In today’s fast-paced world, not having an app for your business is like having three wheels on a four-wheeler. With the world increasingly moving nearly all of their shopping needs online, your business must make a move to focus its energy on the app-o-sphere.
However, creating an app and launching it online is not the end of the game. There are many examples of businesses that ended up creating information-only apps that did little good except being a mobile-friendly version of the company’s website.

What is app monetization?

Allowing users to purchase products and services or allowing users to subscribe to a service that your app provides to them regularly is called monetization. Monetization ensures that your app can sell services to users within the app itself, and they do not need to move away from the app for such transactions. This helps the developer generate a return on their investment.

Physical goods sold from within an app like groceries, plane tickets or movie tickets can be purchased using third-party payment gateways like PayPal, Stripe, and Braintree.

How can I monetize my app with in-app payments?

There are many ways in which an app can be monetized. Some of these ways include:

Buying a physical product online

• One-time purchases that include paying for additional features in the app (for example, extra lives in games, additional game levels or game level-ups). This can further be divided into two sub-types

(i) Consumables: These products are for true one-time use and are exhausted once used.

(ii) Non-consumables: These products can only be purchased once, for example: upgrading to a pro version or getting an ad-free version of the app

• Rewards such as free level-ups on completing a game level early or ad-based rewards
• Subscription services like streaming video and music or online magazine subscriptions like Spotify, Headspace, Calm. These services can be auto-renewing, non-renewing or free.

In-app purchases on iOS and Android

iOS and Android are two of the most famous application development platforms in the world. This article will give an overview of in-app purchases for both these platforms. Developers who wish to read up-to-date platform-specific details and examples on how to enable in-app payments on these platforms can read the official Android platform notes here and the official iOS platform notes here.

• In-app purchases on the App Store

In-app purchases for the App Store require the creation of an In-App Purchase store and use the StoreKit Framework to embed this as an In-app purchase within your app. The StoreKit Framework enables secure payment processing in the app store. This framework communicates with the App Store to process payments and notifies the app when the purchase is successfully completed. Additionally, the StoreKit framework also facilitates subscription to Apple Music and provides recommendations and reviews for third party content that allows users to rate and review your app. Please note that all in-app purchases made by a user must be available across devices registered for that particular user.

The App Store offers the following types of In-App Purchases:

 

• One-Time Purchases

As their name suggests, these purchases are one-time and do not recur. These purchases are further categorized into two distinct types:

(i) Consumables

These purchases must be done every time the user needs the functionality. A good example of these includes time extension, digital currencies, and extra lives in video games

(ii) Non-Consumables

These purchases are one-time and are mostly used to unlock specific functionalities in apps that do not expire. A good example of these includes premium functionality or unlocking specific paid features in apps.

• Subscriptions

Subscriptions allow users to access time-limited features in an app. Typical examples include streaming music apps, newspapers and, magazines. Subscriptions are further categorized into three different types:

(i) Free subscriptions

These allow the delivery of content to users without any charges. Typical examples include Newsstand enabled applications. Free subscriptions can be ended by users.

(ii) Non-Renewing subscriptions

These subscriptions are time-bound and offer paid services for a limited duration. Examples for these services include week-long subscriptions to magazines, digital content, etc.

(iii) Auto-Renewing subscriptions

These subscriptions renew on their own until the user explicitly discontinues the services. A good example of these includes services like the iCloud storage service, subscription to magazines, food delivery services like Amazon’s Subscribe and Save.

Note: developers must explain to users regarding details of how to opt-out of these services as auto-opt out is not applicable for these services.

Note: All purchases made by a user are bound to their Apple ID and not their devices. This means that purchases made by a user must be restored if the user deletes the application and then downloads it again or migrates to a new device.

In-app purchases on Google Play

Similar to the in-app purchase implementation on the App Store, purchases made within apps on the Google Play Store are managed by the Google Play In-app billing service called the Google Play Billing Library. The Google Play console is considered to be more flexible than the Apple Play store when managing subscription products.

