In-app purchases are an approach to generating revenue that is often paired with a freemium model. A user will generally have access to a base level of limited features, and can pay a fee to improve the experience or gain access to additional content, more robust services. IAPs are popular in gaming, social networks, dating, entertainment. Examples of IAPs include: micro-transactions (in-app tokens), digital goods, service upgrades, physical goods, mods/plugins, and more.
small payments from microtransactions can add up quickly, becoming a significant source of revenue, see examples like Fortnite or Candy Crush.
Offering IAP paired with a freemium model, as removing financial barriers allows greater accessibility for the wider audience.
IAPs have been reported to incentivize and enable addictive, gambling-like behaviors in all ages, especially children. These design choices may trigger the psychological reward centers of the brain to release chemicals that act similar to substance use. Users have reported spending thousands of dollars in real world currency to buy digital items like gems or loot boxes for game play. For some users, this may spiral out of control, causing significant impact on financial and emotional well being.
it is common for businesses using IAPs to have a lack of transparency, engage in misleading pricing strategies, exploit psychological vulnerabilities, offer Inequitable advantages for paid users, and generally employ designs that use behavioral modification and nudging as a tactic to generate revenue. When copying the user experience of other platforms, be mindful that strong ethical critiques of various tactics exist.