I think the link might require an ADC account, here's the text from the mail:

In App Purchase is being rapidly adopted by developers in their paid apps. Now you can use In App Purchase in your free apps to sell content, subscriptions, and digital services.

You can also simplify your development by creating a single version of your app that uses In App Purchase to unlock additional functionality, eliminating the need to create Lite versions of your app. Using In App Purchase in your app can also help combat some of the problems of software piracy by allowing you to verify In App Purchases.

Visit the App Store Resource Center for more details about how you can add In App Purchases to your free apps.

I will be happy to see the clutter of all the "Lite" apps disappear from the App Store.

With the race-to-the-bottom economy of the App Store, though, I have to wonder if Free will be the new $.99 and every app will have a screen that says, "Oh, you want wheels with this car?"

Edit: This also makes the Top Sellers list much less relevant. Maybe that will increase what people can actually charge for their apps? I hope so.

I think the "race to the bottom" was due to the initial confusion of the marketplace and lack of discipline. I am noticing many more apps charging greater than one dollar (usually 2-5) now than before and I expect the trend to continue.

I also think that apps that pull the trick you're referencing will probably get hit hard in the reviews section -- people get annoyed at that, and it tends to spark negative comments.

Yep - consider the flow. Sally installs Cool App, only to find out it asks her to pay to get the feature she wanted/was advertised/etc . She quits and goes to delete it, and the rating popup comes up - easy 1-star rating.

Interesting. I am getting slammed in reviews for having ads in my game but I have 900K unique users since June and make $150/day net (for doing nothing).

Perhaps I could integrate in-app purchases and disable the annoying ads per user once they purchase anything. That could get users invested in the possible stream of purchases, would remove complaints about ads, and could be lucrative.

Yet again I wonder who pays all these money for iPhone ads. That is something on the order of a $15 CPM for showing ads to whining anti-commercial (if fairly affluent) users.

Anyhow, I think you'll find that pathological users (i.e. ones who complain about ads) will not be improved by being told they have to pay money to play. They hate that notion, too, almost more than they hate your ads. If you switch to a free trial model, they'll hate that, too. They're unwilling to pay any price for your application.

This is one reason why I don't write software for these people.

iphone eCPM is around 0.50-0.70, and the typical demographic of an iphone user is an early 20 something.

I get a net ecpm of around $1.80 with Quattro.

What's your app?

I have a hypothesis about this change: that in-app purchases were not, in fact, being adopted as rapidly as Apple hoped, and this is their response.

Adding free apps opens up a lot of new uses for in-app purchases, and should drive more usage.

+1 with some proof: http://www.tuaw.com/2009/09/21/in-app-purchases-not-so-hot-f...

Hopefully it will lead to all of the obnoxious "Mafia Wars 10 Respect Points" apps getting out of the top listings for every games category.

Good move in some respects. It will help users try out the app before paying any money and it may help developers drive more sales.

OTH we need to see whether (as mrshoe said) whether "Free" becomes the new $0.99 and if this has adverse consequences (for developers in terms of sales and for users in terms of app quality). If the app is free, it will be easier for people to write fake reviews critical of the app. I don't see any risk of "bait and switch" apps because no one is going to take the upsell if they are unhappy with the app.

I paid AUS$9 this morning for a game, and I'm much happier to do that (pay upfront) than to keep being asked for $1 every few levels

I wonder how this will play out marketing-wise. It's already hard to find good applications, and this will make it harder. I never look at the 'free' section, as there's mostly just crap in there, and only look at the 'top 25'. If everybody starts using in-app purchases to sell the full versions, you can't separate the free crap from the useful stuff.

I'm curious, too. Will free apps that allow you to upgrade to the "Pro" version only be listed as a "Free" app? I see that as a definite disadvantage.

Good point. I also hope that Apple will include some kind of indicator in its listings so one can tell whether an app uses in-app purchasing.

Quick question

Currently, if I buy an app it's available for use on both my iPod and my wife's iPhone. With in-app purchasing, will purchases be reflected across both devices? If I upgrade from demo to full on one device, do I need to pay again on the other device?

This was very interesting news for us. Especially since we have had a 'lite' version of our app (comicstrips) in review for a month. Now only if we could change our paid app to free!

You can. Once you agree to the developer agreement, the "Free" option opens up on iTunes Connect. I spent a few hours tonight retrofitting my server to basically rejigger my app into a "trial mode" -- complete with no code changes in the app :)

Can you actually charge customers in-app if the app is free?

I thought Jobs said that free apps would "stay free" and would only be relevant for paid apps.

Now you can. And Steve Jobs talks a lot. Most of what he says is true, but only for the moment. Nothing wrong with that, just good to know.

This is how it used to work, and what the policy change is about.

That's a Scott Forstall quote; Jobs was still off sick at that time.

Interesting. This will make it possible to have servicing revenue models, with apps that are distributed for free.

So anyone has looked into how exactly In App purchases work and how they could help combat piracy?

has it been determined if purchase virtual currencies are allowed? the terms where a little confusing? have zynga, sgn etc reacted?

Virtual currencies are explicitly not allowed.

It's not that explicit. The terms talks about different kind of virtual currencies, my understanding is that "consumables" are allowed, as long as your currency isn't trad-able back to real money

No, it's not consumables. Virtual currency is anything which you can then trade for something else in-game. And that's not allowed.