Facebook/Coverflow Prashant Fuloria plays guitar with Coverflow

Fuloria, who had a brief stint as an entrepreneur in residence at Mayfield Fund, was previously responsible for Facebook Credits, the social network’s on-again/off-again virtual currency effort.

Flurry helps mobile app developers get wider paid distribution, and gives away free analytics.

When Flurry raised $25 million from investors including Crosslink Capital, Menlo Ventures, Draper Fisher Jurvetson, InterWest Partners and others at the end of last year, CEO Simon Khalaf said an IPO could happen as soon as this year.

Having spent more than three years at Facebook, and six before that at Google, Fuloria is a nice senior hire for Flurry.

Also, while far too many people in Silicon Valley like to call themselves “rock star” and “ninja,” Fuloria is slightly more deserving of the label, given that he plays guitar for the tech band Coverflow.

But Flurry, a mobile analytics company, is introducing the term “app & mortar” in a new report published today that explores the rise in smartphone shopping.

Clearly, the term is a play on the term “bricks and clicks,” which emerged in the late ’90s and became popular as e-commerce started to challenge physical retailers.

In some respects, this report confirms what we already knew about mobile commerce, but takes it a step further by figuring out who is benefiting the most right now from the trend. Surprisingly, it’s physical retailers.

In the report, Flurry analyzed the amount of time spent by consumers across more than 1,800 iOS and Android shopping apps in December 2012, compared to the same month a year earlier.

The biggest growth category by far was apps developed by retailers, such as Walmart, Macy’s and Gap.

Flurry said time spent in retail apps skyrocketed by 525 percent year over year. In contrast, online marketplaces, such as eBay and Amazon, increased by only 178 percent.

In terms of the share of shoppers’ time being spent inside the different apps, retailers also saw the biggest gains. In December 2012, shoppers spent 27 percent of their time inside of retail apps, up by 12 percentage points over the same month a year earlier.

The gain in share by retail apps came at the expense of online marketplace and daily deal apps, which declined year over year. The share of time being spent with online marketplaces decreased from 25 percent in December 2011 to 20 percent in December 2012. Daily deal providers, like Groupon and LivingSocial, fell to 13 percent from 20 percent.

Flurry did not offer a lot of analysis as to why this was occurring, but suggested that retailers were beginning to better respond to the move toward “online meeting offline shopping through mobile apps.” In general, 2012 was the first year that many online or physical retailers took mobile shopping seriously, so it was likely that the distribution of time spent would change with a huge surge in consumer interest and better options.

Interestingly, even though Flurry noted a decrease in time spent in online marketplace apps, eBay still easily beat its mobile revenue forecast (so it’s not clear if there’s a direct correlation between time spent and dollars spent). Last week, eBay said it recorded $13 billion in mobile revenue in 2012, exceeding its forecast of $10 billion. This year, the online retailer expects mobile revenue to hit $20 billion.

EBay is the most transparent of the larger e-commerce players when it comes to mobile’s contribution.

In contrast, an analyst’s best guess for Amazon is that about $3 billion to $5 billion of its annual sales are coming from mobile devices.

Overall, it was a very appy holiday season for the mobile industry, according to Flurry, which is known for producing reports based on the information it gathers through the thousands of developers who use its analytics tools.

In its report today, Flurry said that more than 50 million iOS and Android tablets and smartphones were activated from Christmas to New Year’s Eve, and 1.76 billion applications were downloaded worldwide during that period. That’s a huge jump from last year’s figures.

In comparison, Flurry estimated last year that 1.2 billion apps were downloaded worldwide across both Android and iOS.

Here is a chart comparing the holiday week to the same number of days earlier in December:

The year-over-year progress shows just how commonplace app downloading is around the globe.

In fact, this year Flurry said that a number of weeks since late November delivered more than a billion downloads, which just last year was considered record-shattering. This year, it is forecasting that a billion weekly downloads could become a regular occurrence.

“Looking forward to 2013, Flurry expects the trend of one-billion-download weeks to become the norm, and that the industry will surpass the two-billion download week during Q4,” wrote Flurry marketing VP Peter Farago in a blog post.

Most of these downloads are still occurring in the U.S., where there is widespread adoption of smartphones and tablets. During the week, the U.S. downloaded 604 million applications, or 34.3 percent of the total. China is not exactly a close second with 183 million downloads, and the U.K., Germany and France are much further behind.

Based on Flurry’s previous reports, one of the most popular app categories is games. And based on evidence from at least two game companies, that continued to be the case this holiday season, as people picked up their phones and tablets for entertainment during their time off.

Disney Mobile said game downloads jumped 98 percent year over year to more than 15 million in 2012, from Dec. 22 to Dec. 28. It benefited from new titles such as Where’s My Holiday? and Nemo’s Reef and Monsters climbing the charts. Separately, Storm8, which publishes such titles as Dragon Story, City Story and Jewel Mania, reported that it had two million game downloads on Christmas Day, an increase of four times compared to an average Tuesday.

And after four consecutive months of declines, that cost went up significantly in November, as iPhone app makers geared up for the holidays.

The cost of getting a new loyal user for a free iPhone app, as measured by mobile app marketing firm Fiksu, rose to $1.38 from $1.06 in October. The October figure marked the low for the year.

“We can chalk November’s dramatic surge in mobile app marketing costs to increasing — and anticipated — holiday season spending, combined with a drop in organic downloads in the aftermath of the iPhone 5 launch,” Fiksu CEO Micah Adler said in a statement. “We can expect costs and download volumes to climb through December, much like last year, as marketers spend heavily in preparation for the flood of new devices and rush of user activity and app discovery around Christmas.”

Indeed, numbers released on Thursday by Flurry showed that there was a significant jump in activity this month, including a record Christmas spike.

Photo: Kitch Bain / Shutterstock.com; Illustration: AllThingsD

According to analytics firm Flurry, at least 17.4 million iOS and Android devices were activated on Christmas Day, up from the average of 4 million devices that Flurry saw between Dec. 1 and Dec. 20 and from 6.8 million device activations on Christmas 2011.

What’s more, while smartphones make up 80 percent of activations on a typical day, Christmas saw a roughly even split between tablets and phones.

