Microsoft rips page from Apple’s playbook, sells app gift cards

Gregg Keizer
19 October, 2013
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Microsoft this week said it would start selling gift cards good for purchases on its digital content market, taking a page out of Apple’s iTunes playbook.

Amazon.com has listed digital cards in denominations of $20, $30 and $50 for Australia, and said they would be available from last Friday.

The cards have been in the wind for months. In May, The Verge noted that Microsoft would debut gift cards as replacements for the Xbox Points virtual currency.

And in a blog last week, Microsoft mentioned gift cards in a long missive about changes to the Windows Store, the app distribution mart for Windows 8.1 and Windows 8.1 RT.

According to a long FAQ on Microsoft’s website, a gift card’s dollar amount can transferred to a customer’s digital account, where the money can be redeemed for apps and other content – including movies and music – on the Windows Store, the Windows Phone Store and the Xbox markets.

Microsoft trumpeted the cards as serving a dual purpose: to ‘increase developer monetisation’ as well as the more obvious ‘provide Windows users more ways to purchase apps’.

Cards will be available in physical form and as codes downloaded from Microsoft.

Most of Microsoft’s strategy is identical to Apple’s, which has long offered both real and virtual gift cards to customers, with the former sold at a huge range of retailers, including supermarkets, electronics stores, airports and even convenience stores.

Apple also sells its iTunes gift cards through its own retail chain as well as via its online store. Last year, Apple also started selling iTunes cards through Facebook’s Gifts portal.

Cards have been good to Apple, according to estimates, which pegged 2012′s annual revenue from the gift cards at US$2 billion, or nearly a quarter of the US$8.5 billion Apple reported in revenue from the digital content sold via iTunes and the associated iOS and OS X app stores.

In general, gift cards can be profitable to businesses, as not all of the cards’ value is eventually redeemed – cards are lost or simply forgotten – and many purchases exceed the value of the cards. In 2012, an estimated US$1.7 billion spent on gifts cards in the US went unused, according to Tower Group, an insurance conglomerate.

And in a survey last November by the National Retail Federation, six percent of the Americans polled said their concern that the recipient would lose the card or not use it would make them less likely to buy a gift card for the 2012 holidays.

While some states require firms to fork over the funds in unredeemed gift cards, many do not, leaving the issuing company to eventually record it on their books. In its latest annual report filed with the US Securities and Exchange Commission, Apple did not break out the unused revenue or how long it waits before it moves it from the deferred column.

Microsoft started selling the digital gift cards – which let customers download a redemption code – on Friday 18 October. Physical cards will be stocked in retail next month, a spokeswoman confirmed.

by Gregg Keizer, Computerworld

One Comment

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  1. Peter T. says:

    It may be fairly easy to buy an MS gift card, but it will be a damn side harder to find an app with buying! The MS Store is a joke.

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