The very first lesson I have learned about making profitable iPhone Apps is that the most effective monetization strategy is to have a free app with in app purchases. I have very little problem spending $0.99 for a game on the App Store, but I have found that there are many people out there that don’t have credit cards attached to their iTunes account or simply won’t buy things. The free app gets past this initial barrier and also opens you up to additional people who can play with your app and act as word of mouth promotion.
For in app purchases a lot of thought needs to be put towards how best to price things. Choosing the most effective price points and providing a range of options so that people can buy the things they find the most value in is crucial and non-trivial. But one key thing to keep in mind is to make it really easy to spend $1 and possible to spend $100/month.
The value of money is a strange thing. To me spending $100/month on a iPhone game is crazy, but to others $100 is only 10 minutes worth of work. Perspective is everything. In a world with an increasing gap between rich and poor it is important to give rich people ways to spend more of their money – selling digital goods with zero marginal cost is a pretty good strategy for that.
Looking forward I don’t think I will consider doing an app that doesn’t have the opportunity to make full use of in-app-purchases. I’ll share my actual numbers at the end of the month.