“On this Christmas Day 2012, more iPhones, iPads, Galaxys, Kindle Fires, and more, were activated than on any other day in history,” Flurry said in a blog post.

Overall, a record number of devices were activated on Christmas, and a record number of apps downloaded as well. Flurry estimated that 328 million apps were downloaded, up from an average of 155 million per day earlier in the month and more than 250 million last Christmas.

According to Flurry, which gives developers tools to track consumer behavior, the most prolific business model is the free-to-play scenario, where consumers download the game for free and then pay for virtual goods or currency inside the application.

It says the most successful companies that understand this include Electronics Arts, Zynga, Mobage and Supercell.

In the report, Flurry’s Senior Director of Business Development Dan Laughlin examines consumer behavior, retention and demographics for the top nine most popular gaming genres. For this analysis, Flurry looked at more than 300 million consumers using iOS and Android games over a 90-day period. It only studied free titles, and then lumped them into four main categories based on their earning characteristics.

“The free-to-play business model (a.k.a. freemium), where consumers download and play the ‘core loop’ of a game for free, but then pay for virtual goods and currency through micro-transactions, is the most prolific business model in the new era of digital distribution,” he concludes.

For developers, the more important thing to know is what kinds of games are better at retaining customers and monetizing over the long-term. Here are the four profiles that Flurry says exist in gaming:

1. These games are used frequently for a long time, including slots, turn-based games that are passed between two people and simulation games. From a revenue perspective, the most successful companies maximize revenue through in-app purchases and by displaying ads to those who are not willing to pay.
2. Strategy games are the only genre that are played intensely for a short period of time. Game life cycles are short, and Flurry says the game’s live services must be executed flawlessly. Companies that monetize well encourage players to spend money on continuing their progress through the game.
3. The third profile is defined by infrequent game play for a short period of time, meaning that developers have fewer opportunities every week to monetize the user. The kind of gaming that falls into this bucket is defined as the “Card-Battle genre,” which is mostly popular in Asia, and has now started showing up in the U.S.
4. The final category are games that are easy to pick up and play, and may be enjoyed for years, such as solitaire. However, according to Flurry, the evergreen titles “may lack the depth required to generate sizable in-app purchases.” Instead, it’s better to focus on advertising impressions. The games can also be good for keeping a strong core audience that can be used to promote more apps to.

But, for once, as part of announcing its fourth round of capital today, Flurry is talking about how well its own business is doing — and things aren’t too shabby.

In an interview, Simon Khalaf, Flurry’s president and CEO, said the company’s revenue is on track to hit $80 million to $100 million this year, up 300 percent over 2011. The company is also cash-flow positive, and is on track to go public as soon as next year.

Crosslink Capital led the $25 million round, with participation from existing investors, including Menlo Ventures, Draper Fisher Jurvetson, InterWest Partners, Union Square Ventures, First Round Capital and Draper Richards.

Khalaf said Flurry selected Crosslink, in part, because of the firm’s experience in taking companies like Pandora and Omniture public. In all, the company has raised $51.6 million.

While many people may not have heard of Flurry because it is not a consumer-facing product, it is crunching numbers behind the scenes of some of the most popular apps running across Android, iOS and a number of other platforms. Today, 250,000 apps use its analytics tools for free, or are tapping into its ad network, called AppCircle, which helps developers acquire new users.

Khalaf said that two things are driving the company’s growth right now: The adoption of smartphones and tablets on a global scale, and a growing number of applications that need its services. In more mature markets, like the U.S., it’s mostly the growth of tablets. “It’s the trend that’s replacing laptops and 13-inch TVs and the gaming console and the magazine rack — all at the same time. It’s infinite growth,” he said.

Today, 65 percent of the company’s revenue comes from the U.S., with the bulk of international revenue coming from Europe. Next, Flurry plans to expand to Asia and Latin America. Its advertising platform reaches more than 700 million monthly unique visitors, and with the adoption of more devices, Khalaf estimates it will soon hit more than one billion.

Currently, the bulk of the apps using Flurry’s platform include gaming, social networking and dating, but increasingly, he expects that to change, with more interest coming from the traditional entertainment industry.

While there are many opportunities for growth, the CEO admits that there are still challenges ahead — the primary one being what kind of ad formats will be dominant on mobile. Since smartphones have smaller screens, banner advertisements don’t always work as well. Khalaf said Flurry is having some luck with video advertisements, but a lot of work still has to be done in figuring out the best way to catch a user’s attention.

“We can find really cool ad units that can engage consumers,” he promises.

Here’s the full release:

Flurry Raises $25 Million Series D to Solidify Mobile App Measurement and Advertising Leadership

San Francisco, CA — November 2, 2012 — Flurry, a leading mobile app measurement and advertising platform, today announced that it has received $25 million in an oversubscribed Series D round of financing led by Crosslink Capital. The round of funding, which included full participation from existing investors Menlo Ventures, Draper Fisher Jurvetson, InterWest Partners, Union Square Ventures, First Round Capital and Draper Richards, brings the company’s total funding to $51.6 million.  Nick Mignano, Partner at Crosslink Capital, will join Flurry’s board of directors.

Flurry will use the financing to accelerate the adoption of newly introduced platform products Flurry AppSpot, its supply-side platform, and Flurry Ad Analytics, its advertising effectiveness solution. Flurry will also use funds to grow its team and expand internationally.

“Flurry is powering a new wave of digital advertising with big data for the mobile app economy in an exciting way,” said Nick Mignano, Partner of Crosslink Capital.  “The scale at which the company is operating in terms of data volume, ad serving and revenue generation impressed our team. This enables one of the most innovative uses of data for business customers since our private investment in Omniture in 2006.”

Flurry has grown significantly over the past year, quadrupling the number of data points it measures, now over 32 billion per day.  Each day, the company measures 1.9 billion application sessions across more than 250 million unique smartphone and tablet devices. Over the last year, Flurry has doubled the number of applications using its services from 120,000 to more than 250,000.  In total, more than 80,000 companies now use Flurry services across iOS, Android, Windows Phone, BlackBerry, HTML5 and JavaME platforms.

