What is In-App Purchases (IAP)?

Additional purchases that can be made within an app to extend features, unlock content, or access premium services.

In-app purchases (IAPs) are additional purchases that can be made within an app. Depending on the app, users can purchase various virtual goods to extend the app's features. When it comes to mobile gaming, users may make in-app purchases to progress further in a game, unlock levels and characters, or pay for subscriptions or premium features.

Why It Matters

IAPs are essential for app monetization strategies, allowing developers to offer free apps while generating revenue from engaged users. They provide revenue diversity, higher ROAS for user acquisition, and valuable insights into user spending behavior and demographics.

How to Calculate

IAP Revenue = Number of Purchases × Average Purchase Value. ARPU from IAP = Total IAP Revenue ÷ Total Active Users. IAP Conversion Rate = Number of Paying Users ÷ Total Users × 100%.

Industry Benchmarks

Best Practices

Optimize IAP offer placements at the right time and place, ensure premium content provides clear value, create personalized user experiences, balance free and paid content, implement smooth checkout processes, and monitor IAP performance alongside advertising revenue.

Examples

In a match-3 mobile game, users can purchase extra lives for $0.99, power-ups for $1.99, or unlimited lives subscription for $4.99/month. A fitness app offers premium workout plans for $9.99/month. A photo editing app sells filter packs for $2.99 each or premium subscription for $19.99/year.

Notes

There is a strong correlation between user engagement and IAP conversion. Revenue diversification between IAPs and advertising is crucial for sustainable growth. Apps with exclusively ad-based revenue often struggle to scale effectively compared to those with balanced monetization strategies.