Angry Birds, Happy Company

That's some tasty game sales.

I know a number of industry veterans have looked down on the smartphone game market. They say things like this: "Sure, there's lots of smartphones out there. But games are mostly free or only a few dollars! Maybe we'll sell a lot fewer copies of a title for the DS, but at least we can charge $30 for it. We'll never see that kind of money from a smartphone game!"

Well, unless you're Nintendo, the best you can hope for on a DS game is about 5 million units (Dragon Quest IX). Which, assuming a retail price of $30 and the publisher makes 30% of retail, means about $45 million in revenue. A DS game would cost somewhere in the realm of $250,000 to create (although some cost less; new games for the 3DS and the Sony NGP are going to be more in the $1 million cost range or more). So that's a pretty good return, right? Let's see a smartphone game do better than that!

OK, here's the info on Angry Birds. The game cost Rovio about $140,000 to create, and to date has brought in $70 million. Yeah, you read that right. Rovio is making $975,000 a month just from the free-to-play Android version of the game, and about that much from the cuddly toys. OK, they do say that 40% of the Angry Birds revenue comes from non-game sources like licensing and merchandising. But that still means that the game revenue is about equal to the best-selling thirdparty DS game ever, and Angry Birds is nowhere near finsihed generating revenue, thank you very much.

What about the best-selling Nintendo handheld game? New Super Mario Bros. has sold 26 million copies, so it's roughly in the $250 million dollar revenue range. Angry Birds isn't there yet, but give it a couple of years.

This should make executives wake up and smell the opportunity, or the danger. Revenues from smartphone games will likely exceed revenues from handheld games this year, and the gap will just widen in the future. Sure, there are thousands of smartphone games that never sell very many copies and never make money. But large game publishers should know how to make games that sell, and how to sell them... at least, you'd like to think so. And Rovio was not a large company when they created Angry Birds, even though now they are up to 40 employees.

This is a huge opportunity for smaller developers, if they can figure out how to make a great game and let the world know about it. Don't let anybody tell you smartphone games will never amount to anything. Maybe that's true of most of them, but certainly not all.

Angry Birds Are Angry About Android Payments

Rovio, developers of the smash hit Angry Birds, are attempting to fix what they see as one of the big problems with Android applications: Android payments. Rovio is producing the Bad Piggy Bank in combination with Finnish network operator Elisa, in order to process in-app payments for (naturally) more Angry Birds material. Angry Birds is free on Android because getting Android users to pay for apps is so difficult. This new payment plan, which Rovio hopes will be adopted by other developers, allows charges to be put on your monthly phone bill.

The idea of mobile phone billing is nothing new; many companies in Europe and Asia are used to getting money from customers by billing their mobile accounts. For many countries, that's how you pay for things online, since credit cards are not widely used in their culture. Rovio's trying to make this easy for game developers on Android, since Google has failed to do so. Especially in the fast-growing realm of in-app payments.

We'll have to wait and see if other developers jump on this. Or maybe Google will get its act together and start streamlining its payment process and promoting it, or buy another payment processor and build on that. This is the Achilles Heel of the Android platform. Getting more phone activations than Apple is interesting, but it's not making up for the fact that developers are making seven times as much money from the iOS platform as they are from Android.

Developers see the Android numbers and smell profit potential, but the road is not easy. Rovio's hoping their new payment processing will pave the way to profits for developers. And a nice piece of change for them, too.