Flurry AppCircle, the company’s data-driven ad network, has grown by more than 3 times in volume over the last year. AppCircle now delivers over 120 million completed monthly advertising conversions, including first-time app downloads, user app re-engagements and completed video views.

“Flurry is excited to welcome Crosslink to our board as we expand the reach and adoption of the Flurry platform,” said Simon Khalaf, Flurry president and chief executive officer.  “Flurry is a unique, mobile-first company playing at the intersection of big data, mobile applications and digital advertising. We look forward to using this new round of funding to significantly accelerate our growth in one of the fastest growing technology markets in history.”

The study conducted by Flurry, a mobile-analytics provider, found that social games are among the most intensely used apps, but only for a finite period of time.

In a blog post, Flurry compared the characteristics of social games to mobile dating applications: “For most people, we can assume that finding a long-term ‘significant other’ is the ultimate goal of dating. As a result, the app maker should expect customer churn. While usage may be high during the time when a consumer looks for a suitable partner, once that person is found, usage stops.”

The same goes for social games, which consumers play frequently at first, but then tire of over a period of three months.

Based on a sample of apps used 1.7 billion times each week, Flurry determined that social games are played about 7.9 times a week on average, which is much more frequently than people check the weather (3.7 times per week). But while interest in the weather is abiding, loyalty falls off pretty quickly for games. After 30 days, 47 percent of players are still engaged; after 60 days, 34 percent are still engaged; and after 90 days, 29 percent are still engaged. In contrast, after 90 days, 55 percent of people are still checking the weather.

While this pattern may not be a surprise to some, the most public example of this trend recently was the game Draw Something. After Zynga purchased the company responsible for the mobile-gaming hit, usage immediately started tanking. In the month following the acquisition, Draw Something lost nearly five million daily active users, dropping from 15 million to 10 million. Today, it has closer to two million users. Zynga now expects to write down about half of the $200 million investment this year.

While some chalked up Draw Something’s instant popularity to a fad, it’s now pretty clear that the game was just following the same bell curve that other mobile games follow. In other words, churn and burn, baby!

Sailesh wondered aloud, “How much time do we have for any of these?” “How many of them can coexist?” and “Do we really need them?” My answers were, respectively: “A lot.” “Many of them.” and “No, but we want them.” That dinner discussion prompted some observations that I am outlining here, and I invite you to share your own observations in the comments below.

In a nutshell, the Internet has evolved from being a need-driven utility medium with only a handful of winners to a discovery-driven entertainment medium with room for multiple winners. The necessary and sufficient conditions for this evolution are now in place — broadband, real names and tablets are the three horsemen of this New New Web. As consumers, entrepreneurs and investors, we should get used to the fact that the online economy is increasingly blurring with the offline economy, and in the limit, that distinction will disappear. As a result, just as in the real world, the Web of entertainment will be much bigger than the Web of utility.

A Theory of Human Motivation
One framework for understanding the consumer Internet is Maslow’s Hierarchy of Needs, which Abraham Maslow put forward as a way of explaining human behavior at large. The core premise is that once our basic needs of food, shelter, safety and belonging are satisfied, we tend to focus on things that are related to creativity, entertainment, education and self-improvement. A key aspect of this framework is that it’s sequential: Unless the basic needs are met, one cannot focus on other things. As an example, a study in 2011 showed that humans who are hungry will spend more on food and less on non-food items compared to those who are not hungry. Using this framework, we can see how consumer adoption of the Web has evolved over the last 20 years, and why all of the ingredients are only now in place for consumers to use the Web for what Maslow called “self-actualization” — a pursuit of one’s full potential, driven by desire, not by necessity.

1992-2012: Web of Need
Between the AOL IPO in 1992 and the Facebook IPO last month, the Internet has largely been in the business of satisfying basic consumer needs. In 1995, the year Netscape went public and made the internet accessible to the masses, I was a young product manager for a consumer Internet company called Global Village Communication. We were a newly minted public company and our hottest product was a “high speed” fax/modem with a speed of 33.6 kbps. Back then, using the Internet as a consumer or making a living off it as a business was rather difficult, and sometimes simply frustrating. In the subsequent years the basic needs of access, browser, email, search and identity were solved by companies such as AOL, Comcast, Netscape, Yahoo, Google, LinkedIn and Facebook.

2012-?: Web of Want
Today, the billion users on Facebook have reached the apex of Maslow’s hierarchy on the web. All of our basic needs have been satisfied. Now we are in pursuit of self-actualization. It is no surprise that on the Web, we are now open to playing games (Zynga, Angry Birds), watching video (YouTube, Hulu), listening to music (Pandora, Spotify), expressing our creativity (Instagram, Twitter, Draw Something), window shopping (Pinterest, Gojee*) and pursuing education (Khan Academy, Empowered*).

The Web Is Becoming Like TV
How do we make sense out of a Web where multiple providers coexist, serving groups of people who share a similar desire? Turns out we already have a very good model for understanding how this can work: Television. Specifically, cable television. The Web is becoming like TV, with hundreds of networks or “channels” that are programmed to serve content to an audience with similar desires and demographics. Pinterest, ShoeDazzle, Joyous and Alt12* programmed for young, affluent women; Machinima, Kixeye and Kabam programmed for mostly male gamers; Gojee* for food enthusiasts; Triposo* for travellers; GAINFitness* for fitness fans and so on.

In this new new Web, an important ingredient to success is a clear understanding of the identity of your users to ensure that you are programming to that user’s interests. The good news is that unlike TV, the Web has a feedback loop. Everything can be measured and as a result the path from concept to success can be more capital efficient by measuring what type of programming is working every step of the way — it’s unlikely that the new new Web will ever produce a Waterworld.

Why Now? Broadband, Real Names & Tablets
As my partner Doug Pepper recently wrote, a key question when evaluating a new opportunity is to ask “Why Now?” Certainly, companies like AOL, Yahoo and Myspace have tried before to program the Web to cater to interests of specific audiences. What’s different now? Three things: Broadband, real names and tablets.

