Wearables: After High Interest, High Abandonment

There's a strong belief among tech insiders that "wearables" are an emerging hardware category that's here to stay and perhaps even a new marketing channel in the making. Nielsen consumer research asserts that 70% of US consumers are aware of “wearables" and roughly 15% currently own some form of the technology: 

  • Fitness wristbands -- 61%
  • Smartwatches -- 45%
  • Health tracking devices -- 17%

Nielsen also found that roughly half of its survey respondents were interested in the category: "Nearly half of Americans surveyed expressed their interest in purchasing wearable tech in the near future." Our survey data similarly found a fairly high level of interest: roughly 40% of smartphone owners said they were interested in smartwatches (generally of the same brand as their smartphones). 

A report by Endeavor Partners, published in January (based on Q3 survey data), throws some cold water on all the excitement. The firm says that an online survey of "thousands of Americans" found that 10% of US adults owned or had used an "activity tracker" (e.g., Fitbit, Fuel Band). It didn't address smartwatches as a stand-alone category. 

 

The study also reported high abandonment rates of activity trackers/fitness wristbands. Roughly a third of owners stopped using them within six months of initial ownership and half were no longer using them: 

Endeavour Partners’ research reveals that more than half of U.S. consumers who have owned a modern activity tracker no longer use it. A third of U.S. consumers who have owned one stopped using the device within six months of receiving it. 

This first Samsung smartwatch reportedly experienced 30% return rates. But that's probably a function of the poor design and usability of that device rather than a broad statement about the prospects for the smartwatch category. The Pebble smartwatch is apparently selling well. 

It's still early in the development of wearables and there will be a range of new products of increasing quality and refinement. Hopefully we'll see some "next generation" watches coming out of the Android Wear effort. Apple is also expected to introduce its rumored "iWatch" at some point.  

Yet the Endeavor data offer a sobering counterpoint to all the hype about the category and widespread perception that wearables are an inevitable boom in waiting.

Microsoft Formally Launches Its Personal Assistant -- Cortana

At its Build developer conference in San Francisco today Microsoft finally and formally announced Cortana, its personal assistant. The name is derived from a character in the game Halo.

For a time it was thought that there might be a female Cortana avatar (inspired by the game). However Microsoft (probably wisely) chose not to do that.

Cortana aims to go beyond both Siri and Google Now by being a more comprehensive way to interact with Microsoft devices. It entirely replaces the Bing search button on Windows phones and is powered by Bing and all its back-end capabilities. Users can input queries or questions by voice or through the keyboard (which Siri does not). 

Cortana_Collection_Travel03_16x9

I'm not at the developer event and so am only reacting to the announcement and some of the details trickling out. From what I can tell however Cortana combines most of the capabilities of Apple's Siri, Google Voice Search and Google Now.

Previously I asked, will Cortana be a breakthrough or a "me too" product? There doesn't appear (from a distance) to be a "wow" breakthough capability that would immediately differentiate Cortana/Windows Phones and tips the scales in favor of Microsoft. However Cortana might impress with subtle or refined capabilities and functionality. There's a lot going on here.

After I've had a chance to use Cortana I'll be able to render a better judgment about its competitiveness and utility. Basically Microsoft had to offer an assistant on Windows Phones if it hoped to remain competitive with Apple and Google. 

Cortana will launch on Windows Phones with 8.1 software in the US. It will expand to other non-US markets later. 

Surveys Show Growing Demand and Usage of Mobile Payments

Two surveys independently released in the past couple of weeks indicate growing demand for and consumer experience with mobile payments. One survey released by Verifone (n=1,000) found that 55% of respondents were interested in mobile payments, with higher percentages (70%) of "millennials" expressing interest.  

In that survey the motivations or perceived advantages of paying with a smartphone included: 

  1. Mobile deals: 45%
  2. Track spending: 45%
  3. Faster: 34%
  4. No wallet: 28%

A separate survey released by Local Corporation (fielded by the eTailing Group, n=1,294) asked a range of questions about mobile user behavior. Among them were several questions about mobile payments. 

The survey found that 27% of consumers had used their smartphones to pay for an in-store purchase at some point. However the materials and discussion released didn't indicate how "in-store" was defined (did it include Starbucks, for example?). Reasons for not using a "mobile wallet" were security (44%) and privacy (36%).

