“Offers In-App Purchases”. That’s a phrase that’s become more and more common on the iOS App Store in the last year - and starting with iOS 7 you’ll likely see even more frequently as there’s some interesting new additions to the world of In-App Purchase that will further change how developers monetise their apps.

Before I begin, I would reiterate “freemium” apps aren’t for every market. However it certainly feels as though mainstream apps, in a busy App Store genre, are going to have to adapt to the changing purchasing preferences of millions of iOS users.

Migrating to Freemium

Historically, moving to “freemium” (i.e. free up front, IAP later) was something of a minefield, with two possible ways to do it:

  • Add a mechanism allowing existing customers to keep their paid-for content, ahead of the app going free.
  • A new version of the app, freemium from the get-go.

There’s obviously considerations for the existing user base - folks who’d complain about the fact that they paid, and it’s now Free* (that is, Free with In-App Purchases). And the fact that any mechanism wasn’t 100% reliable in ensuring that existing customers got their content.

What’s New?

iOS 7 introduces a seemingly small, but very significant, addition to the IAP world - a digital receipt in every app (free or otherwise) that includes the version number when the customer originally bought the app.

With this new addition, for the first time it’s possible to move an app from paid-for to freemium (or lower-cost-with-IAP), whilst reliably ensuring the customer is able to access the features they originally bought. The receipt - something Mac developers already deal with on the Mac App Store - always returns the original version the customer purchased, even in the event of a reinstall.

It goes without saying that there are more considerations than just setting an app free with IAP. Having the right feature-set or perhaps “feature modularity” and arguably the right type of app are also important. However, with a single addition to the SDK Apple has highlighted the path they think best serves the platform, and the millions of customers who’re using it.

As my colleague Ted also pointed out one lunchtime as I sounded out ideas for this post, it offers the ability for developers to experiment with what works for them - if freemium doesn’t work then you can consider switching back. The only downsides being you need to manage version number logic and retain the IAP for the app, and the fact that even though you’re no-longer selling IAPs your app will remain advertised as offering them. For some, that may be a negative connotation (though how strong, or moot, a connotation is up for discussion).

The Proving of Value

The expectations of the mass-market have very obviously changed, as has the way developers balance the proving of value with running a (hopefully viable) business. Whilst before many apps worked on proving value prior to download / purchase, the mainstream app is facing a new challenge:

“Prove your value to me, and then I may spend my money”

That’s not to say that higher-priced apps aren’t feasible, just that it requires careful consideration as to whether an app would be better served by having a greater-than-$5 price [you have no idea how heavily my heart sank when writing that].

Paid Upgrades. Ish.

Sat in Session 308 at WWDC, it instantly became clear that this is how Apple believes consumer apps will evolve. Buy or download an app, use the features you bought and over time developers should monetise new features based on the new SDK addition.

It’s not paid upgrades in their current form – of course, there’s an argument to be made that the current form of upgrade pricing is being requested “because it’s how it’s always been done”. However this is quite clearly the paid-upgrade-of-sorts from Cupertino - and the option that serves Apple’s goals and customer base better.

In The End, It’s About the Platform

So what’s the part of the platform vendor in all of this? Whilst Apple’s not going to dictate how businesses bring in revenue, it’s very clear that IAP is the way that Apple foresees that mainstream apps should generate revenue. After all, nothing serves Apple’s platform (and Apple’s customers) better than thousands of high quality apps becoming thousands of high quality Free* apps.

A Final Thought

Throughout all of this, the (let’s say old-school, independent) developer community has found itself repeating an old adage (and I’m loosely paraphrasing):

I can’t believe that people with an $800 phone are complaining about dropping $3 on an app they use every day.

I think it’s time we retired this quip, along with paid upgrade gripes because – if I’m entirely honest – it reveals a lack of understanding for how a vast number of people actually purchase an iPhone, and how they might perceive the value of an iPhone somewhat differently.

The majority of customers, I’d argue, see the iPhone a bit like this: the iPhone is a device with little-to-no up-front cost, with payment made for the services that provide value. That sounds familiar…