Yesterday, Apple announced that they would allow In App Purchases for free applications in the iTunes App Store.  Previously, In App Purchases were only available in paid applications.

Software As A Service

This will allow developers to shift away from the Software As A Product model to the Software As A Service model.  We have seen this shift on the Internet over the last decade with the rise of Web services.

Microsoft Office is a product but Google Docs is a service.  iWork is a product but iWork.com is a service.  iPhoto is a product but Flickr.com  and MobileMe is a service.

Going forward, we will see mobile applications integrate much more tightly with web and location services.

Freemium / Free-To-Play

Freemium is a business model that we have seen in the web services world.  Flickr is free for the most part.  A Flickr Pro account is $25/year and buys unlimited storage and analytics.

We will start seeing this model in the mobile application business.

This model is called Free To Play in the video game business.  Zynga allows you to play games like FarmVille for free.  However, you can purchase in-game currency such as coins and experience points.

Subscription

The big rumour is that Apple will release a tablet that will compete with the Amazon Kindle.  In App Purchases will allow magazines and newspapers to charge a subscription for content.  It makes sense that Apple would want to unify the way e-commerce works across all platforms and devices.