Ronnie05's Blog

Apple: Of mobile and web payments and virtual currencies. The future of money transaction

Posted in Revenues and Monetization, Value added services and applications by Manas Ganguly on November 30, 2010

Apple for a while has been rumored to be interested in and working on mobile payments. Given the strength of Apple’s great innovation track record and the influence that Apple products wield over the industry, technology and the eco-system, Apple’s interest in Mobile payments is noteworthy. Time and again, repeatedly, Apple has brought forth innovations in various segments it has operated in viz. smartphones (iPhone), Tablets (iPad), Application (Apps store), Music (iTunes and iPod). Given Apple’s stake in Web 2.0 and Mobile 2.0 technologies, a mobile payment platform is a natural extension, a transaction enabler and the missing piece of the monetization game.

Not that Apple is new to the game. They are already doing mobile payments since they launched the iPhone. Their solution is built on an existing payment relationship – iTunes to download music on the web. Apple’s 160 million iTunes users outweigh Paypal’s 90 million.

Contactless payments or Near Field Communication chip iPhones could open up payments and they could help create new business models for in store payments. This could also couple with location based ads and other applications. Apple drove the development of new business models with the music and smart phones – depending on what they do they could change the rules by which different players interact to do payment and commerce. So they have the potential to move the NFC world forward significantly by developing a new tapestry of the hardware, software and business models to move it forward. While NFC has been on the horizon for a while with sporadic trials by Obopay and others, Apple moving into this space should ignite the market. Apple’s moves will have particularly powerful impact, and the only other player who is also mulling contactless payment solutions at this point is Google.

Apart from Contactless payments, Apple is also trying to specialize in allowing users to use their mobile phone number to purchase digital content on the web using their phone number and their phone bill. Boku, a gateway specialist in Mobile carrier billing is rumored to be in talks with Apple for a possible acquisition.

Then there is this talk of Apple trying to create an online Virtual currency much like the Facebook credits for the Application and iTunes purchases. There are significant volumes in there for Apple and again the eco-system is pretty well set and Apple would only need to put the online currency in place for this transaction system to talk off as well. This would mostly cater to P2P payments transfer, casual payments, payments to individual merchants, cross border remittances and check replacement. In markets where P2P is fully implemented it represents over 50% of the mobile payment transactions. This is a big opportunity and right in Obopay’s sweet spot.

Apple is already big in mobile payments with iTunes and Apps store and Apple would sooner be looking to leverage this play into a bigger pie of online and instore payments.

Facebook Credits: Gathering Momentum

Posted in Social context, media and advertising by Manas Ganguly on November 15, 2010

Facebook and Apple (notably) have a online payment skirmish lined up next in the scheme of things. At stake for both these companies is the upper hand in crucial ‘points of control’ across the Internet Economy, Online Payments. While I have covered Facebook credits in two of my earlier posts, this post is to profile the continuum in FB Credits program. I would also be featuring Apple’s efforts in mobile based payments in a later post.

Facebook will generate more than $1 billion in sales from virtual goods this year, and approach $2 billion next year. Facebook had introduced Facebook Credits as a enabler of online transactions. Currently, there are more than 200 games and applications from 75 developers that accept Facebook Credits for those virtual goods, including 22 of the 25 most popular social games.Facebook credits can buy virtual goods from more than 200 applications on the Facebook platform, like special crop seeds or enhanced tractors in the otherwise free-to-play social game FarmVille. Credits have now moved into the physical world as well. Recently, Safeway Stores joined Target, Best Buy and Walmart in selling Facebook Credit gift cards, just in time for them to become a stocking stuffer for the onrushing holiday shopping season. Facebook is ramping up its repertoire of services which accept Facebook credits and features the following currently

• Zynga: Farmville
• Electronic Arts: Pet Society, Restaurant City and FIFA Superstars
• Family Tree: Non Game Apps
• Hallmark Social Calendar: Non Game Apps
• Stand up-to Cancer: Charitable organizations
• Nothing but nets: Charitable Organizations

