Summary:

All that virtual currency sold in mobile games is anything but virtual in terms of revenue. Juniper Research, in a new mobile games report, said revenues from mobile in-game purchases totaled $2.1 billion in 2011 and are expected to grow to $4.8 billion by 2016.

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All that virtual currency sold in mobile games is anything but virtual in terms of revenue. Juniper Research, in a new mobile games report, said worldwide revenues from mobile in-game purchases totaled $2.1 billion in 2011 and are expected to grow to $4.8 billion by 2016.

This suggests the freemium model will become even more entrenched in mobile as developers, particularly social game makers, leverage the sale of virtual goods and currency to generate revenue. It’s already an important tool for top app makers, who are bringing in serious money from in-game purchases. And as smartphone penetration grows, it’s going to become an even more important monetization tool for developers.

App analytics firm Distimo said in its year-end report that 65 percent of the revenue in the 200 top grossing apps in Android Market came from freemium apps, while half the revenue in the top 200 grossing iPhone apps came from freemium apps. Flurry said last year the average in-game transaction for mobile games was $14, a figure is pumped up by some big-spending users.

By making an app free, it exposes it to a much wider audience, who might not pay to download a similar app. Then app makers can get to work trying to entice users to pay up for extra currency or items. It can be a fine line, with some developers pushing too hard for revenue and running off consumers annoyed at constant pitches to buy stuff. But when done well, it can be a very lucrative model.

It also helps address the question of piracy, said Charlotte Miller, who authored the Juniper report. She said freemium developers don’t have to worry as much about losing revenue to piracy while still verifying purchases for goods on their own servers.

The Juniper report also finds that:

  • Social and casual games will account for the lion’s share of mobile games downloads.
  • Mobile games downloads on tablets will represent one-third of mobile gaming revenues by 2016.
  • Mobile games revenues on feature phones will be cut in half in the next five years.

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