Aurora Feint: 'Freemium' games to help drive iPhone gaming growth

Many people seem to agree that the iPhone should continue to make a big dent in the mobile gaming market. Just how big a dent, however, is in dispute, particularly when it comes to the potential impact of free-to-play games.

Free-to-play games—also known as freemium games—let you download them for no cost. But if you want to progress further in the game, you’ve got to pay to unlock new levels and features.

Free-to-play games have become something of a growing trend on the App Store, so much so that Aurora Feint, which makes a social gaming platform for the iPhone, believes that some projections about the iPhone’s potential as a gaming platform fail to take the trend into account.

That includes a report from Flurry released this week showing the revenue share of iPhone and iPod Touch games compared to the handheld video game market as a whole. Flurry contends that the iPhone gaming market share will grow, at the expense of established competitors such as Sony and Nintendo. But Aurora Feint, which called the Flurry report “a good starting point,” feels that it undercounts the impact of free-to-play games.

“We’re seeing a huge increase in development activity around these games and believe that virtual goods revenues will grow significantly in the coming months,” Aurora Feint CEO Jason Citron said in an e-mail to Macworld. “Additionally, our data shows a 500 percent growth in audience size on the iPhone/iPod Touch platform in just the past six months.”

Earlier this year, in fact, major iPhone game maker Ngmoco announced plans to move exclusively to the freemium model, making its offerings free to download with in-app purchases unlocking additional features and capabilities. Since then, other iPhone developers—including Glu, Freeverse, and Chillingo—have followed suit.

The free-to-play business model makes it more difficult for traditional analytics services to track sales. As Apple does not offer an API to collect App Store sales data, analytics services like Flurry have to infer trends based on an app’s placement in Apple’s top 100 lists, sales data obtained from iPhone apps that use analytics software like Flurry Analytics, and data available to the public such as the NPD report cited in Flurry’s findings this past week.

This differs from how companies involved in traditional analytics research work, like NPD, Forrester and Gartner. Those companies infer sales trends based on data collected from user surveys or numbers reported from a select group of retailers.

Such data can be hard to get your hands on, Steve Lin, Aurora Feint’s vice president of operations, told me when I spoke to him on the phone. Exact numbers require very close relationships with publishers. Since Aurora Feint provides online matchmaking services, publicity for freemium apps, and a platform to facilitate freemium gaming that’s currently in private beta, Lin believes that his company has connections that other analytics services lack. More than 1,400 apps use the company’s OpenFeint service today, which boasts more than 17 million users. Of the apps tapping into OpenFeint, the vast majority of them are games. (Lin estimates that only one or two of them are productivity apps.)

That’s why Lin and the rest of Aurora Feint’s executives believe that trends inferred from 2008 and 2009 analytics alone can’t predict what will happen in 2010, when he expects adoption of freemium games to become more widespread on the iPhone.

How much greater will sales of iPhone games be in 2010? Given that NPD collects data in a very different manner from Flurry and Aurora Feint, it’s difficult to give an accurate comparison. Nevertheless, Aurora Feint is betting on exponential growth in sales spurred by freemium iPhone games. With the success of established freemium games on Facebook like Farmville, that might not be such a far-fetched prediction to make.

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