Boku has carved out quite a name for itself in the fast-expanding world of mobile payments for virtual goods. The startup, which has raised more than $40 million since its launch last year, is now in 61 countries and has deals with some 200 carriers. However, while the realm of gaming remains rich (see our latest numbers on Zynga), Boku is ready to expand beyond virtual goods and step into real world transactions— within the next twelve months.
By next year, Boku’s co-founder Ron Hirson, predicts that the company will be launching mobile payments for online (non-virtual) transactions and eventually, test programs for brick and mortar purchases. Boku has always wanted to become the PayPal of mobile payments, but has been hindered by lofty carrier rates. Historically, wireless carriers have charged roughly 30 to 40% to process transactions, making it very difficult for mobile payment companies like Boku to scale beyond virtual goods. That dynamic, Hirson says, is quickly shifting.
“We’re now seeing and having partnerships with carriers where the rates are coming down to about 10% which enables us to start moving beyond virtual goods that have no cost of good sold, to things like digital goods which have licensing and then maybe even physical goods which actually have material costs…
Mobile as an opportunity is starting to plateau, minutes have obviously plateaued and eventually data will follow the same. So there’s a need for carriers to explore new revenue opportunities and payments is a great value added service.”
Ten percent is a significant victory, relative to the previous baseline, but Hirson acknowledges that the rates will have to move even lower to support Boku’s grand ambitions. The magic number, he says, is probably near 5%— which he admits may not happen in the near term.
For those who are unfamiliar with the service, Boku (a rival of Zong) works with many game developers like Playdom and Playfish. When a user wants to purchase a virtual item, he enters his cell phone number on a site, the site sends a text message to the phone, the user confirms the transaction with a short reply, and all the charges show up on his phone bill.
For more on Boku’s 2011 strategy and carrier trends see the video above. On Monday, Hirson was also a guest on TechCrunch NOW with Charlie Graham, Shop It To Me‘s founder. Fittingly, we discussed Google’s recent investment in Zynga, the gaming company’s massive revenues, and what it means for Boku (that video is below).
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