Before today, the question of microtransactions always hung in the air for iPhone developers working on the virtual goods business model. Would your app be monetizing better with native microtransactions? What could you be doing differently? When do you think microtransactions will come? According to SGN CEO Shervin Pishevar, nobody had any reason to believe it would happen today during the unveiling of the iPhone 3.0 OS.
"We’ve been waiting for this for a long time, as an entrepreneur. We have over 10 million users and 15% share on iPhone and iPod Touch and we really hoped for the day when microtransactions would be supported. We are so excited. This is a pivotal moment for what I call social mobile gaming," said Pishevar.
Pishevar is not at all concerned about the fact that In-App Purchases have been restricted to paid apps. He points out that his SGN is already forced to offer paid versions of games like Agency Wars and Mafia: Respect & Retaliation on the iPhone, when the social network versions of both games are free-to-play. The paid versions are identical to the free versions in terms of gameplay, but come bundled with pre-set amounts of virtual goods and currency--an approach initially taken to work around the lack of microtransactions for virtual goods.
"If you have a free and a paid version that unlocks microtransactions, it’s essentially the same thing. Only now you don’t have to have four and five different paid apps in different amounts. Subscriptions you can sign up for and microtransaction goods to pay for is much better for the consumer. We’ll be adapting our games for exactly that," said Pishevar.
What is particularly exciting for SGN is the prospect of bringing their entire catalog of titles from social networks over to iPhone intact. The entire catalog of virtual goods for sale via microtransactions in the social network game Fluff Friends, for instance, can now be introduced wholesale into the iPhone version iFluff Friends.
"I don’t see a difference between the social and mobile world. This lets us turn the Facebook and iPhone versions of a game like Fluff Friends into a single unified game. It enables one to create seamless experiences across different platforms," said Pishevar.
Pishevar gives the impression that no one in the iPhone development community had any reason to expect that microtransactions would be appearing as soon as OS 3.0 on iPhone. He calls the decision a "gift to the world" and believes it's a sign that Apple sees microtransactions as an important part of iPhone's future. His feelings are especially strong when it comes to how the In-App Purchases will affect the future of iPhone social gaming.
"It’s going to unleash it--the ability to now build games without having to design multiple paid versions. Now we can design the games using classic microtransactions and virtual goods models where you can purchase things and subscribe. That’s exactly the way it should be. That’s organic," said Pishevar.
There's reason to believe that not every iPhone developer will be as jubilant as SGN when it comes to Apple's In-App Purchases reveal. David Rangels is a developer of the free virtual gifting app iGiphts and he refers to Apple's decision to restrict the service only to paid apps as "unfortunate."
"Both paid and free apps can benefit from ongoing transactions. In many cases apps are free because they, moreso than certain paid apps, benefit from wide adoption and are trying to build up an audience they can monetize through other means later on (precisely through something like the In-App Purchase system)," said Rangels.
Rangels does offer some interesting insight into why Apple may have decided to keep In-App Purchases out of free apps. He suggests that it may have to do with the fact that free and paid apps go through slightly different approval processes.
"It's possible the reason Apple made this rule is because they require an additional contract with developers that use the Apple billing infrastructure," said Rangels. "Free apps do not have this requirement and so have a slightly more streamlined approval process. It is possible that they did not want to slow down all free app approvals with this new requirement and so do not make In-App Purchases available to them. One way to solve this would be to have free app developers specify whether they will require this functionality and then go through the required approval process."
Despite his dismay, Rangels does feel that In-App Purchases will make it significantly easier to monetize virtual goods on iPhone, but that other ways of monetizing virtual goods will continue to play their own roles. While he wasn't ready to say that iGiphts was definitely going to adapt itself to the new In-App Purchase system, he did note that "we are going to take a very hard look at it."
Pishevar was more forthright about the role In-App Purchases would be playing in future SGN offerings, stating that any games currently in the iPhone pipeline would be switching over to the new model. While he can only guess at the financial impact of In-App Purchases at this point, he is optomistic.
"I can guess at it, but it’s basically... when you have seamless transactions, you’re going to have more transactional activity. That will lead to better margins. If you only let people buy certain packages, it’s restrictive. It’s better if it’s unlimited," said Pishevar.
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