Content providers have a new way to make money from the
iPhone. Apple has announced that free apps can now have a microtransaction

That might not sound real significant at first blush. Apple
has let paid apps sell small items for nominal amounts for a while now (The
top-selling “Tap Tap Revenge 3” game, for example, sells a six-pack of
additional songs for $2.99.) This is just an extension of that policy, right?

On the surface, sure, but this also makes upconverting users
of free demos a much easier process – as it’s something that can be done within
the demo itself, rather than requiring users to exit, search for the product in
the App store and hope they don’t lose momentum (or get distracted by something
else) along the way.

It’s also a handy way to make money off of apps that aren’t
looking to convert people to a premium version. Studios, for instance, that offer
free apps promoting elements of an upcoming film could charge for ringtones or
exclusive clips.

Naysayers call it nickel-and-diming, but the long tail
potential of these small transactions is considerable. Korea and China have built
an entire gaming industry off of them – giving away the core game for free, but
charging players for little things like armor and weapon upgrades.


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