The impact of broadband is obvious; we don’t need or want anything on a slow Web. With broadband penetration at 26 percent in industrialized countries and 3G penetration at about 15 percent of the world’s population, we are just reaching critical mass of nearly 1B users on the fast Web.

Real names are more interesting. In 1993, the New Yorker ran the now famous cartoon; “On the Internet, nobody knows you’re a dog.” This succinctly captured the state of the anonymous Web at the time. Reid Hoffman and Mark Zuckerberg changed that forever. Do we find Q&A on Quora to be more credible than Yahoo! Answers, celebrity profiles on Twitter more engaging than Myspace and pins on Pinterest more relevant than recommendations on early AOL chatrooms? I certainly do, and that is largely because Quora, Twitter and Pinterest take advantage of real names. Real names are blurring the distinction between online and offline behavior.

Finally, the tablet, the last necessary and sufficient piece that fuels the “Web of want.” The PC is perfect for the “Web of need” — when we need something, we can search for it, since we know what we are looking for. Searching is a “lean-forward” experience, typing into our PC, either at work or at the home office. The Web over the last decade has been optimized for this lean-forward search experience — everything from SEO to Web site design to keyword shortcuts in popular browsers makes that efficient. However, smartphones and tablets allow us to move to a “lean-back” experience, flipping through screens using our fingers, often in our living rooms and bedrooms, on the train or at the coffee shop. Tablets make discovery easy and fun, just like flipping channels on TV at leisure. These discoveries prompt us to want things we didn’t think we needed.

Early Signs
This thesis is easy to postulate, but is there any evidence that users are looking to the Web as anything more than a productivity platform? As has been reported, mobile devices now make up 20 percent of all U.S. Web traffic, and this usage peaks in the evening hours, presumably when people are away from their office. Analysis from Flurry* shows that cumulative time spent on mobile apps is closing in on TV. We certainly don’t seem to be using the Web only when we need something.

Economy of Need Versus Want
The economy of Want is different from the economy of Need. We humans tend to spend a lot more time and money on things we want compared to things we need. For example, Americans spend more than five hours a day on leisure and sports (including TV), compared to about three hours spent on eating, drinking and managing household activities. Another difference is that when it comes to satisfying our needs, we tend to settle on one provider and give that one all of our business. Think about how many companies provide us with electricity, water, milk, broadband access, search, email and identity. The Need economy is a winner-take-all market, with one or two companies dominating each need. However, when it comes to providing for our wants, we are open to being served by multiple providers. Think about how many different providers are behind the TV channels we watch, restaurants we visit, destinations we travel to and movies we watch. The Want economy can support multiple winners, each with a sizeable business. Instagram, Path, Pinterest, ShoeDazzle, BeachMint, Angry Birds, CityVille, Kixeye, Kabam, Machinima and Maker Studios can all coexist.

Investing in the Web of Want
The chart below shows that over a long term (including a global recession) an index of luxury stocks (companies such as LVMH, Burberry, BMW, Porsche, Nordstrom) outperforms an index of utility stocks (companies such as Con Edison and Pacific Gas & Electric that offer services we all need). The same applies to an index of media stocks (companies such as CBS, Comcast, News Corp., Time Warner, Viacom) which outperforms both the utilities and the broader stock market. Of course, higher returns come with higher volatility — Nordstrom’s beta is 1.6 and CBS’ beta is 2.2, compared to 0.29 for PG&E. It is this volatility that has cast investing in the Want business as a career-ending move in Silicon Valley for the past 20-plus years. As the Web evolves from serving our needs to satisfying our wants and, in turn, becomes a much larger economy, sitting on the sidelines of the Web of Want may not be an option.

Let’s Not Kill Hollywood
With a billion users looking for self-actualization and with the widespread adoption of broadband, real names and tablets, the Web is poised to become the medium for creativity, education, entertainment, fashion and the pursuit of happiness. As the offline world shows, large, profitable companies can be built that cater to these desires. Entrepreneurs and investors looking to succeed in the new new Web can learn quite a few lessons from our friends in the luxury and entertainment businesses, which have been managing profitable “want” businesses for decades. The fusion of computer science, design, data, low friction and the massive scale of the Internet can result in something that is better than what either Silicon Valley or Hollywood can do alone. It is no wonder that the team that came to this conclusion before anyone else is now managing the most valuable company in the world.

Epilogue
When we go see a movie or splurge on a resort vacation, we don’t stop using electricity, brushing our teeth or checking our email. The Web of Want is not a replacement for the Web of Need, it is an addition. Many of the Internet companies that satisfied our needs in the last 20 or more years of the Web are here to stay. In fact, they will become more entrenched and stable, with low beta, just like the utilities in the offline world. Microsoft has a beta of exactly 1.0 — it is no more volatile than the overall stock market. And for those longing for the days of “real computer science” on the Web, do not despair. Just keep an eye on Rocket Science and Google X Labs — there is plenty of hard-core engineering ahead.

Disclosures: * indicates an InterWest portfolio company. Google Finance was used for all of the stock charts and beta references.

Keval Desai is a Partner at InterWest, where he focuses on investments in early-stage companies that cater to the needs and wants of consumers. He started his career in Silicon Valley in 1991 as a software engineer. He has been a mentor and investor in AngelPad since inception. You can follow him @kevaldesai.

Now the videogame maker is gunning for much smaller screens, including smartphones and tablets.

In an interview with All Things D, Activision Blizzard’s VP of Mobile Greg Canessa said to expect several mobile announcements as it invests more heavily in the space.

For starters, the Santa Monica, Calif., company is announcing today that it is creating a publishing arm that will bring third-party mobile games to market. Through the program, it will assist independent game makers with funding, development, distribution and promotion of their titles across both iPhone and iOS.

As part of the deal, developers will get the benefit of publishing their game under the Activision brand, while continuing to own the game’s intellectual property.

The shift to digital has been hard for many game companies to swallow, as it typically means shifting away from selling $60 games at retail to giving away free games that are monetized through advertising and virtual goods.

As part of today’s announcement, Activision said it is partnering with Flurry, a mobile analytics and advertising platform that works closely with thousands of mobile developers to help with this transition. Flurry will provide tools to Activision’s developers to help understand mobile development and distribution, while Activision will lend its expertise in making great videogames.

