Google urging developers to use the service
Google's payment service charges a higher cut per transaction than some rivals'. But the move also suggests Google is using its powerful position in the mobile apps market to promote an in-house offering. “Although this move by Google might seem high-handed, it reduces the friction for purchases inside Android apps and therefore makes users more valuable,” said Hugo Troche, chief executive of Appsperse, a cross-promotion network for app discovery. A Google spokesman declined to comment on Thursday.
At that time, the search company's payment service – now known as Google Wallet – was not available for Android app payments, Shen explained. She said Papaya used PayPal, owned by eBay Inc
The initiative is important for Google. While Android Market has been a hit in terms of the number of smartphones using the platform, there has not been a commensurate increase in purchase activity by users. In early 2011, Android platform manager Eric Chu told a conference that while the number of Android smartphone users was surging, the number of purchases of paid apps in the Android Market was not doing nearly as well, Forbes reported. This is partly because the buying experience has been varied and confusing for users – reducing the chance that they will go through with a purchase, something known as conversion.
By pushing all app developers to use Google's payment system, the experience should be simpler, increasing conversion. “On Android it used to be laissez faire – you could use any payment provider you liked,” said Todd Hooper, chief executive of Zipline Games. “It's probably naive of developers to think they could keep choosing different payment providers,” he added. “If purchasing on Android is all over the place, that is worrying.” Apple's iOS platform generates higher conversion rates mainly because the company required developers to use its own payment system from day one, according to Hooper and others. “This is one of the things that has helped Apple succeed,” said Charles Hudson of Bionic Panda Games, an Android-focused mobile social games company in San Francisco. “Every single developer is using the Apple payment system. Google sees the benefits that provides for the Apple platform and wants to create a similar system.”
When Bionic Panda started on Android Market about a year ago, Google Wallet was not available, so the company used PayPal initially, Hudson said. It switched exclusively to Google Wallet around the spring of 2011, he added. Developers using Google Wallet typically have to pay Google a 30 percent cut of revenue from purchases – higher than the cut taken by rival third-party payment services. But Hudson and other developers said this may be worth it, if conversion rates increase. When Bionic Panda dropped PayPal it lost some customers, but there was “an overall lift in conversion and monetization on a per-user basis,” Hudson said. “Without having to chose your payment option it's closer to the one-click experience of the Apple iOS platform,” he added. “The convenience factor would outweigh customer losses.”