Juniper research has issued a new report predicting that in-game purchases are set to increase dramatically in the next few years driven in large part by consumer acceptance and the rapid adoption of smartphones. According to the report, in-game purchases will more than double from $2.1 billion in 2011 to $4.8 billion in 2016.

The report also credits the growth of in-game purchases to an increase in the number of game developers adopting the "freemium" model instead of a pay-per-download model. The freemium model allows users to download a free version of the app with some functionality reserved for paying customers.

According to the report, the model is attractive because free games are downloaded in greater volume, thus increasing the pool of users who may pay for additional content. Additionally, in-game purchases provide an easy way to reduce piracy, the report says, because the game itself can be downloaded for free while any incremental purchase must be verified via the developers’ server.

"An increasing number of games developers are finding the in-game purchase model attractive simply because it provides easy answers. Their piracy rate will drop and the game will see more downloads," said Charlotte Miller, the report's author, in a statement.

However, Miller said that even though some games may generate significant revenues from in-game items, it's not a model that works with all games.

"(D)evelopers have to tread a fine line between encouraging purchases and appearing to be exploitative," Miller said.

Additional findings in the report:

  • Social and casual games will be the majority of mobile games downloads.
  • Downloads for tablets will be a third of mobile games revenues by 2016.
  • Revenues for mobile games on featurephones will decrease by half by 2016.

For more stories like this visit the Trends/Statistics research center.

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