Interesting news from Apple (by way of Ars Technica). Seems they are lifting the restriction on in-app purchasing that limited it to paid apps, paving the way for, among other things, paid upgrades for free apps.
This addresses one of the long-standing concerns of both developers and consumers by eliminating any need for both a free “lite” version of a app to try and a paid version with full functionality. Now, developers can offer a single free app and make advanced or “pro” functionality available via in-app paid upgrades. Such a system is, of course, vulnerable to abuse by unscrupulous developers, but it doesn’t cost anything to delete a free app before paying for an upgrade.
This also enables content providers to offer free viewers or players for content purchased in-app, such as ebooks, music, and games. Ars recently ran an article about the success of Dungeons and Dragons Online after they switched to a free model with enhanced functionality via paid subscriptions and one-time fees, so there is definite potential for game makers here. Services like Evernote or Pandora could also benefit by offering premium upgrades within their free apps. I expect a whole lot of content and service providers to be sprinting forward with this.
Update: TechCrunch has reported that push notification app, Boxcar, has already moved to a free with paid upgrades model. The presentation makes the paid upgrade options very obvious, so there should be little confusion as to what you get for free and what you can add for a fee.
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