ePayments Week: Freemium is fruitful for mobile games

In-app purchases make free games pay, and iOS 5 reportedly adds facial recognition.

Here’s a few payment stories that caught my attention this week.

Freemium revenue rises

In-App purchaseA report this week from Flurry Analytics, which tracks mobile games and other apps, says the freemium (also called free-to-play) model is rapidly becoming the dominant track for generating revenues from mobile games. Earlier this month Flurry had reported that the percentage of revenue from freemium games (free download, then in-app purchases for new capabilities or levels) in Apple’s U.S. App Store had jumped from 39% in January to 65% in June. This week, Flurry’s general manager of games Jeferson Valadares, followed up on that report with a post noting that the average in-app purchase in a freemium game is $14. Averages can be tricky, and a small share of high-end purchases pulls this amount higher than we might otherwise expect. Looking closer at the stats, 71% of transactions are for less than $10, 16% are between $10 and $20, and 13% are for more than $20. Up at the high end, 5% of the transactions are for $50 or more.

All of this revenue comes from the 0.5% to 6% of players who make even a single in-app purchase on these free-to-pay apps; the rest never get engaged enough to pay for it. But Valadares and Fierce Developer’s Jason Ankeny both note that the revenue from this small percentage is now greater than it might have been had developers charged $0.99 for their games. In other words, a free download followed by in-app purchase makes it possible to create the widest possible opening of the funnel to find a large group of hardcore gamers willing to engage at a deeper level with a game — $14 deep, on average.

Flurry estimates that game revenue on iOS and Android platforms will top $1 billion in 2011 — a symbolic number that should help mobile developers gain a little respect from the old-guard gaming platforms, whose executives have, from time to time, dissed mobile games for lacking the excitement of console games. To help make sense of the various platforms, Gamasutra published this week a rundown of pros and cons for the two leading smartphone platforms and Windows Mobile, with insights from leading game developers about the relative pain points of each.

Report: iOS 5 to offer facial-recognition APIs

Last week I reported on common iPhone passcodes and lamented there was no easy way to put more sophisticated technology to work in securing the data in increasingly important smartphones. One reader commented that biometrics would be a welcome addition. This week there’s news that Apple is moving quickly in that direction. Apple-watching site 9to5Mac reports that iOS 5 will include facial recognition as a public developer API for iOS 5 applications. So don’t expect to see it soon as a security preference in the iPhone’s settings, but we might see third-party apps with a biometric lock available at some point, perhaps this fall. 9to5mac also reports that the technology is most likely from Swedish facial-recognition developer Polar Rose, which Apple acquired in 2010.

Here’s a video showing the Polar Rose tech in action:

Credit cards on webcam: Payment through video capture

This isn’t exactly what we meant by swipe-and-pay, but mobile payments start-up Jumio introduced this week another new way to pay online with old credit card technology. Jumio’s Netswipe would let a consumer pay for goods and services purchased online by holding their physical credit card up to the webcam on their computer. The idea isn’t just to capture the 16-digit credit card number. Netswipe uses video streaming to guard against fraud detection, noting characteristics of the card, including how the letters are raised, its size and depth, and even what material it appears to be made of. Tapping in your 3-digit CVV code from the back of the card adds yet another layer of security. Netswipe forces users to mouse-and-click on a graphical keyboard rather than keying in the numbers, for further security against automated hacks. A mobile version supporting smartphone cameras is planned for later this summer.

Here’s a demo of Netswipe:

Got news?

News tips and suggestions are always welcome, so please send them along.

If you’re interested in learning more about the payment development space, check out PayPal X DevZone, a collaboration between O’Reilly and PayPal.


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