel the subscription.

   Example: An automated monthly subscription to a music streaming platform.

2. Nonrenewing subscriptions

   In contrast, a nonrenewing subscription is not renewed automatically. This in-app purchase model provides services or content for only a limited period. If users want to maintain access, they will have to purchase a new subscription once the current subscription ends.

   Example: A one-time 6-month subscription to an online magazine.

3. Consumable

   Once bought, consumable purchases become depleted as the user uses them. After using all of a consumable purchase, the user must purchase another consumable IAP again to enjoy the same benefits.

   Example: Extra lives in a gaming app.

4. Non-consumable

   Once a user buys a non-consumable purchase, it’s permanently available to them. It does not expire with time or use. Non-consumable purchases are often premium features.

   Example: Additional filters in a photo app.

In-app purchases are prevalent across all verticals. Let’s look at a few examples from different industries.

Gaming

Pokémon GO is a gaming app that is free to download and play. Users can move around in their real-life location to discover creatures (Pokémon) within the app. Users can pay for in-app currency to spend on items, and can pay for in-game and real-world events directly from the shop.

Social Network

The social media app TikTok has taken the world by storm with its 30-second videos. Free to download, the app offers coins and gifts for purchase which users can give to other users.

Dating

Tinder, a popular dating app, is free to download and use as users swipe left and right to match potential dates. If another user has also swiped right, the pair matches and can message each other. Tinder limits how many swipes a user can make in a given time period. However, users can enjoy unlimited swipes via in-app purchasing.

Entertainment

The video-sharing service Youtube utilizes a freemium model by allowing users to download and use the app for free. However, should a user want to remove ads, they’ll need to pay a monthly subscription within the app.

As a leading mobile marketing platform, one area of focus for Adjust is in-app purchases. Adjust helps app publishers measure and monitor in-app purchases. We offer a Purchase Verification feature and a Fraud Prevention Suite to help our clients detect any fraudulent activity, empowering them to make the right decisions on correct data.