When asked what brands consumers trusted to manage mobile wallets and mobile payments, consumers said:

  1. Visa: 24%
  2. PayPal: 21%
  3. Apple: 15%
  4. Amazon: 13%
  5. Amex: 7%
  6. Google: 6%

It's not clear whether the findings immediately above are statements about the brand in general or indicate any direct experience of usability. The mobile/offline version of Google Wallet in its current form is essentially a dead product.

Apple and Amazon have not yet fully entered mobile payments but are going to do so. Apple has filed patent applications that indicate its intention to get into mobile payments, with its more than 600 million consumer credit cards on file.

We have argued that mobile payments are entering the mainstream through vertical or specialized apps that contain a commerce elment but with offline fulfillment -- Uber, AirBnB, OpenTable are examples. We should continue to see mobile payments "mainstream" and gain increasing momentum over the next five years.

Apps Killing Mobile Web, Facebook Biggest App, Google Biggest Revenues

According to new data released by Flurry apps have solidified their hold on mobile user behavior, claiming 86% of all time spent on the mobile internet. Early prognosticators believed that mobile apps were a temporary bridge to the mobile web and would eventually give way to the "open internet."

That obviously hasn't happened. Perhaps years from now things will be different. 

Earlier this year, consistent with Flurry's report, Nielsen found that about 89% of all time spent in mobile is with apps; 11% on the mobile web. Yet, despite this massive time-spent imbalance, the mobile web still has greater audience reach than mobile apps.  

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Among mobile apps, gaming is still the single largest category with 32% of time spent according to Flurry. However Facebook (including Instagram) is by far the dominant individual app, accounting for 17% of all time spent. By comparison YouTube captures 4% and Twitter 1.5%. Apple's Safari browser grabs 7% of time spent and Google's browsers 5%. 

Ad spending in mobile is growing quickly as brands and marketers race to catch up to consumers. According to the chart below Google claims a disproportionate share of ad spend, while Facebook is more or less in balance. By comparision the long tail of apps fail to capture their share of ad spend -- suggesting significant future growth for in-app advertising. 

An app developer and publisher survey conducted this year by App Annie found that only 42% monetized with display advertising.   

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Webcast: Everything You Always Wanted to Know about Beacons

Live Webcast: Wed., April 30, 2014 - 1:00pm ET / 10:00 am PT

Beacons are hot. Once dismissed by many, they are now being widely deployed in retail and grocery stores, stadiums and entertainment venues. Apple’s support for Bluetooth (iBeacon) has put the technology on the map and driven its growing adoption.

While many people have read about iBeacon, they don’t clearly understand what beacons can and can’t do. Join Opus Research Senior Analyst Greg Sterling and Steve Hegenderfer, director of developer programs at Bluetooth SIG, for an informative and interactive discussion about all things beacon.

Bluetooth SIG is the group that oversees the standards and licensing of Bluetooth. We assure you Hegenderfer will speak plain English during a presentation aimed at marketers, agencies and business decision-makers.

In this accessible, non-technical session you’ll learn:

  • What iBeacon is and how it fits within the larger Bluetooth landscape
  • How many different types of beacons there are and who makes them
  • The cost, lifespan and transmission range of beacons
  • Optimal indoor beacon use cases (and things that beacons don’t do well)
  • How marketers/retailers can avoid spamming consumers with beacon triggered notifications
  • How indoor messaging and notifications can be personalized
  • Whether beacons can equally be used for indoor marketing and analytics

Early Nokia X (Android) China Success Hints at What Might Have Been

From the beginning, after Nokia announced that it was embracing a third party mobile operating system (Windows), I argued that Nokia should have also released Android devices. And in something of a surprise, we learned late last year, after the $7+ billion acquisition of the company's hardware division by Microsoft was announced, that Nokia had been secretly working on an Android handset.

Chinese and other Asian regulators have delayed the closure of the Microsoft-Nokia transaction, which has now been pushed to the end of April. But it still should be approved and close. 

Earlier this year we got to see the Nokia-Android handset, the Nokia X (and its kin). The company created a Windows Phone-like UI and overlaid it on top of a semi-forked version of Android. The idea is to bring low-end buyers into the Nokia fold with a Windows-like Android UX and Microsoft services and then upsell them into a true Windows-Phone experience.

Intended to be highly affordable the Nokia X has now rung up 10 million pre-orders in China. These are not actual sales (yet) but reservations to buy the phone when it becomes available in the near future. This impressive level of demand indicates that had Nokia been building Android phones all along it might now be in a very different position and potentially wouldn't have had to sell to Redmond. 

Of course Microsoft, heavily dependent on Nokia, recognized its own vulnerability and essentially bought the Finnish company's devices division for defensive reasons. Had Stephen Elop made different OS choices, Nokia might today be vying neck-and-neck with Samsung for position as the top global Android OEM. 

