Little Fingers, Big Purchases: Guarding Against "In-App" Spending

Watch out for those flashy icons and banner ads promising extra content in game apps for kids. When little eyes see them, Mom or Dad's credit card bill could go through the roof.

A slew of recent news reports have shown just how easy it is for young kids to make expensive "in-app purchases," or IAPs, while playing games on mobile devices, and just how much their parents are paying for it.

In a recent piece in The Guardian on kids using iPhones and iPads, reporter Mark King tells the story of a 6-year-old boy who spent 160 pounds (roughly 240 U.S. dollars) on "Smurf Village credits" for the Smurfs' Village game in a matter of 15 minutes.

The child was able to do this because under current rules on Apple's iTunes, after a user first enters a password to make a purchase, there's a 15-minute window to make additional purchases without being prompted to re-enter the password.

Chris Brown, the boy's father, tells The Guardian his tale of app (and Apple) woe: "I contacted Apple and discovered I wasn't the only naive parent in the world. This is a common occurrence and Apple refused to issue any kind of refund. Needless to say that I have now disabled all in-app purchases on my devices. Lesson learned."

Such stories of parents surprised by monster bills for online gaming are on the rise everywhere (see this piece from Ireland, where one grandfather was left holding a pretty big bag).

"App developers are not often altruistic," Spencer Whitman of the firm AppCertain told The Guardian's King. "They often include in-app purchases hidden behind the free price tag. Either they offer a small amount of play, then charge for continued use; offer in-app purchases for more in-game content such as extra areas of play or upgrades; or they constantly interrupt game play to ask for in-app purchases."

Indeed, the "freemium" mobile app business model — in which the app itself is free but users are charged for additional content or functions — is highly effective. It's quickly becoming the standard for developers as revenue growth for freemium apps explodes.

In-app purchases will in fact drive 41% of app store revenues by 2016, up from just 10% in 2012, according to forecasts by Gartner Analysts, King reports. A Juniper Research forecast out this week said tablet users alone will generate $3.03 billion each year via IAPs by 2016 — a tenfold increase from the $301 million generated in 2012. Smartphone users will spend $6 billion on IAPs in 2016, Juniper forecasts.

King and others offer tips on protecting against costly IAPs.These include: Put a mobile device in "airplane" mode or turn off the Internet when your little one is using it. Link your app store account to a gift card instead of a credit card to limit the amount that can be spent. Require the account password to make any purchase.

And watch out for that in-app advertising. In another Guardian piece, out last week, King reports on an ad in a new app for a popular kids series that enticed kids to sign up for a subscription service for additional content — for a mere 208 pounds a year (about 315 U.S. dollars). The ad, on the Talking Friends Cartoons app for iPhones, iPad and Android devices, was pulled shortly after the app launched this month. (For more on this controversy, see this post on Apps Playground.)

Another new app, Dino Land from National Geographic, also stirred up controversy this month over an in-app extra in which kids can buy virtual "bones" for as much as 69.99 pounds (and apparently the same amount in dollars), King reports. (See Apps Playground again for more in-depth discussion.)

In the U.S., the Federal Trade Commission is looking closely at mobile apps designed for children. They put out not one but two reports last year on privacy concerns surrounding children's apps (see the earlier post on this blog "2012 Was an Interesting Year"). The warning is clear to developers: They should pay close attention to advertising rules and policies — and to a basic sense of what's right and wrong — when it comes to apps for kids. If they don't, they could be facing a major "app-lash" one day soon.