Earlier this year we wrote about how Android users are not buying apps. Earlier reports also stated that iPhone users buy more apps than Android users. Well, a Gigaom article suggests that those numbers are changing, but with a twist. According to the article, which cites data from Distimo, in-app purchases account for 72% of the revenue from the App Store, and a significant number of in-app purchases are being made with free apps.
I think it shows that iOS developers are moving towards a model of increasing revenues by selling content and features within their apps. You might install a free game in the App Store on your iPhone and be able to play the first ten levels, but pay a few dollars to play additional levels. It is possible that in the future we might only be able to buy only a few apps, with most the apps available for free with in-app purchases.
It is ironic that this subscription model of software sales is being embraced now with smartphones because desktop computer software companies have been trying to move to a subcription model for years. The difference is rather than charging a yearly fee for a new version of an app like Microsoft Word, smartphone developers are charging fees for additional functionality.
The important thing, however, is that the cost of in-app purchases is much lower than the yearly renewal fees some software companies charge. I wonder, given that the newest version of desktop OSes from Apple and Microsoft have taken on features introduced on smartphones, if in the future we’ll be able to buy a base version of an app like Microsoft Word for $20 or less and then pay nominal fees to add functionality when it is needed?