Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. (More…)
An IDC report released this week indicates that smart device shipments broke records in Q3 2012, reaching 303.6 million and are expected to grow to 362 million in the holiday quarter. This statistic coupled with the fact that smartphone users worldwide will download more than 45 billion apps this year, almost twice as many as last year according to the research group Gartner, makes for a truly exploding market. The industry is expected to grow from 31 billion downloads in 2011 to 66 billion downloads by 2016, an annual growth rate of 20% over the next five years.
As I indicated in my previous post, mobile app search is becoming a critical component for any company in the mobile sector. Google (GOOG), Microsoft (MSFT), Apple (AAPL) and Amazon (AMZN) all understand this and are doing their utmost to make apps as easy to find as possible on their respective platforms. Of equal importance, and somewhat overlooked, is app discovery. Finding an app that is of interest is rewarding, however discovering similar apps you may not have even thought of can sometimes feel like striking gold. Mimvi (MIMV.OB) understands this, and has just launched the Mimvi app discovery and recommendation engine on Microsoft Windows Phone 8 platform with versions for the iOS and Android platforms to follow. Meanwhile, Berlin, Germany-based Xyologic announced an international app search partnership with phone maker Nokia (NOK) that is designed to help Lumia smartphone owners discover Windows Phone apps based on the iOS and Android apps they know and like.
Once users have found an app they want, the next logical part of the process is making it as easy as possible for users to perform in-app transactions. So-called “carrier or operator” billing enables this by allowing users to purchase a product or service on their mobile device and have it charged directly to their phone bill. This type of carrier billing has been popular in Europe for some time, allowing users to pay for myriad services and products with their mobile devices.
Google just signed a deal with mobile carrier billing company Bango to bring carrier billing to Google Play, beginning in Australia. The deal could be a vital factor in driving up conversions and revenue for Android developers. Despite its greater market share, Google’s mobile platform generates significantly less revenue and fewer paid customers than rival Apple’s iOS. In a press release, Bango CEO Ray Anderson suggested that carrier billing could be a big step in helping Android developers monetize their products. “As user numbers soar, we will see an increasing flow of developer talent and compelling content channeled through Google Play,” said Anderson. “We’re expecting that operator billing from Bango will boost conversion rates and developer monetization.” A study by Flurry, a leading mobile analytics firm, in March of this year concluded that for the same number of users per platform, every $1.00 generated in the Apple App Store, will generate $0.89 in the Amazon Appstore and $0.23 in Google Play. Google has been working on making carrier billing an option for customers, so they don’t need a credit card to buy an app or to pay for in-app purchases, for the past few years. In October, Verizon (VZ) became the last of the major U.S. carriers to adopt carrier billing. ATT (T), Sprint (S) and T-Mobile have all been accepting charges for quite some time.
Mobile Payment Sector
There is plenty of action in the world of mobile transactions right now. Here are some of the other companies that are striving to make mobile transactions as seamless as possible. Square has introduced a new way to send gift cards. Using Square wallet, you can go through the businesses that use Square, pick the right one for your gift and then purchase a gift card in the amount that you choose. Then you can send the gift card to your friend or family member by email. When someone buys you a gift card and you have Square wallet installed, it’ll pop up in your Passbook in iOS 6. Square recently raised $25 million in funding, led by its new partner Starbucks and is being integrated into all 7,000 of the U.S. Starbucks stores. With Starbucks gift cards as popular as they are, Square’s payment infrastructure could be very busy indeed this holiday season. The company is already processing $10 billion in payments annually (not including the Starbucks partnership.)
Cardfree announced that it has raised $10 million in Series A funding from Jeffrey Katz, who founded Mercury Payments Systems, a payments processor. Cardfree is a new mobile merchant service that wants to make it easy for small businesses to drive traffic into their stores, increase incremental visits and allow for more meaningful engagement. It accepts payments from mobile devices, browsers or at the point of sale. Using Cardfree, small business owners can offer promotions, mobile payments, loyalty and social media engagement backed by reporting and analytics that allow them to see how well it is working. Cardfree also allows merchants to create prepaid digital payment cards that are compatible with 90 percent of point-of-sale systems on the market. Like LevelUp, this means Cardfree’s mobile payments systems aren’t tied to one particular technology.
LevelUp has seen increased adoption by eliminating credit card processing fees for merchants with its Interchange Zero program. Rather than making money on interchange fees, LevelUp plans to sell services to merchants with the aim of getting new consumers in the door and keeping them coming back. However if it really wants to solve the mobile payments problem, LevelUp has to support every method people use to pay with their phones. The startup added another big piece, announcing in September new hardware that supports NFC payment for any phone with NFC capabilities.
As the mobile marketplace continues to rapidly expand, the leading companies involved are fighting on multiple fronts. Search, in-app transactions and the nascent mobile advertising sector are all areas of heavy competition. Likewise, the mobile transaction field is getting very congested. All of the startups mentioned here must be considered acquisition targets with Google, Microsoft, Apple and, of course, Visa (V) and MasterCard (MA) likely suitors. For its part, Google has had a real problem monetizing Google Play. Its new relationship with Bango will surely help it improve this situation by increasing in-app transactions. Given Google’s current PPS and its strategic partnerships, I would consider it a buy.