“Flurry can scout and find those indie developers that we should partner with,” Canessa said.

Flurry President and CEO Simon Khalaf said his company also will be able to help promote Activision’s first- or third-party titles, by cross-promoting the apps in its advertising platform, which reaches more than 250 million consumers a day.

To date, Activision has developed some of its own game titles for mobile, including Crash Bandicoot Nitro Cart 2; Call of Duty: Black Ops Zombies, which is a rendition of the console version of the game; and Skylanders Cloud Patrol. The games cost, respectively, $6.99, $2.99 and 99 cents on the iPhone.

In the future, Canessa said Activision will experiment with releasing games for free, to be monetized through advertising and virtual goods.

There are a number of reasons why Activision decided that now was the right time to invest in mobile, Canessa said, including increased smartphone and tablet penetration and the capability of the devices.

“It made a company like us, that’s focused on mid-core and hardcore gaming, take a second look at the platform,” he said. “Two or three years ago, you couldn’t envision a world where you could put mid- or hardcore games on mobile.”

To date, Activision hasn’t talked about the importance of mobile very much, but it may not really be late to the game, after all.

Last week, Activision’s close competitor Electronic Arts said that a majority of its mobile game titles will become free by the end of the year, representing a shift away from the premium games market. Unlike Activision, Electronic Arts has been one of the largest mobile games developers on both Android and iOS, but it also represents one of the biggest holdouts when it comes to shifting to free.

Timing is a little vague, but from what I’m hearing, the e-commerce giant is expected to announce next week that it will start accepting submissions from developers soon.

Similar to the Apple App Store and Google Play, Amazon’s virtual store allows consumers to download mobile apps to Android phones and tablets. Once available, the Appstore will likely work across most Android devices in Europe, but more interesting to consider is whether the announcement signals that Amazon is preparing to sell the Kindle Fire internationally.

Like the Appstore, the company’s iPad competitor has only been for sale in the U.S.

Sales of the Fire appear to be declining, so opening it up to a larger market makes a lot of sense.

Last month, IDC published research indicating that global Fire shipments had fallen from 4.8 million units in the fourth quarter of 2011 to fewer than 750,000 units last quarter. And, a survey conducted in North America showed that just 8 percent of respondents were interested in purchasing the Fire in the next 90 days.

Amazon does not disclose sales figures for any of its Kindle devices.

Today, Amazon.com has six specific European sites: United Kingdom, Germany, France, Austria, Italy and Spain. Indeed, those markets could provide many new customers for the Fire/Fuego/Feu/Fuoco/Feuer (depending on whether you speak English, Spanish, French, Italian or German, of course).

In addition to more hardware sales, the fresh territory would also fuel app sales for developers. Flurry, which provides analytics software to developers, recently said that Amazon’s in-app payment platform monetizes well but falls short of Apple’s performance.

Amazon launched the Appstore in March 2011, or about eight months before the Kindle Fire went on sale in the U.S.

It’s not clear how fast Amazon would be able to launch the Fire internationally since it will likely have to secure licensing deals for each country with content owners to enable its music and video services to work abroad.

Apple will get first crack with its Worldwide Developers Conference, which runs next week at downtown San Francisco’s Moscone Center. Next up is Microsoft, which plans to outline the future of Windows Phone at an event on June 20.

Google, meanwhile, will have plenty of Android topics on tap at its annual I/O conference, which runs June 27 to June 29.

Research In Motion is also hoping to convince developers to invest in its forthcoming BlackBerry 10 operating system. A traveling “BlackBerry Jam” developer event made a stop in the Bay Area on Thursday.

For its part, mobile development tracking firm Flurry says that roughly seven in 10 new projects are for iOS, rather than Android. That’s largely consistent with other recent quarters.

“Among the reasons iOS appears more attractive to developers is the dominance by Apple in the tablet category,” Flurry said in a blog post on Thursday. “Not only does Apple offer a large, homogenous smartphone base for which to build software, but also when developers build for smartphones, their apps run on Apple’s iPad tablets as well. That’s like getting two platforms for the price of one.”

Flurry also said that developers continue to be able to generate more revenue on Apple’s platform. Their estimate is that for every $1 earned by iOS developers, Android developers see only 24 cents in revenue, similar to its prior findings.

“At the end of the day, developers run businesses, and businesses seek out markets where revenue opportunities are highest and the cost of building and distributing is lowest,” Flurry said. “In short, Android delivers less gain and more pain than iOS, which we believe is the key reason 7 out of every 10 apps built in the new economy are for iOS instead of Android.”

Illustration via Shutterstock | Picsfive

This week Rovio said its Angry Birds games have been downloaded more than a billion times. That’s a serious milestone, and beyond that there’s no doubt about the cultural effect of the franchise’s stuffed animals, movie tie-ins and repeat success with new titles. So I think it’s fair to call Angry Birds a smashing success.

But on a daily basis, we get pitched by start-ups who want to talk about how they have a thousandth of that many users. Really, a million registered users? Does that even matter anymore?

Well, yes — maybe for a paid subscription service or a marketplace. It’s not quite as impressive for a social game or a photo- or video-sharing service.

How do you know when something hits the big time, between numbers of downloads, users, visitors, page views, subscriptions, customers, monthly actives and daily actives, engagement, growth curves, millions and billions? It all starts to run together.

And very often, these metric milestones are massaged and selectively disclosed.

While it’s been well established that the number of people who actively use an app is more interesting than the number of people who have registered for it or downloaded it since it was released, many companies still tout those all-time user counts.

In response to criticism of it referring to registered user numbers, Google now counts people who have Google+ accounts and also use any Google product within a certain time period as “active” users of Google+. It’s a puzzling substitute for real engagement stats.

But numbers do tell a story. Take Instagram’s growth: 1 million registered users in December 2010, 15 million in December 2011, 30 million in the beginning of April, an estimated 50 million by the end of that month, after it launched on Android and was bought by Facebook.

Or look at mobile gaming, where the records are eclipsed almost as soon as they are set. In the month of April, Draw Something reached 50 million downloads, 50 days after it launched – while Angry Birds Space took only 35 days.

