Picture 5With the announcement last week that Apple would allow In-App Purchasing (IAP) for free apps, we wondered what will really change in the App Store. Obviously right now this is a theoretical exercise as, so far, very little has changed. We’ve seen a couple apps that were previously paid switch to free, and at least one high profile app released as free with IAP.

We talked to a few users and a few developers to get their take on what this could mean for the future of the iPhone App Store.

This new app type, free but with In-App Purchasing has quickly been nicknamed free+. There are some really great things about it, and some really bad things about it. Let’s break this down into what’s good and what’s bad for developers and consumers.

Good for Developers

There are lots of really good things to like about this decision for developers and they are almost uniformly happy with the decision. We asked Kyu Lee of Gamevil for his thoughts, “In-app purchasing for free apps is a huge step for Apple, and it really shows how much they are willing to adjust to the developers/publishers needs. Apple was first to adopt in-app purchases, and now first to adopt in-app purchases for free games. We strongly believe the next steps would be introducing microtransactions that are lower than 99c or the ability to use an intermediate currency within the game. We believe that Apple should provide as many options available to the developer/publisher as possible as long as it enhances the customer’s experience, and we’re very excited about what the tracks they’ve been following so far.”

For some types of apps it makes the developers job a lot easier and potentially more profitable. Then there’s the added bonus of making piracy much harder with apps that include in-app purchasing.

More Income Options

With in-app purchasing there are many more income possibilities for developers. Not only can they sell expansions to their app from within the app, but they can also sell subscriptions, upgrades, and virtual goods (think MMO apps). Doing in-app purchasing allows for the impulse buy. For example, the recently detailed Eliminate from ngmoco:) will feature a certain amount of time you can play per day while advancing your stats. If you are really getting into the game and you run out of time you are pretty likely to drop a buck and buy more time. Maybe just once, maybe a few times. Depends on how compelling the app is. Think of this as the candy racks at the grocery store checkout. You are standing there looking at it, a certain number of people will decide to buy.

In addition to more options, income opportunity is spread out for a much longer time. The way it is now most apps that make it to the top 100 do so quickly, then fall off quickly. This little spike represents a very high percentage of their sales. Sales after that are usually tied to an upgrade, press, or other such promotion. IAP allows for longer term income opportunities for developers as they can add content to the app and charge for it over a longer period of time. In addition, you can continue to get money from the dedicated users more than just once like most current apps.

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