Back at Google I/O earlier this year, Google announced it was bringing in-app purchases to web applications through its somewhat popular Google Checkout product. A few days back, Google finally launched their Google Checkout-powered system, allowing web app developers to open to door to their virtual shelves.
The service gives web app developers a way to let people make micro-purchases inside their apps, much like Apple’s IAP service to allow in-app transactions in iOS apps. This is a great way for developers to monetize apps without having to resort to subscriptions. Surprisingly, though, the service is not limited to just web apps that are hosted on Google’s own Chrome Webstore; any web app can utilise this new source of revenue.
What is Google’s In-App Payments?
Firstly, let’s just explain what in-app payments are. An in-app payment is a purchase taken inside an app, and not for the actual app itself. These have been highly popularised on iOS, such as buying the add-on “Mighty Eagle” in Angry Birds, or the layers feature in Adobe Ideas. In-app payments can be used to unlock expansion features, books and media or to buy disposable credit to use in games.
Google have created their service to allow similar purchases to be made inside web applications, rather than native ones. Google powers these purchases through Google Checkout – the same service used by some online stores and the Android Market – and takes a 5% fee from all purchases made.
Making Websites More Profitable
We love things for free. We don’t like paying for things, especially on the web. To put this into context, paywalls are hardly respected by customers so a lot of blogs and other websites opt for advertising since it helps make the content free for the end user.
On mobile platforms, many games are free, but use in-app purchases as a business model in order to generate revenue. An app is provided to the customer for free, but as they get more involved with it, the options to purchase upgrades and expansions become more attractive. Therefore, for a developer of a popular product that has a strong lasting appeal, Google’s service might be a really fantastic way of generating new revenue.
The Criticality to Chrome
Google is trying to reinvent casual computing with the Chromebook (at the same time as the tablet), but it’s vital that the developers get on board too. Due to it’s lack of native software (or even an unestablished platform to run them on), web apps are critical to the Chromebooks’ success. However, as I said before, we don’t really like paying for content on the web, but, in order for the developers to dedicate their time to making an app and to address that market, they need a source of revenue.
The Chrome Web Store is still a little bare of apps.
In-app payments provide a useful and effective way of generating revenue from customers through a bait-and-switch-style approach. A user is introduced to the application without charge, and as they use it more, the purchase of expansion is increasingly attractive. It’s a business model that developers use all the time to either generate revenue, or to increase the longevity of an app. As bad as bait-and-switch might sound, many customers would much prefer one-off in-app purchases to expensive subscriptions. There’s no mental cost of wondering you can afford it forever. Instead, users just purchase what they need, and go on with life.
Final Thoughts
Google is doing something for the developers here, and, hopefully, bringing in a new stream of revenue for them. However, it does – naturally – come with the pretty generic “US only” limitation. Developers wishing to receive funds need a US-based Google Checkout account, even though in-app purchases can be made in 140 different countries.
Just as Google is offering the developer the tool (and the attractive 5% fee) to generate revenue, the developer is offering Google the critical mass of applications needed to successfully operate a platform such as Chrome OS. It’ll be interesting to see how this plays out, and whether in-app payments do offer some incentive for developers to join Google’s circle (get it?).