I asked some metrics providers and investors what’s enough to turn their heads.

One public place to find up-and-coming mobile products is the top app charts that are published by Apple and Google. An iPhone app that is consistently in the top 10 of the U.S. popular app charts gets 1.5 to 2 million downloads per month, according to Oliver Lo of App Annie.

Meanwhile, Peter Farago of mobile analytics provider Flurry told me, “What makes a hit, in our view, is 1 million daily active users per platform (e.g., 1 million on iOS and 1 million on Android).”

Jack Abraham, who founded Milo and now leads local at eBay, was one of the earliest investors in Pinterest a few years ago. What got him to notice that company when so many other people couldn’t tell it was about to become a juggernaut? It was the growth chart, he recently told me.

“What I look for is 1 to 3 percent sustained growth in users per day,” Abraham said. “It could be as small as 5,000 or 10,000 users if it has that growth.”

Suhail Doshi, CEO of the widely used analytics start-up Mixpanel, said that even active user counts can hide a larger story.

“You should pay attention to what their definition of ‘active’ even means,” he said. For instance, the number of users who are active on a service within a month could be swayed by a single day’s big spike in usage. “An average rolling daily active is far more indicative,” he said.

By far the most important metric for a consumer app, Doshi argued, is retention — which is to say, the percent of users who come back the very next day after they first sign up. (Of course, measuring retention is Mixpanel’s specialty.)

“Any VC worth their salt is asking for retention numbers,” Doshi said. “You’re nothing without it.”

A reasonable retention rate is 20 to 30 percent, Doshi said. Really great retention is 50 to 60 percent.

However, it’s fair to expect lower retention rates for transactional services like TaskRabbit or Airbnb, where users might not return every day but often spend money when they do, Doshi said.

In fact, consumers are now spending equal amounts of time social networking and playing games, according to Flurry, which provides tools to app developers to track consumer behavior.

In the first quarter, Flurry found that the average consumer spent 24 minutes on games and social networking — each — every day. In the same period a year earlier, consumers spent 25 minutes playing games and only 15 minutes social networking.

In a blog post, Flurry’s Peter Farago explains that while time is now evenly split, the shift is more severe when you calculate the percentage of time spent on each type of application. By doing so, you can see that time spent on gaming has dropped as overall usage on phone applications has increased from 68 minutes a day to 77 minutes a day.

In the first quarter, consumers spent 31 percent of their time playing games, falling from 37 percent a year ago. Likewise, social networking has soared from 22 percent to 37 percent.

Social networking on the phone would include Facebook and other applications like Instagram (which Facebook just acquired for $1 billion). Games include everything from Rovio’s Angry Birds to Zynga’s Words With Friends. Other popular phone categories include news and entertainment.

Flurry also discovered that advertisers have followed the change in behavior with more ad revenue being generated by social networking apps than games. In April, 37 percent of ad revenue went toward social networking apps versus 36 percent going toward games. Just two months earlier, games were generating 35 percent of ad revenue and social networking was generating only 24 percent.

One limitation of the study is that it is looking only at smartphones and does not take into account behavior on tablets, where a lot of gaming is taking place.

As part of the announcement, the retailer is also confirming that it will take a 30 percent cut of each transaction, which is the standard across Apple’s App Store, Facebook and Google Play (Correction: In an earlier version, it stated that Google takes 5 percent, which only applies to the Google+ game network.)

The announcement is not a huge surprise, since Amazon has been testing in-app payments over the past few months with a number of developers in the Amazon Appstore, which runs on the Kindle Fire and a number of Android handsets.

The payments platform utilizes Amazon’s well-recognized and trusted “1-Click” purchasing experience that so many consumers are familiar with from shopping online. By bringing it to mobile, it will make it easy for consumers to purchase a few more coins inside a game or to subscribe to a magazine.

But while the announcement sounds fairly basic, the rollout is important for Amazon to get right, since developers’ initial reception to the Appstore was a little strained — and stories of making money on the platform have been mixed.

That’s because, unlike other app stores, Amazon has decided to dictate how much an app sells for, and in some cases, the company elects to make apps free as part of its Free App of the Day promotion. In doing so, developers sometimes make less revenue than they would normally expect (especially since there was no potential upside from in-app purchases).

Developers and publishers will be able to set the price of the items within the store, including virtual goods or subscriptions, an Amazon spokesperson said.

Based on developers that participated in the beta tests, so far Amazon’s Appstore looks like it has been monetizing well.

Storm8, which was one of the game developers that participated in the beta test, told AllThingsD that it generated $700,000 in revenue from in-app purchases in March — before Amazon’s cut. The Redwood City developer said it has 10 free-to-play apps in the store, including such titles as Kingdoms Live, Nightclub Story and Farm Story; at one point, four of its games ranked among the five most popular free apps on Amazon.

Flurry, which provides analytics software to developers, also estimated  that Amazon’s in-app payment platform monetizes well, and that it outperforms Google Play, but falls short of the industry’s gold standard, which is Apple.

Still, it’s unclear whether Amazon will be able to woo developers, given that it is so much smaller than the other players. Last month, after celebrating its first year in business, Amazon confirmed that it had more than 31,000 apps in its store, which is far fewer than either Google or Apple.

It’s also unclear how many devices the Appstore is installed on, since Amazon does not share much information, including how many Kindle Fires it has sold.

According to a report by IHS iSuppli, Amazon shipped 3.9 million Fires in the fourth quarter, to claim 14.3 percent of the market. That makes it the world’s second-largest tablet vendor, surpassing Samsung, which has been in the market far longer, with many more devices.

In the future, what could potentially be even more interesting for developers than in-app payments is if Amazon will let them use apps to sell merchandise, such as Rovio’s plush toys, or DVDs and other cross-promotional items.

An Amazon spokesperson declined to comment on the possibility.

According to mobile analytics outfit Flurry, combined iOS and Android activations in China surpassed those in the U.S. some time in February. And by the end of March, the world’s most populous country will account for 24 percent of activations to the U.S.’s 21 percent.

Hardly surprising. China is the world’s most populous country, and it’s the first with one billion mobile phone subscribers. But worth noting, as China is increasibly becoming a point of focus for companies like Apple.

