It appears the question is no longer whether Apple will break into mobile payments but when. A payments-related patent application recently surfaced that indicated Apple is quite serious -- at least over the long term -- about mobile payments. After all, it's a natural for the company.
Yesterday the Wall Street Journal reported additional details that indicate Apple may be preparing to enter the market sooner rather than later. Here are some of the key facts from the story:
These moves don't guarantee Apple will enter the space but they're strongly suggestive of it. Apple has roughly 600 million consumer credit cards on file in iTunes. It also has a consumer trust advantage over other competitors in the segment. (Wall Street would celebrate an Apple move into payments.)
Apple's fingerprint sensor could become a key security feature of a Pay with iTunes/iWallet service. However there's considerable complexity still "on the back end" with real-world retailers and merchants and their POS systems. Retailers also have their own mobile payments initiative, which could create resistance to Apple just as carriers supporting ISIS have resisted or blocked Google Wallet. Those factors would probably limit the immediate availability of an Apple payments solution for goods at major retail stores, though not necessarily at places such as QSR and fast-casual restaurants.
It would be technically easier for Apple to enter e-commerce and create a PayPal or Pay with Amazon competitor. Perhaps most likely, however, Apple could enable app developers to incorporate a Pay with iTunes capability, which would in turn enable payments for offline services (AirBnB, Uber, Dash, etc.). This is where "mobile payments" has traction today -- in specific apps or "vertical" contexts with a stored credit card.
Apple's Passbook app would probably get merged into or incorporate any Apple payments program. I would also expect that iBeacon (BLE) would be tied in to an Apple payments solution (as with PayPay Beacon). All this potentially adds up to a very powerful set of related capabilities including location awareness/indoor location, couponing/loyalty and in-app payments (for e-commerce and offline services).
An Apple payments service could also operate as a meaningful differentiator vs. Android handsets for both app developers and consumers. Google Wallet's offline payments capabilities have so far failed to catch on.
I also wouldn't be surprised if Apple made one or more (high profile) acquisitions before launching payments to bolster technical capabilities. Google would probably be motivated to compete for some of the same acquisitions -- for its own sake and/or to keep them away from Apple.
In the near term, a comprehensive mobile payments solution will probably require a hybrid approach to offer merchants and consumers a couple of ways to accept mobile payments and to pay. And while mobile payments have yet to gain mainstream adoption, Apple is one of the few companies that could really accelerate the market.
Email marketing and "mobile marketing" are now effectively synonymous -- or should be treated that way. There's no trend that illustrates the decline of the PC perhaps better than the consumer shfit from reading email on PCs to mobile devices.
In Q4 roughly two-thirds of all US emails were opened on tablets or smartphones, according to Movable Ink’s Q4 2013 US Consumer Device Preference Report. That's up from 61% in Q3 and it will probably continue to grow (perhaps to 75% by year end). Although these are US data, the trend directionally applies to other developed markets.
Source: Movable Ink
Here are some of the topline data coming out of the Movable Ink report:
Despite the steady climb in mobile email usage, far too many marketers still act as though their emails are being opened mostly on PCs. And even when HTML emails are formatted for mobile devices too often the landing pages and subsequent websites are not.
Offline analytics and indoor location will change the way that retailers, venue owners, manufacturers and brands think about operations, marketing and the customer experience. Opus Research predicts the market for indoor location and place-based marketing and advertising to surpass $10 billion by 2018.
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The buzz around iBeacons continues this week with a couple new hardware and software technology vendors entering the market for indoor location.
Hardware startup Sensorberg, based in Berlin, Germany, has secured $1 million in funding from Technologie Holding GmbH and undisclosed angel investors. Sensorberg offers various packages to retailers that combine setting up Beacon sensors in stores to deliver mobile marketing campaigns and location features via software developer kits and management dashboards. The prices range from as low as $120 (€89) that includes 3 mini-beacons and an SDK to connect apps to an unlimited package that offers developer resources and enterprise support.
Founded in 2013, Sensorberg began as a startup in the Microsft Ventures Accelerator in Berlin and plans to use the new funding to further develop its platform and build an extensive iBeacon network.
Meanwhile, in Los Angeles, CA, Datzing is positioning itself as a new competitor to Apple's iBeacon with an Android platform for indoor location technology. Profiled this week at The Verge, Datzing is a software-based startup with patent-pending technology to turn a Bluetooth or Wi-Fi device into a beacon. Datzing doesn’t require purchasing any special hardware to set up an access point. The company plans to launch an Android beta app in March and doesn't rule out the possibility of an iOS option down the line.
