UPDATED 14:32 EDT / JULY 28 2011

In-App Purchases Bring in Big Bucks for Small Game Developers

Mobile gaming is expanding as social games leader ngmoco, a DeNA company, announced that its Mobage social games platform for Android has been released in English-speaking countries around the world; the service is slated to expand to other territories and mobile platforms soon. Completing this first stage of a global rollout, today DeNA also announced the launch of Mobage for Android in China.

“Mobage’s release outside of Japan marks the next step in our company’s global expansion,” said Neil Young, CEO, ngmoco, and Executive Officer, DeNA.

“The opportunity in front of us is to build Mobage into the definitive destination for games and entertainment across territories and mobile operating systems. We’re tremendously excited about the potential for the platform, both as a great way for players to experience the very best games and for developers to access a global audience easily and effectively.”

So, here’s the situation: you’re bored so you get your Apple or Android device and you decide start playing, an ad pops up about another game that interests you, so you click on it and purchase it – another game for you to enjoy, just like that.  Or, you’re playing a farming game, need a new tractor to plow crops faster, and want to purchase one directly in the game.  It doesn’t seem like a big deal, but recent study shows that in-app purchases average about $14 per person, marking a very lucrative revenue stream around virtual goods.  And with mobile gaming at its highest, game developers are seeing some high returns on this emerging business opportunity.

By the end of 2011, Flurry estimates that total U.S. iOS and Android game revenue will surpass $1 billion.  Digital distribution has already affected notable Media & Entertainment industries including film, newspaper, television, music and books.  The video game industry is no exception, with portable gaming already feeling the impact. The key to any business playing in this space, whether incumbent or challenger, will be to understand and command consumer engagement, and turn that engagement into revenue.  The freemium business model on mobile, enabled by a device that is always with consumers and always connected, is unlocking profound new ways to deliver value and extract revenue from consumers, and for far more than just $1 at a time.

This may be the reason for Apple blocking in-app purchases, but the weird thing is, they’ve only done this with e-books and not in gaming.  Apple recently booted Google Books from their App Store and it’s hard not to think that it’s because to Pottermore is set for an exclusive release on Android devices.  Jealous much, Apple?

“When all is said and done, Apple’s iBooks will be the only iOS app that will allow you to buy e-books directly from within the app. But at least Apple has allowed e-reading apps from other companies to remain in the App Store. You can choose to see that as a magnanimous gesture — or not.” CNET’s David Carnoy wrote.

It makes one think that though not all in-app purchases in e-books have been blocked, just those from the big guns like Amazon, Kobo and Barnes & Noble, Apple can do the same thing with gaming.  Is Apple out to monopolize the app world?  If so, they may end up losing app developers as Android devices seem more open to doing business with all sorts of app developers, undercutting Apple’s revenue-sharing scheme.


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