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Opinion: In-app transactions for free apps will be the death of a thousand cuts for some developers

Even 99c is a better model than free
Opinion: In-app transactions for free apps will be the death of a thousand cuts for some developers

When Apple announced the ability for developers to include in-app micro-transactions in iPhone games in the OS 3.0 update, everyone seems confused why it was limited to paid for apps.

After all, the explosive growth of freemium gaming as proved by companies such as Big Point, Jagex, Sulake, Zynga, Playdom and Playfish highlights the fact that people are happy to pay small amounts many times over to play games they know they love: much moreso than paying $5 or $10 upfront for a game they're not sure about.

And if you needed any further proof about the financial implication of the model, just look at yesterday's rumours concerning EA buying Playfish for $250 million.

Free for all

To that degree, the fact Apple has dropped its restrictions on charging micro-transactions for free apps makes complete sense. It was always going to happen.

Where it's been clever however is how it's rolling this change into other areas of development.

The split between the free Lite versions of paid apps has always been artificial so the integration path enabled by developers releasing a free app which contains the complete game, unlockable by paying via an in-app micro-transaction, will be very welcome.

Although how this will play out in terms of the Free, Paid and Top Grossing App Store charts is another matter entirely.

What's important for studios is their development overhead will be eased as they will only have to make and submit one binary, ensuring that every release will hit the Free and Paid chart at the same time. Although as everyone will have the ability to do this, it won't be a competitive advantage.

Wider complications?

Indeed, some players who rely on in-app advertising may argue it will complicate their business. For example, will the system be flexible enough to include in-app advertising which is switched off when you buy the paid app?

Still, everyone will be pleased Apple has overtly tackled the nervy subject of app piracy. Giving away content for free but then forcing paid verification through the App Store to unlock the full app content will tilt the balance back if only for a time.

Walking a razor's edge

Yet, in the short term at least, the temptation for developers will be to assume they can release a free game and then spend time converting downloaders into paying players. But unlike browser or Facebook games, this model hasn't been proved on iPhone and iPod touch.

Investing tens of thousands of dollars in a game you give away from free is certainly going to be more risky, even than one where the average price of the game is 99c.

So if there's one thing we can predict it's that there will be more casualties on this new proving ground, because for small developers with no cash reserves or VC funding, there's nothing more challenging or dangerous than operating in a competitive free-to-play environment.