Facebook Announces 1 Billion Mobile Users As It Readies the 'Platform of the Future'

Yesterday on the conference call discussing the $2 billion acquisition of Oculus VR, Facebook CEO Mark Zuckerberg also told the audience that it now had one billion mobile users -- quite a milestone. The company previously reported in its Q4 2013 earnings that it had 945 million "monthly active" mobile users, as of December 31, 2013. 

Daily mobile users are now probably around 600 million on a global basis.

Ad revenue from mobile devices in Q4 was "approximately 53% of advertising revenue ... up from approximately 23% of advertising revenue in the fourth quarter of 2012." That means the mobile ad-revenue number will likely be 65% or greater by the end of the year. Twitter gets roughly 70% of its ad revenue from mobile, based on its most recent earnings report.  

Even though mobile experiences, advertising and marketing are still relatively young (since 2007), Facebook is looking beyond mobile to the "next computing platform." For Zuckerberg that's virtual reality. 

He's potentially right.

However much depends on whether and how virtual reality can be translated into a mainstream experience. It's not unlike taking original IMAX and turning it into a smaller but more "accessible" cinematic IMAX for popular film releases.

Beyond gaming, which is Oculus' current pursuit, Zuckerberg articulated the idea of bringing people (virtually) into places, events and experiences in a more immersive and direct way. There are both commercial and non-commercial scenarios. Many of them, however, are straight out of science fiction or dystopian novels and movies (see, e.g., Matrix, Demolition Man, Strange Days).

Paradoxically, the Oculus acquisition brings Facebook more into the "real world" (away from 2D internet) but also offers new potential opportunities to create internet-like experiences for users, into which they can enter.  One such example might be strolling down a virtual shopping street, like a character in a 3D game, where people can "touch" and examine products in a holistic 3D experience. 

It's fascinating to contemplate an internet of the future that might be radically different than what we know today.  

Retailer Apps Must Focus on the Offline Shopper, Not Just Ecommerce

The notion that retail apps or mobile sites should primarily be a shrunken ecommerce experience is misguided. That idea, however, is promoted in February survey results from RSR Research. The survey data reflect how retailers regard the role and value of mobile.

The results divide retailers into "winners" (market leaders) and "all others" (presumably laggards). Among the winners, the top use case for mobile is "an ecommerce site that can extend into mobile." That's followed by "downloadable shopping app, "public WiFi in stores," and "employee assisted selling mobile capability."

It's a bit unclear what these secondary responses mean. However I assume they all pertain to an offline or in-store role for retail apps or sites.

 

Source: RSR Research

RSR celebrates the notion that the primary role for mobile is to extend ecommerce into mobile: "an eCommerce site that can extend to mobile is the best technology approach for their customer-facing mobile strategies." I disagree with this philosophy. 

Although most smartphone users have conducted transactions on their handsets, this is not the primary shopping-related use of smartphones. The overwhelming majority of ecommerce transactions that involve mobile, start on a smartphone and end in stores or on a tablet/laptop later. 

A recent ShopVisible survey illustrated that while mobile devices drive 30% of ecommerce/retail traffic, they're only responsible for 15% of purchases. But beyond this the data show that smartphones only generate 4% of "mobile orders."

ShopVisible data  

There are range of surveys with different percentage findings about mobile transactions. But directionally they're virtually all the same: consumers use smartphones as a critical part of the shopping research process but when it comes to buying they do so on PCs, tablets and, overwhelmingly, offline in local stores. (Internet influenced offline spending is probably worth more than $2 trillion annually, many times larger than ecommerce.)

We don't argue with the idea that mobile apps and sites have an important role to play in ecommerce (tablets especially). Despite this, smartphone retail apps should be thought of primarily as a tool to aid the offline shopper. Most of the current deficiencies of the offline retail experience (lack of competent in-store personnel, inability to find products, additional product information) can be mitigated or addressed with a strong in-store app experience.

It's also possible to "have it both ways": to emphasize ecommerce when the user is far from the store but use location detection (and opt-in) to offer a in-store experience that features shopping lists, product information, buying incentives and in-store maps/navigation (where appropriate).  

Juxtaposing ecommerce and offline commerce is something of a false dichotomy. Offline shopping support should not be neglected, however, because retailers are focused on trying to drive mobile-commerce transactions (because they misunderstand consumer behavior). Retailers should provide an ecommerce catalog in mobile while still recognizing that there's far more value and opportunity in supporting the real-world shopper.

