Why Apple and Google are Talking to BOKU

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There are reports that both Apple and Google have had discussions with mobile payments player BOKU. BOKU, along with several other players, such as Zong, Danal (and their U.S. subsidiary BilltoMobile), Surfpin, MoPay, Billing Revolution and Fortumo are providing consumers with the option to pay for virtual goods bought in MMOGs ( Massively Multiplayer Online Games) like World of Warcraft and increasingly, social games like Farmville offered through social networks like Facebook by placing the charge on their mobile bill or in the case of prepaid, debited against their balance. These mobile payment companies are essentially aggregators, connecting mobile carriers and the broad range of digital content merchants who offer virtual goods. It’s big business – in my forecasts I have projected that global sales of virtual goods will reach $26 billion in 2015, with more than $10 billion of that paid via mobile. Of that $10 billion, more than 70% will come from the Asia Pacific region.

So by acquiring BOKU are Apple and Google interested in becoming a mediator of virtual goods? Perhaps to an extent, but I think it runs much deeper than that. I think the primary driver for both Apple and Google in this case is to expand their billing options past credit cards or PayPal for their app stores. The main attraction of BOKU is the carrier billing portion, the virtual goods business is simply gravy.
Apple drivers

BOKU will help Apple sell their devices to a broader global audience. Today, ITunes accounts must be associated with a credit card. And while Apple has more than 160 million cards on file, Apple is still missing a huge addressable market of individuals who don’t have a credit card or bank account. In most countries, youth under the age of 21 are a primary target for mobile apps and virtual goods, yet most have neither a credit card or bank account but do have a mobile phone. And while credit card usage is on the rise globally, credit card penetration is higher than mobile phone penetration in only six countries -- U.S., Taiwan, Canada, U.K., Norway and South Korea. Being able to make an app purchase through carrier billing, not only for an iPhone, but for an iTouch or iPad as well, greatly enhances the appeal of these devices to consumers in the global market.

Google drivers

BOKU will help boost a substandard Android Marketplace payment mechanism, which if fixed, will help keep app developers on board and help increase Android marketshare. Today, buying apps through the Android Marketplace is slower than Apple’s App Store. Both Google Checkout and PayPal require minimal but nonetheless more steps than the App Store. In July, Google announced they would begin implementing carrier billing, but acquiring BOKU would provide a nearly immediate solution compared to Google organically setting up carrier billing.

I think Apple has more urgency in this situation. Look for Apple to keep the pressure on, and don’t be surprised if they aren’t talking with Zong, Surfpin, MoPay, Billing Revolution and Fortumo as well, since all of them have sufficient carrier reach. Google might be less motivated to look elsewhere, as Zong and Billing Revolution have developed a work around for Android developers (but that’s another story).​