What are in-app purchases?

In-app purchases, or IAPs, are types of virtual goods or services that players can buy for an additional fee in a game, like skins, coins, or battle passes. Also called microtransactions, they’re a main form of mobile game monetization that’s primarily used by developers of free-to-play (F2P) games to earn a profit while offering their title at no cost to download. 

Benefits of in-app purchases

In-game purchases are one of the most popular monetization models - in fact, in Q1 2024, players spent $13 billion on ingame purchases on iOS. And this doesn’t even account for in-game purchase revenue hidden below the surface of what we call the “D2C iceberg” that’s driven by direct-to-consumer channels, like webshops. 

Clearly, games and players find value in in-app purchases. But why?

For developers

Free-to-play games drive 78% of total gaming revenue. And that’s not just talking about mobile - on Steam, 51% of total time users spent on the platform was playing F2P games.

With the rise of F2P, in-game app purchases became a top strategy for developers to make a profit despite offering their titles for free. And it’s working: studios like EA Games recently raked in over $1 billion in in-app purchases from their F2P titles on mobile. 

The revenue benefits of ingame purchases are the biggest advantage, but here are a few more developers can enjoy with this monetization model:

• Scale your user base: With in-app purchases, you can afford to offer your game for free. Eliminating this financial barrier means you have the ability to reach a much wider audience. Like Eric Seufert says in his book Freemium Economics: “The ultimate logistical purpose of the freemium business model…is the frictionless distribution of a product to as large a group of potential users as possible.”
• Gather more player data: Premium games use the initial purchase as the main touchpoint to gather player information. But with in-app purchases, you can gather player behavior and purchase data along the entire user lifetime curve. With this info, you can then tailor appealing offers to players - and keep adjusting and optimizing them according to their gameplay, spending habits, etc. to drive more revenue
• Improve in-game metrics: Using in-app purchases to fulfill player motivations - whether that’s the desire to progress or to stand out from the competition with a unique collectible - increases engagement and retention

For players

In a perfect world, in-app purchases can give players an enhanced gameplay experience. (We say in a perfect world because when not implemented purposefully and carefully, an imbalanced in-game purchase strategy can lead to negative outcomes like pay-to-win scenarios, inflation of the in-game economy, and higher user churn.)  

That experience does depend on your game’s genre. For example, a PvP game that needs to avoid pay-to-win scenarios often offers cosmetic in-game app purchases that have little-to-no impact on how the game is played - think skins, champions, and decks of cards. League of Legends from Riot Games puts this idea into practice with their in-game purchase strategy, which centers around values including: 

• Players don’t need to spend a dime to succeed
• They should want to make purchases, rather than feel forced or tricked into doing so

This player-first monetization strategy works. League of Legends players spend hundreds - and sometimes thousands - of dollars each day to unlock cosmetic items, like champions and skins to stand out from other users, personalize their experience, and show off their status. And it’s helped the game earn over $20 billion in lifetime revenue so far.

"In all honesty, I really don't regret spending money on the game. You can legitimately play the game [without] spending a dime. The only thing that requires cash are skins. Anything else can be bought with enough play time,” - League of Legends user Sw0rDz

Meanwhile in a PvE game, in-app purchases can help players progress more quickly or extend their session. For example, a game like Coin Master offers spins - the primary energy source - as an in-game purchase that players can buy to keep playing the game. The $1.99 pack of spins accounted for over 42% of total in-game purchase volume on iOS in Q1 2024. 

Another PvE game like Homescapes gives players the option to purchase boosters that help them progress faster in the game. That sense of satisfaction that comes with progressing encourages users to keep playing - and purchasing. 

Types of in-app purchases

We touched on a few examples of in-game purchases above, and now let’s dive deeper into the three categories that all in-game purchases fall into:

1. Consumables

Consumables can be used once in the game before they expire - then players need to re-purchase them again. They’re intended as ingame purchases that users need to buy again and again, so they’re usually the primary revenue driver in a game. 

Example: Hay Day from Tencent uses diamonds as its primary currency that can be used to buy other items, like boosters and cosmetic improvements. Users can buy bags of diamonds - once they’re used up, players can purchase them again.

