By Stewart Tongue

YNOT – A new study from Juniper Research predicts in-app purchases will generate $3 billion annually by 2016. The figure represents an enormous leap of nearly 1,000 percent over 2012 levels ($310 million).

Tablet-optimized games will account for a majority of the increase, Juniper analysts indicated, but other app developers will play into the picture, as well.

Gaming continues to be a very strong sector for app developers; consequently, monetization methods evolve quickly. Initially, the dominant financial model consisted of a one-time fee to access a downloadable game. Developers soon discovered that lack of a continuing revenue stream left them underfunded to meet gamers’ expectation of continued development for the product. Without new content and software updates to address evolving device operating systems and hardware, gamers rebelled.

In response, developers tried various kinds of recurring subscriptions — with limited success.

In the most popular model to date, game designers incorporate in-game currencies and extras that can be purchased from within the app. The solution has proved beneficial for both consumers and developers: Game apps create a fluid revenue stream that funds constant development, and consumers pay only for things they really want without fear of being stuck with a stale or static product.

Juniper’s analysts predict that by 2016, the primary financial model will shift again, this time to a “freemium” approach that already is gaining in popularity. Freemium products are free to download and play, but advancing to new levels, overcoming some obstacles more quickly and unlocking special content require payment (often micropayments that can be combined to build stores of in-game currency). From a developer standpoint, the key benefit of the freemium model is that only a small fraction of “power users” must pay in order to fund both future development and continued play by those who pay nothing. Ideally, free players contribute by spreading word-of-mouth about the product. The challenge for developers is generating excitement about and desire for in-game premiums that cost.

It’s worth noting that adult-entertainment apps, at least in theory, are not all that different from mobile games.