In-app purchases represent the majority of revenue share in the app stores today. So what exactly are they?

If you have ever played Candy Crush and bought an extra life or paid for a subscription to the NYTimes.com app, then you've experienced in-app purchases for yourself.

For the uninitiated, in-app purchases are optional items offered most frequently in freemium pricing strategies, but can also be offered in paid app pricing strategies as well. These "items" can be just about anything: a feature upgrade, a new sword for your character, a subscription for time-limited access, or just another chance to make it to the next level.

The powerful idea at play within in-app purchases is that they happen as easily as paying for an app. When coupled with a free version of the app, you get one-tap access to a purchase from a customerin the moment that the customer wants it,and after the customer has tried the experience. You get all the power of the app stores' revolutionary distribution channels and payment mechanisms (bypassing a critical component of most startups: e-commerce and merchant services, which is fairly complex for any product), and the customer gets to buy it with a single tap in the moment.

The key thing to remember is that in-app purchases are used fordigital goods only. You cannot offer things like a taxi ride directly through the in-app purchasing mechanism for your store. If you are doing that, you will need to have your customers enter their credit cards and setup your e-commerce platform yourself, which is out of the scope of this guide (though see chargify.com, stripe.com, and braintreepayments.com for platforms to integrate this more quickly).

If you are providing digital goods, such as feature upgrades, more space in a friends list, another free life, or a subscription to an ongoing service, then you should be aware of the two main archetypes of in-app purchases.

The first archetype is our personal favorite at Twin Engine Labs.The Subscriptionis a fantastic way to monetize, but is also the most difficult since it requires the user to receive value from the product every month. Sometimes, in consumer apps, this is a difficult monetization method because the app itself has useful features but may not provide that value over and over again.

Good subscription examples are those like the NYTimes.com, that give you full digital access for a premium, and then constantly churn out fresh, new, relevant content.

The key to remember with subscriptions is that you must provide enough satisfaction to your customer every single month so they feel good about paying the monthly charge. Each month, your customer has an opportunity to decide not to pay you again, so it's crucial you continuously deliver when charging subscription fees.

The second archetype is a common one seen in games, but is also often used in apps that have value-adding features.The Producthas two main types: aconsumable productand anon-consumable product. Both can be made available in either of the app stores.

Anon-consumable productmeans that it is a one-time-only purchase for the customer. These are most often seen in feature upgrades, level unlocks, or similar products.

An example of this was used when Twin Engine Labs offered a tool for the iPhone that allowed gamers to scan their game screen. They scanned their opponents during the pre-match loading, which automatically told the player proper countering techniques for them to try in the match.

This feature upgrade was a one-time purchase for $0.99, and is a great example of offering a useful but limited free product (browsing game data for free) to get users in the door, while converting customers to a more feature-rich experience behind an in-app purchase.

Aconsumable productmeans that it is a repeatable purchase. These arevery commonin games on the app store (extra lives, special types of items, etc), and very rare in non-gaming apps (though if you have examples, please let us know!).

Knowing the ways that the app stores help you monetize will aid you in crafting the right pricing strategy for your business model.