Opt-In a Must: Consumer Survey Indicates Retailer Risks with Indoor Location

There have already been several surveys that show consumers are interested in the benefits of indoor location and will share their personal data or opt-in when they're clear on what those benefits are. See, for example: 

A new survey (n=1,024 US adults) from OpinionLab shows that consumers are skeptical about indoor "tracking" and only want to participate in indoor location and marketing programs if they're opt-in. In an article about the survey Fortune sensationalizes the findings "Consumers hate in-store tracking (but retailers, startups and investors love it)."  

That headline overstates the degree to which consumers are hostile to being located in stores. It's very fair to say they're ambivalent and cautious about indoor location, though most haven't had any experience of indoor location at this point and are speaking only in the abstract.

The use of the word "track" is very charged and that's the framing here -- "In your opinion, is it acceptable for retailers to track shoppers’ in-store behavior via smartphone?": 

  • No -- 77%
  • Yes -- 23% 

An alternative question such as "would you be willing to share your location with retailers for benefits X, Y, Z" would have produced a different result. Indeed, how surveys present these issues to consumers really matters (see, e.g., Majority Of Shoppers Want Cross-Channel Personalization.) Accordingly survey results can be manipulated to serve agendas in favor of or against indoor location. 

Another question in the OpinionLab survey similarly predisposes the outcome -- "If one of your favorite retailers were to implement a tracking program in their stores, would you participate?":

  • No -- 63%
  • Yes -- 38% 

This survey found that consumers are open to indoor location if the programs are entirely opt-in (even with the "tracking" framing) -- "In your opinion, what is the best way for retailers to approach in-store tracking?"

  • Opt-in -- 64%
  • Opt-out -- 12%
  • No tracking at all -- 24%

Consistent with earlier surveys, consumers say they would opt-in for discounts and other incentives -- "What incentives would motivate you to participate in a retail tracking program?": 

  • Save money / price discounts 61%  
  • Free products 53% 
  • Chance to win a big prize (vacation, HDTV) 28%  
  • Better shopping experience overall 24% 
  • Unlock new experiences and awards as you shop the aisles 23% 
  • Personalized attention from store associates 12% 

What this survey, like others before it, shows is that consumers have real privacy concerns about indoor location and tracking. However, the word "tracking" is one that triggers an immediate, negative response and associations (i.e., "surveillance," "spying"). By contrast, discussing the benefits of indoor location produces a very different set of findings (see other surveys).

Yet the OpinionLab survey also shows that uncer the right circumstances consumers will share their location where retailers ask for permission (opt-in) and the benefits are sufficiently enticing and clear. 

Despite my criticisms of the framing of the OpinionLab survey I think it does illustrate that there are clear risks for retailers around indoor location if they don't respect consumer privacy and don't get the messaging to consumers right.

At the upcoming Place Conference Jules Polonetsky, Executive Director and Co-chair of the Future of Privacy Forum, will moderate a session on consumer privacy: "Indoor Location & Privacy: Steering Clear of the ‘Creepy Line.'"

Will Digital Advertising Work on Wearables?

Last week Google announced Android Wear, its smartwatch platform. Later in the week Nielsen released consumer research asserting that 70% of US consumers are aware of “wearables" and roughly 15% currently own some type of wearable technology today.

Among the 15%, Nielsen found the following breakdown: 

  • Fitness wristbands -- 61%
  • Smartwatches -- 45%
  • Health tracking devices -- 17%

The Nielsen survey probably overstates the number of Americans that actually own/use wearables currently; 15% of adults would translate into roughly 36 million people. Nielsen also found (I tend to believe this): "Nearly half of Americans surveyed expressed their interest in purchasing wearable tech in the near future." We found in our own research that roughly 40% of smartphone owners were interested in smartwatches. 

An article in Mashable speculates about the role that advertising might play on wearable devices. The article correctly notes that consumers will be far less accepting of "interruptive" ads on wearables. As much as smartphones are perceived to be "personal," this goes 2X for something like a smartwatch.

So-called "native" advertising may have a role to play in the context of a stream of news or other content, delivered on a smartwatch. But most if not all "advertising" on smartwatches will need to be opt-in marketing. These could take the form of location or time-based alerts or notifications (this could extend into indoor location and marketing as well). These types of marketing could prove to be very effective -- emphasis on the word "could." 

The bottom line is that all marketing on wearables (mostly smartwatches) will need to be highly sensitive to user privacy and almost entirely permission based.