Remarking on sales of the iPhone 4S in Greater China during a company earnings call earlier this year, Apple CEO Tim Cook said demand for the device there has been staggering. “We felt we were betting bold, as I think many of you would have thought if you would have known what we were doing,” Cook said of the 4S rollout plan for the country. “But as it turns out, we didn’t bet high enough.”

The drop-off in players affected almost all developers, but did not hit all titles equally.

For example, Electronic Arts saw 1.2 million fewer monthly users over the past week for its top title The Sims Social; Zynga’s Empire & Allies game lost one million monthly users, and its newest game, CastleVille, lost 900,000, according to AppData, which publishes such information.

On the flip side, many of the games that performed well were old favorites; these logically would have longer-term, more-committed players, who would make a point of returning during the holidays to take advantage of seasonal promotions.

The games that benefited from the holidays include Zynga’s Words With Friends and FarmVille, which gained 1.3 million and 800,000 monthly active users, respectively, according to Inside Social Games. Other gainers rounding out the Top 5 were Tetris Online’s Tetris Battle; Wooga’s kingdom-building game, Magic Land; and Men vs. Women, a role-playing game by Social Point.

Still, the general direction for the week was heading down.

That contrasts with other game platforms, such as consoles, PCs and mobile, which largely benefit from the holidays and from more free time in general.

Console games often skyrocket in popularity as kids and adults unwrap new titles for Nintendo, Xbox or PlayStation on Christmas morning.

PC gaming also typically surges during the season. EA timed the launch of Star Wars: The Old Republic ahead of the holidays, in hopes of drawing new players who would be sold on sticking around for months, after spending time on the game during their time off.

But perhaps the biggest competitor came from mobile, which benefited from breaking records for the number of new Android and iOS devices that were gifted during the holidays. Flurry reported that more than one billion apps were downloaded worldwide during the last seven days of 2011, breaking the all-time weekly record. Games are often one of the most-downloaded categories of apps.

So the more important question to ask is, why would Facebook be an exception, if other platforms performed well?

Clearly, all of the platforms are competing for a limited number of minutes in the day, and so are other forms of media, like the Internet, TV and the movies. But when it comes to Facebook, a larger driver may be the environment — after all, it’s no big secret that a lot of social networking and social gaming is done in the workplace.

In a study conducted last summer, advertising agency Saatchi & Saatchi found that 47 percent of respondents said they play social games at work during a typical day, and that 28 percent play for at least 30 minutes. Without that dedicated time in front of the computer every day, people may have had the opportunity to be more obsessed with other screens, such as phones or TVs.

Another potential reason that Facebook and social games did not see a lift from the holidays is because they have not yet figured out how to capitalize on the Christmas economy.

For years, console games have been timed with the end of the year, so they could be wrapped up and placed under the tree. More recently, smartphones and gift cards for music and apps have helped mobile prosper. Perhaps there wasn’t enough hype and promotion for social games to compete for people’s dollars.

Regardless of the reasons, the drop may ultimately be a small a blip on the radar screen for most game developers, who also see several spikes in activity during the year.

The bigger impact may be felt at Facebook, which takes a 30 percent cut of all virtual goods sold inside social games, and would feel the cumulative impact across all of the games.

In a Twitter posting on Wednesday, Android boss Andy Rubin posted that 3.7 million Android devices were activated on either Christmas Eve or Christmas Day.

Rubin, who uses his Twitter account mainly to call attention to Android momentum statistics, noted on Dec. 20 that Android activations had reached a rate of 700,000 per day.

Clearly, though, the holidays are a busy time for all devices, not just Android.

Flurry Analytics estimated a total of 6.8 million Android and iOS devices were activated on Christmas Day alone. Assuming both its numbers and Google’s are accurate, that means Apple had quite the holiday, as well. It will be interesting to see if Cupertino comments at all on what it has seen this holiday season.

On the app side, Flurry projected that there were 242 million app downloads for Android and iOS, up from an average of just more than 100 million app downloads a day during a typical 24-hour period earlier in the month.

Apple’s App Store is on pace to exceed 10 billion downloads this year alone, which is twice the number it recorded over the three previous years combined.

The Android Market is also setting records. Over the past seven months, it has achieved more than 7 billion downloads, which more than triples its life-to-date downloads of 3 billion reached in May 2011.

At those rates, both operating systems are generating roughly one billion downloads a month, or the equivalent of 33 million a day.

The data was reported by Flurry Analytics, which creates tools that thousands of developers use to track usage of their mobile applications.

Christmas Day was one of the big catalysts for achieving huge end-of-the-year records.

Flurry found that application downloads more than doubled on Christmas compared to the average number of downloads occurring during the first 20 days of December.

On Dec. 25, it registered 242 million app downloads, jumping more than 125 percent over an average day.

In addition, because of its insight into application usage, Flurry is also able to see the number of new devices activated. Phones and tablets are always a hot Christmas item and this year was no exception.

On the average day in December, 1.5 million phones were activated, but on Christmas, 6.8 million were activated, representing a 353 percent spike. Last year, Christmas held the previous single-day record with 2.8 million device activations.

Check out this chart from Flurry, a mobile analytics company that overlaid its data on top of an earlier chart produced by New York Times digital exec Michael Zimbalist for Advertising Age:

Important to note that the line graph doesn’t compare total audience, but “the proportion of consumers reached during a given hour on that respective medium.”

Flurry’s point is to show that mobile app use is comparatively higher than Internet and TV use during the day. Which makes sense — you may not always be in front of a PC from 6 am to 6 pm, and if you’re employed you probably don’t get a lot of TV-watching done during that time, either.

But I’m still struck by the peak evening use for all three mediums. I think you can file this away in two categories: “Growing evidence that we spend a lot of time watching TV while playing with other devices” and “Growing evidence that a lot of our ‘mobile’ use happens at home.”

Then we found out that a very small number of people were willing to spend money (although it might be as much as $50 a game), and that they mostly spent their money on a whole lot of nothing.

And now the dissection of the freemium games business continues, based on a series of reports by Flurry, which has a clue about the major trends because it tracks more than 110,000 apps across all the major smartphone platforms, including Android and iOS.

