An in-app purchase (IAP) is something bought from within an application, typically a mobile app running on a smartphone or other mobile device.
Software vendors can sell all manner of things from within apps. In games, for example, users can buy characters, upgrade abilities and spend real money on in-game currencies. Other examples include enhancements and upgrades to software.
Apps that offer items for sale may themselves be free or inexpensive to purchase; the vendor relies on in-app purchases to deliver a profit. In-app purchases enabled the freemium model for games and software: providing the basic software for free and charging for additional features, items and functionality. This model allows an app to reach as many users as possible while also allowing users to select the add-ons they want and making it possible for app developers to realize a profit.
The items available are presented within the app where the user is likely to see them when they would be most useful. In-app purchasing tends to encourage more purchases, and those purchases may not be ones a user would typically make outside of the app. For example, gamers whose characters just got killed might be more liable to purchase an upgraded weapon or armor in the heat of the moment.
In-app purchasing is enabled by having one's payment data already stored on the device. Generally, the user adds that information to facilitate buying apps from platform-specific stores and services. These stores are part of a walled garden style of mobile app market such as Apple's iTunes app store and Google Play for Android devices.
The convenience of in-app purchasing can lead to higher-than-expected mobile service bills. Users tend to underestimate the way that multiple small purchases add up, for one thing. In some cases, the purchases may not even be deliberate. IAPs have also been subject to accusations of false marketing because “free” games sometimes require the purchase of add-ons to finish or even advance in the game.
The actor Jack Black was shocked recently to see a $3000 charge for in-app purchases on his mobile bill. He learned that his small son had racked up the charge in a single day, buying bags of digital diamonds from within a game. Black’s service provider refunded the fee. However, to be on the safe side, it’s important to ensure that your accounts are protected from such purchases.
At 1:58 in the video, Jack Black explains to Jimmy Fallon how his son racked up a $3000 bill for in-app purchases: