# In-App Purchasing: Definition, Conveniences, and Securities Risks

## What Is In-App Purchasing?

In-app purchasing refers to the buying of goods and services from inside an application on a mobile device, such as a smartphone or tablet. In-app purchases allow developers to provide their applications for free. The developer then advertises upgrades to the paid version, paid feature unlocks, special items for sale, or even [ads](https://www.investopedia.com/terms/m/mobile-advertising.asp) other apps and services to anyone who downloads the free version. This allows the developer to profit despite giving the basic app itself away for free.

### Key Takeaways

*   In-app purchasing refers to the buying of goods and services from inside an application on a mobile device, such as a smartphone or tablet.
*   In-app purchases allow developers to provide their applications for free.
*   Because in-app purchases are conducted through a mobile device, unauthorized purchases can result in security issues.

## Understanding In-App Purchasing

In-app purchasing allows application owners the ability to upsell​ application users from within the application itself, rather than through other marketing channels. For example, a game application may offer the user the ability to skip a particularly difficult level for a fee or the owner may provide consumers with the ability to view premium content that is behind a pay-wall.

The developer hopes to make enough money from these small transactions and the advertising revenue to cover the costs of creating and maintaining the app.

> **Important**
>
> The most common type of in-app purchase is to pay for the ad-free version or the full version of an app.

## Special Considerations

Application stores, such as [Google Play](https://www.investopedia.com/how-google-plans-to-beat-apple-in-video-games-4771543) or [iTunes](https://www.investopedia.com/company-profiles-4689825), allow users to download applications with in-app purchasing, but they typically let the user know that an application has this feature. Some have policies allowing refunds if they are requested soon after a purchase is made. Application stores often [take a percentage of the in-app sales](https://www.investopedia.com/apple-anti-trust-cases-what-they-mean-for-you-11730298).

In-app purchases are part of a [freemium](https://www.investopedia.com/terms/f/freemium.asp) model for monetizing mobile applications or content. Consumers making purchases through an application do not have to visit a separate website to conduct the transaction. In fact, attempting to conduct a sale by redirecting to an external website violates the terms of most application stores as it prevents them from collecting a [commission](https://www.investopedia.com/terms/c/commission.asp). 

## Criticism of In-App Purchasing

Because in-app purchases are conducted through a mobile device, unauthorized purchases can result in security issues. This is especially the case if the username and password used in the application are not strong or [credit card information](https://www.investopedia.com/terms/c/credit-card-encryption.asp) is stored in the app in an insecure manner. Many applications will email a receipt after a purchase is made, which can allow a fraudulent purchase to be stopped.

There are no overarching guidelines for in-app purchasing, but regulators have taken a keen interest in in-app purchasing. One of the primary reasons for this is that many children have access to smartphones. Many of the optimization schemes in these apps result in children making in-app purchases that their parents do not want or may not immediately notice in time to reverse.

Parents, and by extension regulators, have noticed that the optimization of these in-app purchasing ads appears to target children in particular. Advertising in a way designed to take advantage of kids for a profit tends to be frowned upon, but it is governed more by ethics and codes than specific regulations or laws.