The latest installment reveals that while younger players between the age of 18 and 24 spend more time playing games, it is an older group — between the ages of 25 and 34 — that spends the most money.

That makes sense, since younger people generally have more time to spare, while older people have more money to spare.

This is particularly the case since most freemium games allow people to pay small amounts of money in order to accelerate game play. So you could see how younger people might be more willing to wait, while older people would pay to continue playing.

Developers have seen value in giving away their games to gain a larger audience and then charging players for items in the game. Now we are gaining some insight as to what users are willing to spend money on — turns out, it’s a whole lot of nothing.

Players are buying things that don’t even exist, including virtual armor, crops, fertilizer, energy beans, food or weapons. While it’s a small percentage of users who ever buy anything, the ones who do are paying, on average, $14 per transaction.

The results were published this morning in a blog post by Flurry, which sifted through a year’s worth of purchases on iOS and Android games, which are played by an average of more than two million people a day. Flurry is able to report on these aggregate numbers because thousands of developers use its tools to collect data within their individual applications.

Everything that users will pay for in the game are considered virtual items, but even more telling is that they are willing to purchase items that don’t last very long.

These items are called consumables and consist of things that become depleted when used, such as energy, fertilizer, etc. Typically, these items help you advance through the game faster, as opposed to durable items, such as armor that helps you defend yourself in a battle or new buildings that stick around and may help you earn additional revenue.

Flurry said it found that more than two-thirds — or about 68 percent — of purchases are for consumable items, or the disposable items, and that only 30 percent of purchases are on durable items. The least popular category is on personalization items, such as trees, park benches and other items that are purely decorative. Only two percent of purchases fell into that bucket.

In conclusion, Flurry GM of Games Jeferson Valadares writes that the games with the best return on investment are the ones that are designed with consumable items in mind.

Flurry estimates that total iOS and Android game revenue will surpass $1 billion this year.

That’s a fact.

But a new study conducted by Flurry, an analytics provider for mobile games on Apple and Android devices, provides a fairly compelling argument as to why a developer should continue to give away his or her games for free.

Ultimately, it’s because consumers are willing to pay much, much more — if given the option.

After evaluating the spending habits of 3.5 million consumers across both iOS and Android, Flurry found that among those who pay for in-app transactions, greater than five percent will spend more than $50, which rivals the amount paid at retail for top console and PC games.

What’s more, consumers are spending $14 per transaction on average, which easily exceeds the price tag of most premium games being sold on smartphones today.

Since $14 sounds high, Flurry’s GM of Games Jeferson Valadares explains the logic behind it in a blog post today. The findings are also a continuation of a report issued earlier this month that generically found that mobile games generate more revenue if given away for free.

Valadares explains that only three percent of consumers are likely to spend money at all, but that at the high end, there are some very big spenders who are bringing up the average and generate a bulk of the revenue. Additionally, the number of consumers who pay very little remains fairly low. In fact, consumers spend only 99 cents less than two percent of the time.

“Why then would so few consumers spend just $1 in freemium games when this price point is so popular among premium games?” Valadares writes. “Because freemium games drive a different decision-making mindset for consumers. They simply are deciding whether or not to spend.”

The study found that 71 percent of all transactions are for amounts under $10; 15 percent are for spends between $10 and $20; and 13 percent are for amounts greater than $20.

The higher-end buyers are considered the “whales” of the industry.

Flurry’s advice to game developers is to focus on the whales: “If you’re a game designer, your main take away is that very few transactions — and consumers who complete those transactions — make up the bulk of your revenue. Therefore, your ‘meta-game’ should be about whale hunting.”

The number of new developer project starts for Android fell from a 36 percent share in the first quarter of 2011 to a 28 percent share in the second quarter, according to new data from mobile analysis firm Flurry Analytics. Meanwhile, the number of iPhone/iPod touch project starts rose to claim a 57 percent share, up from 54 percent. At the same time, iPad project starts rose to 15 percent from 10 percent.

In other words, total iOS project starts increased to nab a 72 percent share, up significantly from the 64 percent share they had in the quarter prior. The platform is clearly winning some developer attention away from Android. As Flurry notes, this is the second quarter-over-quarter decline for the OS, which enjoyed steady growth throughout 2010, peaking at a 39 percent share in the fourth quarter.

So what happened?

Two things: The launch of the iPhone on Verizon and the debut of the iPad 2, which gave developers two more good reasons to focus their resources on iOS rather than Android.

“We believe that wholesale consumer acceptance and adoption of tablets, which just a year ago was questionable within the industry, is further luring developers to build for iPad instead of Android,” says Flurry’s Charles Newark-French. “… With developers pinched on both sides of the revenue and cost equation, Google must tack aggressively at this stage of the race to ensure that Apple doesn’t continue to take its developer-support wind.”

As it turns out, game developers are finding it is easier to make money on the iPhone if they give their applications away for free and sell virtual goods inside the game, instead of expecting users to plop down 99 cents on a game they’ve never played.

According to Flurry, which tracks the performance of more than 90,000 apps that use its analytics service, more than half of the top performing games on Apple’s iOS are making money by using a free-to-play model, up from only 39 percent in January.

In a blog post, Flurry’s general manager of games, Jeferson Valadares, who worked previously at EA’s Playfish and Digital Chocolate, writes that when the game is free, two things can happen: “First, more people will likely try your game … and second, you will likely take more total money since different players can now spend different amounts depending on their engagement and preferences.”

In other words, if a user really likes your game, he or she may end up spending more than 99 cents.

Flurry said that can represent a lot more money, even though more than 90 percent of players never spend a dime.

Valadares writes that the number of people willing to spend money in a free game ranges from 0.5 to 6 percent.

The freemium model has been well demonstrated on Facebook, where game companies like Zynga are making millions of dollars from users willing to pay for small items inside of games, such as crops for the farm or energy boosts to continue playing.

Zynga has disclosed that a majority of its revenues come from a very small percentage of users.

While many independent game studios have embraced freemium models, it’s been more difficult for other companies. Nintendo is perhaps the most vocal company speaking out against the trend.