by Lotaris

In-app purchasing is set to become the dominant source of revenue for apps, ahead of revenue for paid-for apps and advertising, according to a new report by Gartner. The report predicts that in-app purchasing will increase from $4.5 billion (17.2% of all app revenue) in 2013 to $36.8 billion (48.2%) by 2017. Distimo’s research indicates that in-app purchasing revenue already accounts for 76% of iPhone app revenues in the US.

The dominance of the Apple App Stores and Google Play Store, together accounting for about 70-85% of app store revenues, and the benefits of launching in multiple stores, is described in the blog post “The Future of Alternative App Stores” of 3 September.

We believe that the biggest barrier to developers launching their apps or games in multiple stores and platforms is the complexity in each store (with unique policies, functionalities and APIs) and the additional effort in preparing their apps for each store.

Our advice to developers who are considering launching their app on more than one store is to build the in-app purchasing functions of the app (such as the business models, virtual goods catalogue management, checkout and merchant of record)  to be as store independent as possible. The in-app purchasing functionality provided by each store is easy to use but very specific to that store, arguably creating the greatest store stickiness. Fortunately, there are tools available to provide developers with the in-app purchasing functionality independently of stores, whilst working within store policies.

The Business Model is the 1st element of in-app purchasing, which can be provided independently of stores. Stores typically provide subscription, freemium, fixed period and perpetual models. In fact the developer could have even greater business model flexibility, if the store business model mechanism is not used. How about free trials, usage-based models, and more varied subscription models such as opt-in and opt-out?

Virtual Item Catalog Management is the 2nd element of in-app purchasing, and can also be provided independently of stores. In “The Perils of In-App Billing” blog post of 30 May by Simon Slee explains how the virtual goods management functionality of stores is tightly coupled to the store, and advising developers to look for solutions that help them manage their digital catalogue billing across a wide variety of stores.

Checkout is the 3rd element, and refers to payment for the in-app purchases. This is where store policies vary from being totally closed to store independent checkout, such as the Apple App Stores and Amazon app store, to totally open, such as the Opera Mobile Store, Windows Store and Windows Phone Store, and those that allow it in certain cases, such as the Google Play Store which allows store independent checkout for digital content that may be used outside of the app.The ideal tool would provide the flexibility to the developer to specify store checkout or store independent checkout, depending on the store and its policies.

Merchant of Record is the 4th element, which means that the store will be the actual seller, taking responsibility for the settlement of sales and other taxes in each country, such as the Apple App Stores, Amazon app store and Samsung Apps, whilst others do not, such as the Google Play Store. Some stores provide this functionality in a very limited list of countries, such as the Windows Store and Windows Phone Store.

In summary, in-app purchasing can be largely managed independently of the stores, the main touchpoint with the stores being the store checkout, which is mandatory in some cases.

LotarisLotaris in-appCommerce is a developer tool which aims to reduce complexity for developers across platforms and ecosystems by providing an independent in-app purchasing service through a single API (also reducing the learning, implementation, test and maintenance overhead for developers). in-appCommerce provides independent business models, virtual item catalogue management, checkout and a merchant of record service.  Developers have a single console to centrally configure and view analytics and settlement reports for their app across platforms and stores. The tool supports Android, Windows and Windows Phone, and Lotaris is now working towards iOS and HTML5 support.

in-appCommerce currently supports store independent checkout, such as for the Google Play Store (in certain circumstances),various 3rd Party android app stores, Windows Store and Windows Phone Store. As of next month, it will support store checkout, starting with the Google Play Store. The store checkout feature will provide checkout options and guidance to the developer based on each store and its policies.  For more information:

Lotaris is the leading independent in-app commerce provider monetizing apps and reducing complexity for developers across platforms and ecosystems. Lotaris developed its commerce platform over the past few years to service its large enterprise ISV customers, but is now making it generally available to all developers through its comprehensive Lotaris® in-appCommerce service.  

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