2. Non-consumables

Unlike consumables, non-consumables don’t expire after purchase - they remain an active part of a player’s collection. We mentioned how PvP games often use non-consumables like cosmetic items as their main type of in-app purchases because they don’t affect gameplay.

Example: Stumble Guys by Scopely is a multiplayer game that offers a variety of non-consumable in-game app purchases, like skins and flags. Players can purchase these to customize their character and enhance their experience - without getting any gameplay advantage.

3. Subscriptions

This type of in-game purchase happens on a recurring basis that can either be renewed automatically or repurchased manually at the end of a set duration. The idea behind subscriptions is to provide players with benefits over a period of time, rather than just at initial purchase.

Example: Ebony from Top Games offers a Premium Currency Pass that gives players extra rewards over a set time period - whether that’s a day, month, or a full year. 

Who makes in-game purchases?

Generally, you can expect 5% of your users to make in-app purchases - but don’t let this low number deter you: 70% of the App Store’s revenue from games is driven by less than 10% of players. This small group of high-value players are usually the most loyal and engaged users, which means they’re likely to keep spending significantly into the longer-term. 

Strategies from games for boosting in-app purchases

The key to a successful in-game purchase strategy is balance: your aim is to increase spend from each player without greatly impacting their gameplay experience.  

Much of this comes down to fulfilling player motivations. Your in-game purchase strategy is more likely to achieve that right balance when you focus on meeting player expectations and providing a better game experience - rather than just selling more items. So let’s look at some examples from games in different genres that use in-app purchases to tap into their players’ psychologies. 

PUBG: Mobile 

In a PvP game like PUBG: Mobile from Tencent, players are interested in a sense of achievement and competition. In cases like these, the studio needs to be careful not to create a pay-to-win scenario. That’s why the in-game purchases Tencent mainly offers are premium battle passes, which upgrade the free battle passes with exclusive rewards - mostly skins and other cosmetic add-ons. With these Elite Pass-exclusive items, players feel they have something that their competitors don’t during battle pass seasons, even though these items are purely cosmetic. And as a result of fulfilling this player desire, the battle pass system helped PUBG increase revenue by 365%.

Monopoly Go!

For a social casino game like Monopoly Go! from Scopely, users crave the feeling of progression and playing with others. So their primary in-game purchase is dice rolls, which represent moves in the game. These dice rolls are the energy source that players use to keep playing and progressing - so the more dice rolls they have, the faster they can progress. 

Scopely took it a step further to speak to the social side of their game. They introduced LiveOps events in which players work together to earn a reward - like their Baking Partners event:

While these events aren’t monetized outright (e.g. don’t need to pay to participate), players can progress more quickly - and help their team succeed - with more dice rolls. 

Sell in-app purchases directly

Even if you implement the strategies above to increase spend, the reality is that you’re still missing out on in-game purchase revenue. That’s because Apple, Google, and Steam take 30% commission on every ingame purchase - which actually adds up to more than 30% when you do the math (we did it for you in this article).

The solution to bypassing these fees is going direct-to-consumer (D2C). D2C channels like a webshop let you establish a direct relationship with players. In addition to getting 30% more revenue per in-app purchase, webshops also let you:

• Get access to first-party data, like email, that you can use for retargeting and remarketing campaigns
• Improve retention and engagement by expanding your IP universe through web-specific features, like a content hub containing lore and guides
• Gain more control over your in-app purchases, like having the ability to offer dynamic pricing, personalized bundles, and volume-based discounts

Studios are recognizing these advantages and jumping onto this gaming trend, including:

By offering appealing web discounts and incentives - along with additional engagement features - games can shift the spend of their highest-value players to the web shop and increase revenue, engagement, and retention.

Partner with Stash to sell in-app purchases D2C

Stash can be your partner for maximizing in-app purchase revenue by shifting spend and traffic to a webshop. We built our product around the philosophy that D2C channels like web shops need to provide players with the “best way to pay” - an experience they’ll want to keep engaging with because they get the best offers, coolest items, and awesome content that lets them interact with your game in entirely unique ways. 

Talk to us today about maximizing ingame purchases and direct revenue by shifting your top spenders to D2C.