Have you ever downloaded a free app and later paid money to unlock new functions, special features, or other virtual resources? You witness in-app purchasing. To users, it seems to be an organic part of the app experience. In-app purchases are one of the highest value opportunities available to app owners and marketers, since they will potentially extend user lifecycles and can be used to increase customer engagement and yield more revenue opportunities.
But what actually is an in-app purchase? What has made it a staple monetization technique across industries, including in the gaming and lifestyle apps sector? And what is the best way to approach the measurement, optimization, and protection of this revenue stream? Here is all you need to know.
What Constitutes an In-App Purchase?
An in-app purchase is any purchase made digitally inside a mobile app once it has been downloaded from a mobile app store. In definition, IPA differ from a one-time app store purchase in that an app could be offered for free or at a lower charge, and users can still pay for features, upgrades, expansions, add-ons, and subscriptions later.
This approach is quite conventional yet revolutionary. An app will offer a user a base experience at no expense, while the user can unlock premium features, change their experience in a paid ad-free environment, purchase additional content, and many other things, as well as subscribe to exclusive and specialty services. Thus, the approach provides both freedom and flexibility. The user can extract their own value from the app experience based on their personal needs and beliefs about acceptable payment levels.
Types of In-App Purchases
While there are many types of IPA to support different user behaviors and business objectives, there are three major types of purchases in most app stores:
1. Consumable in-app purchases give users an item that can be consumed and repurchased. Examples of consumables are: extra lives in a game, or virtual coins. Once a user consumes these items, they must repurchase them, and rarely can the user get these items back!
2. Non-consumable in-app purchases unlock permanent and lasting benefits for a user, such as removing ads from an application or gaining access to a pro version of a creation application.
3. Subscriptions have also become a dominant form of in-app billing in most app stores (whether auto-renewing like a monthly music streaming plan, or non-renewing like an educational content calendar with ongoing access to past/future fitness-related content).
Depending on how the subscription is defined/complied with, they can also give them access for one period of time (e.g., monthly) before they will need to “repurchase” another month.
These three categories illustrate how versatile the in-app purchase model is – it can satisfy the impulse-driven casual player that needs just one last chance to win, while supporting the dedicated learner that is investing in their own long-term professional development with premium educational content.
Why In-App Purchases Matter
In the app economy, the role of in-app purchases is massive. Industry reports estimate that global in-app purchase revenues were between USD 171.7 billion in 2023 and USD 195.7 billion in 2024, with strong forecasts for continued growth in the coming years. Gaming apps continue to dominate mobile monetization, with 95% of mobile app revenue in 2023 coming from in-app purchases or ads (Data.ai). Even outside gaming, subscription-based purchases are expanding quickly: in 2023, app subscriptions generated USD 45.6 billion in revenue (Statista), accounting for nearly 30% of global app revenues by 2025.
This all means that IPA is not simply a monetization strategy. In an ever-changing competitive landscape, it is fundamentally the basis of the mobile ecosystem. It provides app developers with ongoing and scalable revenues, while for marketers it becomes a leading indicator to assess user acquisition through campaign lift, and ultimately the value of each audience in terms of future in-app purchasing behavior.
In-App Purchase vs. App Store Purchase
It is necessary to differentiate between an in-app purchase and an app store purchase. An app store purchase is the act of purchasing an app as you are downloading it. This is typically a one-time purchase where, once complete, the app is fully unlocked. An in-app purchase happens after download, and it allows users to enhance or extend their experience as they continue to engage with the app.
The differentiation is important because app store purchases only monetize a revenue opportunity during one moment, while in-app purchases create monetization opportunities for the entire lifecycle of a user. This also means your measurement of success becomes not only based on installs (or downloads) but also on the extent to which your campaigns are able to drive ongoing in-app billing events.
How In-App Purchases Work
Every in-app purchase is supported by a robust and straightforward process provided by the app stores. When a user decides to buy something in-app, the request is sent to the store’s billing platform (e.g., Apple’s App Store, Google Play billing service). The billing platform verifies the request, processes the payment, and provides the user with their item. The developer receives the money after the store takes its cut (which can be up to 30%).
This entire system is mostly unseen by users, but it ensures trust is maintained. For developers, this trust is important as they receive the payment through a trusted service while users trust that their payment details are secure. Trust is one reason IPA have achieved global growth quickly.
The Benefits of In-App Purchases
The primary advantage of the in-app purchase model is both flexibility and scalability. The model allows developers to freely distribute apps, decreasing the barrier of entry for users, while also increasing the potential audience size. Moreover, upon entering the app, users can then determine their investment in unlocking further value, thereby creating monetization potential that may be repeated several times. This flexibility can also increase the overall lifetime value of the application. Users who complete IPA transactions are statistically more likely to return to the app, have higher engagement levels, develop habits around app usage, as well as increase average revenue per user (ARPU).
For users, in-app purchases provide a customized experience. Rather than burdening all users with a premium charge, they give users options—some users may opt for a free option that is supported by ads, while other users may be willing to pay to remove the ads or unlock additional features. This flexibility makes in-app billing appealing across a wide variety of app categories, whether entertainment or education
The Challenges of In-App Purchases
In-app purchases provide clear advantages, but it’s not all smooth sailing. The first concern is user trust. If an app is overly aggressive about prompting purchases or leaving users feeling like they have to pay to access core features, the app risks losing users altogether. Second, fraud is a concern. Fake payments, payment reversals, and unauthorized payments can compromise revenue and harm an app’s reputation.
Store commissions are not insignificant either. Apple and Google typically take up to 30% of in-app purchase revenues, though many smaller developers pay a reduced 15% rate, meaning developers are left with significantly reduced revenues and profits on each transaction. Additionally, various regional regulations can influence business practices, and policies related to billing (or billing practices) are continually changing as they relate to global app businesses. In general, these issues serve to highlight the need for solid attribution systems, fraud detection, and transparency for users.
Measuring In-App Purchase Success
In-app purchases have value, but you won’t unlock the value unless you actually measure and optimize them. So, marketers need to measure key metrics such as average revenue per paying user, conversion rates from free to paying, number of purchases per user, and revenue by purchase type. These measurements help you discover which of your audiences or campaigns is delivering the highest-value users.
Attribution is particularly key here. Knowing exactly what ad campaign or user journey resulted in a paid customer allows marketers to better assign budgets and get more return. If these insights are not available, it is easy to overspend on acquisition channels that deliver installs that do not convert into meaningful in-app billing revenue.
The Future of In-App Purchases
Looking ahead, the in-app purchase model will evolve with an array of personalization, where offers and bundles will be customized to the user’s behavior and preferences. While subscriptions will continue to dominate, hybrid models will emerge that will tease consumables, upgrades, and subscriptions together.
Payment methods will also evolve, as mobile wallets, regional payment gateways, and even cryptocurrencies become part of the purchase landscape. On a broader note, regulatory changes will change the balance of power, especially as governments examine app store commissions and call for more transparent billing models. For developers and marketers, this means remaining agile while prioritizing user trust and user purchasing experiences.
Final Thoughts
An in-app purchase is not just a payment within the app; it is a relationship between users and developers. It is the point at which users recognize that the value produced by the app is worth paying for. When invoked thoughtfully, IPA represent not merely a source of revenue; they build loyalty, increase engagement, and grow the role of the app in the user’s day-to-day life.
You need more than payment options; you need accurate attribution and anti-fraud solutions, and a user-first design that ensures that purchasing via IPA feels like a natural, rewarding part of the app journey. As mobile helps digitally transform every part of society, in-app purchases will remain at the heart of monetization strategies as new technologies and user behaviors evolve.