Facebook Credits also have the potential to become a universal online currency that crosses both applications and country borders, not to mention a multibillion-dollar revenue source for Facebook, which takes a 30 percent cut of each transaction. future currency used by publishers of digital content like news and video. Facebook is only taking baby steps. However the potential of Facebook Credits is far from being properly and fully understood. As Facebook Credits increases in usage, Facebook will begin to look and feel like its own economy. FB is slowly expanding its list of developers who can “just plug into Facebook Credits” and not have to worry about creating their own payment system. Social gaming is just the first industry to be affected, but a number of verticals will break through

Airline tickets or other big-ticket purchases may not be practical for Facebook Credits. But news site publishers, for example, could use Facebook Credits to get readers to buy access to an important story or a special video. And music is a very social phenomenon. iTunes has tasted enormous success in the micro-payments space to sell 99-cent songs on iTunes at a time when downloading songs for free was all the rage. Facebook Credits account is charged for the value of a virtual item that in real currency might cost only a few cents each.

As Facebook becomes a bigger part of the user’s shopping and purchasing activities as well as an even greater part of their communications activities, Facebook credits will ascend in number of transactions and acceptance by more and more vendors, publishers, developers and e-commerce platforms.

Zynga: The advent of social Gaming

Posted in Gaming by Manas Ganguly on September 28, 2010

Zynga is to Social gaming what Google and Facebook are to Search and Social networking. In partnership with Facebook, Zynga has metamorphosed into the largest internet social gaming platform. Facebook and Zynga have a symbiotic relationship. While Facebook provides Zynga the scale in terms of its 500 million account holders, Zynga provides the stickiness to Facebook usage. Together, Facebook and Zynga are now instrumental in staging out the first global virtual currency, the Facebook Credits. Zynga, based in San Francisco, is the largest maker of games on Facebook, and is expected to record revenue of as much as $500 million this year, according to Inside Network. Zynga has more than 200 million monthly active users, with between 1 percent and 3 percent paying for virtual items.

In a Tech Crunch event, Disrupt, Internet Evangelist and Investor, Bing Gordon, who founded gaming giant Electronic Arts prior to joining KPCB, recalled what made him think that Zynga would be a massive success. Gordon said that, years ago, he anticipated that there would be four disruptive trends in the game industry: social, analytics, an “APIable Internet” (app economy), and new payment methods. But he’d previously thought of each of these as separate entities, not something that would be combined into a single company. Then he saw what Mark Pincus was onto with Zynga — which he says combined these “four disruptions in one”.

Mark Pincus, CEO Zynga, in the same event, stated that Zynga is still far from being an Internet treasure, at least in the way he defines one. The way he defines an internet treasure is about adding a new meaning to the “daily grind” of the lives of the users. I suspect if that be the statement, Pincus has more on his mind then just the farming games to “add a new meaning to the daily grind of the lives of the users”.

As of Today, Zynga is a part of a new concept that is starting to take wings: Virtal Goods. The U.S. virtual-goods market may grow more than 30 percent in 2011 as games on consoles and mobile devices replicate the success of applications on Facebook Inc. The market will jump to $2.1 billion next year from $1.6 billion in 2010 and $1.1 billion in 2009, as quoted by Inside Network. Companies such as Nintendo and Ngcomo are following suit after Zynga added the new dimension to virtual goods on social games. The objective is to get more and more engaged users into paying for virtual goods. Social Gaming now accounts 40% of the virtual goods market with Zynga, Electronic Arts and Walt Disney Co making up half of the social gaming market for next year.

Online Gaming In India
Online gaming in India is rapidly expanding. Forty one percent of active Internet users played online games in 2008, up 89 percent from the previous year, according to the Internet & Mobile Association of India. With more than 81 million Internet users, India is projected to become the third largest online market behind China and the U.S. by 2013.

Virtual Currency: Powering on-line transactions

Posted in Revenues and Monetization, Value added services and applications by Manas Ganguly on September 23, 2010

As discussed about in an earlier blog, when increasing majorities of our lives are going online, and online behavior and habits will increasingly get transactional such as buying goods and products. Due to the global nature of the domain itself, purchasing and buying will be greatly facilitated by a virtual online currency, for procuring virtual goods and services online. Sales of virtual goods are projected to reach $1.6 billion this year in the United States alone, according to an Inside Network report. About half of that will be spent on social games, and the majority of that in Facebook games such as Farmville. Facebook Credits is one of the first virtual online currencies that promises to be a billion dollar business soon in the days to come.

