Listen carefully in the City of London and, very faintly, you may be able to hear the bell ringing for round two of Facebook’s simmering battle with Apple over mobile apps.
Bango and Facebook are both tight-lipped on the details of the deal. “The board believes it is too early in the relationship to accurately forecast the level of business which it may generate,” Bango said. But shares in the company leapt by a third on the news, taking its valuation to £40m, on expectations that the deal will be worth quite a lot to the 13-year-old firm.
That’s a long way short of Facebook’s expected $80bn+ valuation when it goes public in the spring, but the deal could be worth a lot to Facebook, too.
Bango provides many kinds of mobile payments and analytics services, but most interesting to Facebook is likely to be its carrier-billing capabilities. Research in Motion already uses Bango to allow BlackBerry owners to pay for apps through their mobile-operator contracts, saving them the hassle of entering credit card details on the small screen.
In December, Bango struck a deal with Amazon, although details of that agreement have not been revealed either. Other clients include Electronic Arts, a leader in Facebook gaming, and Gameloft, a mobile games pioneer.
Allowing Facebook’s 425m mobile users to pay for apps or buy virtual goods in games on their smartphones without having to fiddle around with inputting payments details on a small screen will be critical if the social network is to build out its Credits business in emerging markets.
As the FT has previously reported, mobile was cited as a significant risk factor in Facebook’s S-1 filing because it does not generate any “meaningful” revenues from usage on portable devices, which is an increasingly large part of users’ overall activity on the site. Mobile advertising, expected to be launched in the coming weeks, is one way to tackle that problem, but that doesn’t address the wider strategic risk – which Facebook also flagged – that it is currently reliant on mobile platforms operated by its sometime rivals, Apple and Google.
Last year, after a summer of feverish speculation, Facebook launched a new iPad app and opened up its mobile platform to third-party developers for the first time. But Facebook was unable to allow users of its iPad and iPhone apps to use Facebook Credits to buy tractors on Farmville, as they do on the desktop version of Zynga’s game, due to Apple’s rules around in-app payments. The Cupertino computer company demands a 30 per cent commission on all purchases within the App Store.
Facebook does enable such transactions on its mobile web app, which is accessed through the iPhone’s browser rather than the App Store and is therefore exempt from Apple’s tax. But if Facebook really wants to make paying for virtual goods as seamless as it is through Apple’s iTunes, carrier billing is a smart solution.
While paying for apps through the phone bill will improve the user experience in more mature markets like the US and Western Europe, analysts say it’s especially critical as Facebook begins to tap its next billion users in regions without a fixed-line internet infrastructure. Says Ian Maude, head of internet at Enders Analysis:
“Many people with mobile devices in emerging markets are not going to have credit cards or bank accounts. A lot of people in those markets will only access Facebook via mobile devices and the only way they can transact online is through something like Bango, where you can charge it back to the mobile operator… It’s very hard to see someone like Facebook agreeing to pay Apple 30 per cent. They are effectively another platform operator.”
Bango’s chief executive Ray Anderson wrote on the company’s blog last June – when TechCrunch first reported on what it called Facebook’s “Project Spartan” to take on Apple – that his company had “strong support” for web apps, which use HTML5 technology to create rich, app-like experiences in the browser:
“Bango technology has been optimized for browser deployment, and we see the browser as a great platform to enable truly explosive growth of mobile by making apps less dependent on the handset operating system. If you want to share an App or service with others, it makes more sense to mail or tweet out a link to a web app than to try to get your friends to download apps! It seems like Facebook may have the same vision… Bango provides payment services that work really well in web apps.”
If that reads like a pre-emptive sales pitch, it seems to have worked. Now we (and Apple) must wait to see how aggressively Facebook – which is in its pre-IPO quiet period – plans to deploy Bango’s technology.
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