Bango forecasts that in-application charging in 2011 will grow more than 600 percent to account for close to 30 percent of all mobile application payments.

Expectations for in-application payments are high, with many people in the industry seeing mobile applications as the perfect catalyst for this kind of micro-charging model. But in-application billing adoption has been slower than predicted—Bango reports that less than 5 percent of payments billed through its mobile payments platform in 2010 were of this in-application variety.

“In the industry in-app billing has been talked about for a while, and it’s been seen as the answer for developers to generate revenue from their mobile apps,” said Vanessa Daly, marketing communications manager at Bango, Cambridge, England. “Despite this, adoption has been slower than we all thought, with only a few developers experimenting with this payment model.

“Less than 5 percent of the revenue from mobile applications we see through our system has been from in-app channels,” she said. “In-app billing maximizes distribution and conversion rates in cluttered app stores, which as a result brings more money to the developer and of course the App Store, but still only a few app stores are starting to experiment with this payment method.

“Surprisingly, app stores have been very slow at solving their technical limitations, which has meant they haven’t been able to offer this functionality—but with the removal of these limitations already starting to happen, we forecast that 2011 will see a revenue growth of 600 percent.”

Bango provides the technology that enables commerce for businesses targeting the growing market of Internet-enabled mobile phone users. Bango’s products collect payment from mobile users for online content and services and provide analytics for mobile marketing campaigns and sites.

App boom
Demand for mobile applications has soared during 2010. Today’s smartphones have access to thousands of third-party applications, accelerating consumption and in turn driving more smartphone sales.

Boosted by the smartphone wars and tablet devices from Research In Motion, Samsung, Dell, Acer, Sharp and others, the number of mobile application downloads is predicted to rise to almost 50 billion by 2012, according to Chetan Sharma’s “Sizing Up the Mobile App Market” report.

A simple summation of the “daily download” figures claimed by major handset manufacturer application store providers suggests that now, in 2010, downloads are already close to 20 million applications every day.

But when it comes to the subject of how all these mobile applications are being monetized, the picture is not as clear.

Most serious developers have a premium model attached to application distribution.

In other words, at some point the end user pays.

In the mobile market, in-application billing as a charging model has been talked about for a long time.

This is the idea that the download happens without charge, but continued use of the application, or particular application features, would trigger a charge to the consumer.

The thought is that this model provides for unobstructed access to the application to maximize distribution, followed by payment at the optimal time of usage, to maximize conversion rates.

One reason has been the application stores’ technical limitations, according to Bango. Most do not offer the functionality to enable payments from within the application.

But this limitation is starting to be lifted as application stores experiment to drive more revenue.

For example, RIM announced in September in-application billing support in early 2011.

“As the app stores’ limitations start to be lifted, brands, publishers and developers need to start experimenting more with in-app charging models and minimize their over-reliance on mobile advertising revenue,” Ms. Daly said.

“Users are used to getting free pieces of mobile content and pay to upgrade later,” she said. “Today’s market is perfect for experimenting.”

Micropayments driving revenue
According to Bango, the platform battle next year will focus on developers as much as users.

Developers will need to determine which of the application platforms to prioritize for development and distribution.

Those that deliver the most revenue will capture greatest mind-share.

Bango forecasts that for 2011 in-application charging will grow more than 600 percent to account for close to 30 percent of all mobile application payments.

The forecast is based on end-of-year trends from leading developers in the games, music and broadcasting segments.

Near-term, the developers and publishers who monetize regular use of the application—streamed video and audio, games, news and alerts—will most readily capitalize on in-application payment features.

Bango is also working with music and print publishers that are looking to develop revenue models beyond simple subscription-based paywalls.

Here, the ability to charge per-play, per-video or even per-page, opens up many new possibilities.

Today, in-application payment models are starting to spread.

Touchnote Inc. uses Bango’s in-app billing solution for its digital greeting card service.

The company enables customers to download the application for free and then charges users for generating and sending post cards.

Touchnote, available for download for the iPhone, Nokia, Windows 7 and Android devices, has proven this model to be very popular with consumers in these application stores.

Tablets like RIM’s PlayBook, supporting a front-facing camera could, at last, unlock video-calling opportunities.

Applications will look for the best available broadband connection—wireless or carrier—and bill from within the application based on usage.

The year 2011, Bango believes, will see many more such innovations and greater experimentation with in-application revenue models from the mainstream media and content publishers.

What is driving growth in the adoption of in-application payments by consumers?

“When users download an app for free, whether is a game or a news app they know that at some point they might have to pay to either upgrade or get extra features for example,” Ms. Daly said.

“At this stage in-app billing as a payment model offers ease of use, convenience and a seamless payment experience, which is helping drive the adoption of this payment method by consumers,” she said.

Final Take
Bango mobile credit card payment