Google posted a somewhat innocuous-sounding legal update to its Android Developer Terms and Conditions a few weeks ago:
In the spirit of transparency, we wanted to highlight the changes:
• In Section 13.1, “authorized carriers” have been added as an indemnified party.
• Section 13.2 is new in its entirety, covering indemnity for payment processors for claims related to tax accrual.
The developer community is anticipating that this may be a very big deal. It could give Apple’s iPhone a run in an area where it has remained unchallenged — in-app purchasing. The consensus is that Google will attempt to use carrier billing to emulate Apple’s iTunes platform.
With its original post, Google provides a handy Trackbacks list of selected stories linking to the post. Sites from all over the world are abuzz over this story, all with the same sense of anticipation — when will Google launch carrier-based in-app purchasing?
An obvious question is why has this taken so long? Carrier billing has been around almost since mobile phones were first launched. The main reason, as always, is probably economics. Carriers are used to taking 50 percent to 60 percent. Developers would never go for that. Apple’s 30 percent already feels like highway robbery. So the real breakthrough here might be in economics — carriers are seeing what’s going on with iTunes and want a piece of the in-app revenue stream, even if it’s much lower on a per-unit basis. The rapid growth of in-app revenues has them singing, “We’ll make it up on volume.”
Right now, the main in-app purchasing channel on Android is PayPal, which requires extra keystrokes. Every interactive marketer knows that every keystroke hurts close rates. The brilliance of the iPhone is you can buy so much stuff, including the apps themselves, with one tap. If Google enables carrier billing with one touch, it will be a significant breakthrough toward leveling the economic playing field vs. the iPhone from the perspective of publishers and developers.
A key difference will be that the Android payments will initially go to the carrier, whereas iPhone payments go to the device manufacturers (Apple). We’ll not know for a while how those revenues are split between the carriers, Google and publishers/developers, but in any event, the carriers will add a financial incentive to push Android devices through their channels. If this platform takes off, the losers may be financial services companies that charge their respective tolls for credit card purchases, including PayPal.
The details of this purchasing system are the subject of much conjecture in the developer blogosphere right now. What we do know is that consumers buy more when given more and better payment options, especially if easier and trustworthy. No matter how it plays out, the net effect of an Android in-app purchasing system tied into carrier billing will be that another piece of foundation has been laid for the rapid growth of mobile commerce.
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Tobias Dengel is CEO of WillowTree Apps Inc., a mobile applications developer. He is also BIA/Kelsey’s new technical editor and will be posting regularly on mobile-related topics. The views he expresses are his own and do not necessarily reflect those of BIA/Kelsey.
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