Following the release of its Q2 2011 financials, Glu Mobile (NASDAQ:GLUU) provided more detail in a follow up call with analysts.

It was keen to point out this was first quarter in which its smartphone business - now based on the freemium model - generated more revenue than its legacy feature phone business.

"Glu has become a majority smartphone revenue business, significantly ahead of schedule," said CEO Niccolo de Masi.

Up the Android

An early supporter of Android, Glu said that while 70 percent of its business came from iOS, it was particularly pleased with its growth on Android.

"We have had four of the top 30 grossing titles on the Android marketplace, and expect to be increasing investment and support for Android still further, over the next 12 months," de Masi pointed out.

"Plus, we've had a number of disappointing iOS title launches over the spring."

Although not mentioned, these are thought to include Star Blitz, Zombie Isle and Men vs Machines.

Less incentives

Related to the iOS-Android situation is the case of incentivised downloads (CPI), something Glu used to cross market its games and well as generate revenue.

However it was banned by Apple during the quarter, forcing Glu to replace that model with video advertising. It had expected to generate similar revenue. On occasions it has seen these revenue streams running at around 75 percent of CPI totals. However, there's not enough inventory in the system.

"Throughout the remainder of 2011, it means that replacing CPI advertising revenues will be more challenging than originally anticipated," de Masi revealed.

Of course, CPI can still be used on Android; another reason Glu is heavily supporting the platform.

Cost of expansion

Announced together with the Q2 figures was news that Glu has bought two studios, Blammo Games and Griptonite Games.

Both deals are funded with equity. The Blammo deal is initially worth 1 million shares, with up to 3.3 million additional shares available if the company meets certain future revenue targets.

Assuming Glu's current share price of $4.60, this would value the deal at $4.6 million, up to $15.2 million.

As an established studio, Griptonite is a bigger deal, with 6.1 million shares issued ($28 million), although Glu gets the roughly $10 million of cash on Griptonite's balance sheet, giving a nominal net value of $18 million.

The deal will see Glu's total staff double to around 600, adding around $5.4 million of burnrate per quarter to the company's costs.

Glu CFO Eric Ludwig said as a result of this, he expects Glu to end 2011 with $23.8 million. "We will continue to burn cash until the end of 2012," he remarked.

Neither company will increase Glu's revenue in the short term, but it hopes they can grow its smartphone revenues at least 90 percent by the second half of 2012.

Every little helps

What's most significant about Glu's business however is how the freemium model is growing and monetising.

It's now had a total of 101.9 million cumulative installs on iOS, Android and Facebook, of which 31.8 million occurred in Q2.

As a result, it had a total of 16.5 million monthly active users across Apple, Android and Facebook in June up from 11.9 million in March. It had 1.6 million daily active users in June, up 72 percent compared to March's 953,000 users.

When it comes to monetisation, Glu booked 999,000 IAP billable transactions, up 32 percent compared to Q1. The average revenue per IAP increased from $2.31 to $4.07. Glu said this was mainly due to higher price points for its virtual goods.

In terms of games, Gun Bros. remains Glu's key release. It generated $2.2 million of non-GAAP smartphone revenues in Q2, slightly down from the $2.3 million in Q1, thanks to the loss of CPI revenues, down from $1.5 million in Q1 to $1.1 million in Q1.

More importantly for Glu, the growth in IAP for Gun Bros. was a 29 percent quarter-over-quarter increase.

Also, newer game Contract Killer generated $2.5 million in total non-GAAP revenues in Q2, 36 percent of which was related to CPI activity.

You can list to the analysts' call here, or check out the transcription at Seeking Alpha.