Facebook Credit Gift Cards

Facebook is taking its first steps to becoming a dominant player in the virtual currency space and is expected to face stiff competition from Apple, Google and Paypal. Currently Facebook credits is the “funny” money that is used to pay for things on Facebook from online magazines to Farmville turnips. Going forward this “Funny” money may have serious relevance to a lot more than Facebook fun elements. Right now, most virtual goods are acquired within games, but music, movies, and other forms of content could follow suit, increasing the stakes in the race to reduce the friction affecting in-app transactions. Paying Consumers (Through Virtual currency) for watching online video ads or service registration is another way of transacting “funny money”

Facebook already has a big advantage over those companies: a virtual currency, Facebook Credits, that works across different apps rather than being tied to one specific app or another. The other fact that also provides the edge to Facebook in terms of virtual currency is the way they have migrated their partner game and application publishers: Zynga, Playdom, Playfish, Crowdstar, RockYou to Facebook credits. Zynga, the Farmville creator has already been selling over $1 million-worth of virtual credits per day as early as April. Because of the relationship that Facebook has with publishers, it has been able to have every single major publisher switch to Facebook Credits. This provides enormous traction to the platform in its very early days.

The significant other players who could challenge Facebook on the virtual currency platform are Apple and Google. Apple with its 250K apps and iTunes store already has a platform ready through which it needs to integrate its virtual currency. Apple also has the experience and the competency in terms of real time selling of their virtual goods i.e selling iTunes through payment gateways and pre-paid gift cards. Google hasn’t reported much on the virtual currency but with allies like Google Checkout, YouTube, Google Books; Google also has a very strong base for building a virtual currency framework which would integrate into its online merchandise pretty well.

Emergence of more than 2 virtual currency platforms can create complications for developers. App users and gamers will then have to maintain stockpiles of multiple virtual currencies, one for each platform on which they wish to access the same cloud-based app or game which could be a bit of muddle. However, ignoring/non-participation this platform could be a foolish tactic because as and when the Virtual currency platforms reach critical mass and thresholds, would mean lost opportunities and failing to encash on the opportunity !

The Global Virtual Currency courtesy Facebook

Posted in Social context, media and advertising by Manas Ganguly on July 23, 2010

Profiling Facebook’s attempt at Virtual Global Currency: Unveiling Facebook Credits

Even while Facebook has crossed 500 million mark, it has lacked a consistent mechanism for turning the user/follower legions to dollars. Banner advertising in most cases doesn’t provide a worthwhile return on investment internationally.

With an eye on its revenue engines, Facebook has also declared that it will now roll its Credits programme beyond its Beta confines. The network-wide rollout of the virtual currency application would streamline transactions online and, in effect, pave the path to the world’s first global currency. It’s also going to help Facebook scale one of its last major economic hurdles – monetizing its millions of international users. Now translated into more than 100 languages, Facebook will do more than $1 billion in revenue this year

The potential implications of a virtual global currency are staggering, if not difficult to pin down precisely. Facebook users have already shown a willingness to shell out for virtual goods in online games like FarmVille and Mafia Wars. The software company behind these, Zynga, is expected to make more than $450 million this year, the bulk from virtual purchases. With a Facebook credits program, users both domestic and abroad may soon be purchasing real goods through companies that utilize Facebook Connect. The benefits of One-click purchasing for targeted Facebook ads could be enormous: Advertisers and social marketers might have unprecedented access to real-time data on spending patterns and international purchases. Mobile carriers stand to benefit, too, as international consumers are increasingly more adept at using smartphones for financial transactions. A virtual currency could also be a boon to entrepreneurs in developing nations. Consumers could use credits to purchase directly from artisans in Brazil or Thailand. That may require Facebook to ultimately abandon the dollar as its exchange root, but it certainly presents a unique opportunity for micropayments to blossom.

There’s increasing chatter about Facebook giving Google a run for its money. But in some ways it may also carry the torch once wielded by PayPal, which held a similar vision of a truly global currency.