What is an in-app purchase (IAP)?

The types

• Consumable. Used up and repurchasable — currency, credits, boosts.
• Non-consumable. Bought once and owned permanently — an unlock, a feature, removal of advertising.
• Auto-renewing subscription. Recurring access, the dominant model in software.
• Non-renewing subscription. Time-limited access that does not renew automatically.

The commission

Platforms take a percentage of in-app purchases, historically 30% with reduced rates for smaller developers and for subscriptions after the first year. Regulatory action in several jurisdictions has begun to force alternative payment options, with the rules varying by market and still changing.

The commission is the single largest input to app monetisation economics. It determines what price points work, whether subscriptions or one-off purchases make more sense, and whether it is worth routing purchases to the web where platform rules permit.

Why revenue is so concentrated

In most consumer apps and games, a very small minority of users produce the large majority of purchase revenue. That is not a failure of the other users; it is the normal distribution of willingness to pay in a free-to-play product.

Two consequences follow. ARPU alone describes the business badly, and ARPPU — revenue per *paying* user — has to be read alongside it. And the free tier is an acquisition and retention mechanism rather than a cost to be minimised, since it produces the base from which the paying minority emerges.

For AI products this interacts with a complication games did not have: the free tier has real marginal inference cost, so generosity is directly expensive — see monetization.