How to submit your app to the App Store in 2020? Read here: Apple App Store Submission Checklist

These services can only be leveraged by apps that are distributed through the Google Play Store. All billing services on Android are handled by the Play Store app. A Google Wallet merchant account is required to use the Google Play In-App billing service.

Purchase types that can be managed through the Play Store include:

 

• One-Time Purchases

These purchases are one-time and do not recur. They can further be categorized into two distinct types:

(i) Consumables

These are temporary purchases that can be repeated once consumed. A good example of these includes time extension, digital currencies, and extra lives in video games.

(ii) Non-Consumables

These purchases are mostly permanent and can only be done once. A good example of these includes premium functionality or removing ads.

• Rewarded Products

These are in-app products that require the user to watch a video advertisement or use a promo code. A good example of rewarded products includes extra lives, in-game currency, and completion of timed tasks.

• Subscriptions

Subscriptions allow users to access time-limited features in an app. Typical examples include streaming music apps, newspapers and magazines. Subscriptions are further categorized into three different types:

(i) Free subscriptions

These allow the delivery of content to users without any charges. Typical examples include Newsstand enabled applications. Free subscriptions can be ended by users.

(ii) Non-Renewing subscriptions

These subscriptions are time-bound and offer paid services for a limited duration. Examples for these services include week-long subscriptions to magazines, digital content, etc.

(iii) Auto-Renewing subscriptions

These subscriptions renew on their own until the user explicitly discontinues the services. A good example of these includes services like the Google Drive storage service, subscription to magazines, food delivery services like Amazon’s Subscribe and Save.

Note: developers must explain to users regarding details of how to opt-out of these services as auto-opt out is not applicable for these services.

Note: Weekly subscriptions cannot be charged using direct carrier billing.

Google Play offers a Free Trial Period for all subscription-based apps. In this, users are not billed until their free trial period ends. All free trials are automatically converted to subscriptions if the user does not cancel during the free trial period.

Note that there are no refunds allowed in the Google Play store subscription mode. Users get access to their subscriptions until the end of the pre-paid subscription period. All active subscriptions can only be canceled through the play store.

Does Apple or Google charge for these payment services?

Both Google and Apple take a cut as a fee for each purchase made on the application marketplace. This cut is in percentage and it differs according to the purchase being made.

• One-Time Purchase

Both Apple and Google charge a 30% fee for all one-time purchases.

• Subscriptions

Both Apple and Google charge a 30% fee for all subscriptions in the first year. After the end of the first year, this fee is reduced to 15%.

Platform-specific caveats for subscription period calculation

In the case of Apple, all subscriptions made on any supported apple platform are eligible, including paid introductory periods (these include pay as you go or pay upfront). Free trials and bonus periods will not be included in the calculation of a full year. Calculation of a full year is not affected by crossgrades, upgrades, or downgrades between subscriptions in the same group, however, moving to a different group will reset the day count.

In the case of Google, subscribers who are still within a grace period, or those subscribers who successfully recover from an account hold, grace period, pause, or restoration of subscription will still count. This will be the same for those who sign up with discounted introductory pricing, those that upgrade or downgrade or sign-up again within two months of cancellation. What does not count towards a full year are any trials, purchases that have been refunded or the period during which the account was on hold.

How soon do I get paid after a successful transaction?

Neither of these platforms pays developers immediately or as soon as a transaction is successfully completed. Payouts may take up to 30 days after the end of the month to reflect on your account. The schedules differ across these platforms:

Google

Google usually makes payments at the beginning of the next month. There is no minimum threshold for payment.

Apple

Apple makes payments after 30 days of the end of the monthly period. Apple requires all banking and tax information to be provided. A minimum threshold that ranges between $10-$150 must be met.

Note: Please ensure that you refer to the official App Store and Play Store websites for details regarding payments and payouts.

In-app payments are a successful monetization method for any app developer and in some cases, can help a developer rake in a massive return on their investment due to the popularity of the app and demand for the paid services on offer. Being robust and mature payment platforms, both the Apple App Store and Google Play a secure, quality purchase experience that is well integrated in the apps on their respective platforms.