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In another indication that micropayments are staging a comeback, Live Gamer Inc. and Skrill Holdings Ltd. on Tuesday announced an integrated platform that lets game publishers collect small sums from users around the world without chargeback or foreign-exchange risk.
The integration also represents the U.S. debut of London-based Skrill, which is the new brand name for the 10-year-old online payments processor Moneybookers, in the increasingly crowded market for online-games transactions. The market for digital goods worldwide and in the U.S. is growing fast, up an expected 42% to $1.55 billion this year, according to research from Live Gamer. Skrill has added half of its 17 million users in the past year, Julian Artope, vice president of marketing for the company, tells Digital Transactions News. “We’ve seen a huge boost in the past year in the segment of virtual goods,” he says. “It’s a huge growth segment for us.”
In the integration with New York City-based Live Gamer, which markets e-commerce services including payments and analytics to game publishers, Skrill will bring its coverage of more than 100 payment options across more than 200 countries and territories. Options include credit, debit, online bank transfers, Facebook Credits, and prepaid accounts.
While online-games transactions are quite small, involving items like virtual swords for characters about to enter battle, the introduction of a micropayments capability means ongoing revenue for the game developer, Artope points out, that goes beyond a one-and-done $60 disk sale. “You can pump out a game and then monetize on the fly,” he says. “There’s a constant stream of cash for things you can sell [to the user].” Average revenue per paying user at Live Gamer exceeds $30 per month, according to the company. Live Gamer serves 90 million users in 23 countries, and counts Electronic Arts and Namco Network among its clients.
Because transactions are under $10, indeed 99 cents or less in many cases, publishers can struggle to make money after transaction fees and other costs, including the cost of fraud. Skrill’s micropayments fee is 4.9% plus a nickel per transaction, but it offers what it calls chargeback protection for 5.9% plus 9 cents. With this protection, Skrill assumes all liability for any chargebacks, Artope says.
For publishers marketing internationally, Skrill also offers instant settlement in the publisher’s digital wallet. This allows the publisher to avoid the foreign-exchange risk involved in transferring deposits from a foreign to a domestic bank account. “We’re effectively hedging the FX risk for the publisher,” says Artope.
The rapid rise of the online-games market, coupled with factors such as the popularity of social networks, has led to a resurgence of tiny online transactions and a need to find ways to process them profitably. Besides the Skrill-Live Gamer tieup, startups like Minno Inc. have emerged to take advantage of the broad reach of Facebook and the data that network collects about its users. Even established payments players are seeing potential in the market. Earlier this year, Visa Inc. paid $190 million in cash for PlaySpan Inc., a Santa Clara, Calif-based processor of digital-goods transactions.
Whether these factors will be enough to allow micropayments processing, historically an unprofitable business, to thrive at last remains to be seen. But because of the explosive market for digital goods, the urgency to make it work appears stronger than ever.
