The Smartphone has become a serious contender as a mobile gaming device. According to Flurry, a mobile application consulting and research firm, the iOS and Android’s revenue share of the U.S. portable game software jumped from 1% in 2008 to 34% in 2010.

Traditionally, gaming companies have earned revenue by charging customers an upfront, one time only cost when the game is purchased—known as the premium pricing model. However, virtual currency is reversing this model. More and more games being developed are free-to-play, and the majority of revenue is generated from users exchanging their real dollars for virtual currency (this is known as the Freemium gaming model). In fact, as the below chart illustrates, it is more beneficial to develop free-to-play games than it is to create Premium games. 

Source: Flurry

Amazingly, the percentage of revenue generated from Freemium games has almost doubled from 39% in January 2011 to 65% in June 2011 (Based upon the top 100 Grossing Games)—that is only a 6 month span!

Take a look at this chart to see what types of items mobile gamers are spending their money on:

Source: Flurry

An astonishing 68% percent of purchases are made on “consumable” goods, or items that can be depleted over time or with continued use. A good example of a consumable good is ammunition in a first person shooter game. This type of purchasing helps perpetuate the free-to-play game model, because users continually run out of their consumable goods and have to purchase more to move on the game! 

Other purchases include “durable” goods or items cannot be depleted, and “personalization” items used to decorate your profile.

And gamers are spending big bucks in these games: 

Source: Flurry

As you can see, although only 13% of total transactions were for purchases over $20, they compose 51% of the total revenue generated. What does this tell us? Mobile gamers are not just making $1 to $2 purchases—they are spending $50-$100 or more on digital mobile games.

It will be interesting to track the progression of virtual currency and its impact on the mobile gaming industry. One thing for sure, mobile devices like the Android and iOS are here to stay!

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