Apple allows free apps to sell virtual goods

The move is a coup for app developers and a boon for the nascent industry

Technology trends and news by Matt Bowman
October 16, 2009
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Apple announced today that it will allow in-app purchases of virtual goods from free iPhone and iPod applications. This will be a big boon for the nascent app industry.

This summer Apple allowed “in-app purchases,” but only from paid applications on the AppStore. It expressly prohibited this feature in free apps. The about-face enables a "free-to-play" model that makes it easy to convert a freeloading user into a paid customer on the spur of a moment, without forcing an upgrade to a premium app version.

The typical case scenario for in-app purchases is games--users play for free and are invited to purchase a weapon to kick some additional monster arse. Zynga's games like Mafia Wars and Texas Hold’Em stand to benefit big time, as do Tapulous's popular apps, including Tap Tap Revenge.

And the possibilies go beyond games. Last night I ran into HearPlanet's founder Steven Echtman at the SF Mobile Conference, who said this was big news for his company. HearPlanet, one of Vator's Juice Pitcher Top 10 Winners, collects geographically relevant information and delivers it to your iPhone in an audio format--it's essentially an audio tour guide for any place on the planet. They have over 500,000 downloads and have begun being featured in Apple's advertisements.

Echtman said the revenue model hinges on location-based advertising and subscriptions to premium partner content. The App Store's new policy means HearPlanet won't have to upsell users to a premium app before selling them more valuable info.

Only virtual goods used within the application may be purchased (ie, additional game levels, subscription content)--Apple is not allowing apps to sell goods that would be used outside of the app.

HearPlanet's pitch at the Juice Pitcher last week is embedded below.

Related companies, investors and entrepreneurs

Tapulous, Inc.
Description: Tapulous is a Palo Alto, CA based startup building a family of fun and social apps for the iPhone.  We are angel funded and have rel...
Description: HearPlanet turns your cell phone into an audio guide to the world. Get iPhone App Here: Get Android App Here:...
Description: Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are avail...
Bio: Founded or helped found 4 tech oriented companies. Worked in all aspects of operations, product definition/development, UI/UX, ...

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