While iBeacon is getting more than its fair share of press -- notably, a partnership between ShopKick and American Eagle (AE) Outfitters to outfit 100 U.S. stores with iBeacons and Apple's chain-wide deployment of iBeacons last year -- the push for in-store marketing and indoor location is still in its infancy. This year should present a good opportunity to see how the market plays out.
For the past several years there's been speculation about whether and when Apple might throw its hat into the mobile payments ring. A new patent application (filed in Q3 2012 and discovered by Patently Apple) indicates that Apple is ready to move and introduce an iWallet.
Here's the abstract, which indicates use of two or more technologies to enable the transaction:
A commercial transaction method is disclosed. The method first establishes a secure link over a first air interface by a purchasing device. This secure link is between the purchasing device and a point of sale device. The method further identifies a second air interface, which is different from the first air interface, and the second air interface is used to conduct a secure commercial transaction.
Multiple technologies are discussed, including Bluetooth Low Energy (behind iBeacons), near-field communications (NFC) and RFID The failure to incorporate NFC into the iPhone was regarded generally as a rejection of the technology by Apple in favor of others (e.g., BLE). However the patent application suggests that future iPhones (and iPads) would potentially be compatible with it.
Apple's failure to build NFC into the iPhone is one reason it has stalled in the US. However, as the patent application suggests, NFC in the US may not be dead after all. We'll see.
The precise technologies and methodology described in the application are less important than the existence of the application itself. Mobile payments for offline services or goods are starting to happen but generally not in a "horizontal" context. They're happening today in very specific scenarios (e.g., Uber, Starbucks, parking apps, dining). Google Wallet and carrier-backed Isis, which are broad "horizontal" payments platforms, have largely failed.
Given its installed base of users and credit cards on file Apple could potentially spark widespread adoption of payments by consumers. Apple has more than 600 million consumer credit cards registered. That's quite a bit more than even Amazon and more than PayPal as well.
The payments segment will consolidate in the next 12 to 24 months and there will be a number of additional acquisitions by the major players for technology or to remove competitors from the market.
Ultimately mobile payments -- paying with smartphones for goods or services in the physical world -- will shake out as follows: mass-market/horizontal mobile wallets dominated by a few major players: potentially Apple, Amazon, PayPal, potentially Square and maybe Google. Banks are a wild card.
Otherwise individual apps (including retailers) will offer to store consumer credit card information for faster checkout or frictionless offline payments. But the payments giants will also likely be options within these app/vertical contexts as well (e.g, PayPal, pay with Amazon, pay with iTunes).
In partnership with ShopKick, American Eagle (AE) Outfitters is outfitting 100 US stores with iBeacons to power deal notifications when shoppers enter stores. ShopKick also has a similar but much more limited partnership with Macys.
Right at-the-door notifications are the full extent of the ShopKick-AE indoor marketing functionality. But later it will become more precise by area or zone within the store.
Outside of Apple's own chain-wide deployment of iBeacons this is the largerst and most visible iBeacon launch to date. Clearly Apple's credibility and support of BLE and iBeacons is propelling the technology. However it's important to point out that iBeacons don't work with older iPhones and it only work with a few Android phones currently.
Over time that will change. But iBeacon is not a stand-alone or complete solution.
The rise of iBeacon argues that it will potentially be one of several "winning" indoor location technologies. But there won't be a single technology standard that emerges. Retailers and others will need to employ a layared or hybrid approach to provide store coverage and accuracy.
WiFi and closed circuit TV are the foundational in-store analytics and location technologies -- but WiFi in particular. Acousitc, LED lighting and magnetic may also make gains as retailers and venue owners come to see they need multiple approaches for success. For example, Rouse Properties has adopted acoustic technology from Sonic Notify to power indoor location awareness and marketing within its network of 34 malls in the US.
While indoor analytics are driving the market, companies are quickly stepping up with consumer-facing solutions -- such as ShopKick-AE. And while consumers widely use their smartphones in stores and are generally interested in things such as deals and personalization, retailers will need to be careful about annoying or spamming consumers with too many messages.
For example, research from ISACA suggests that an education process and gradual roll out of indoor marketing are in order. Too much, too soon may have the opposite of the desired effect:
We've reached a potent new mobile milestone: half of Americans own tablets or e-readers. That's according to new data from the Pew Research Center.
Specifically Pew says that 42% of American adults now own tablets and 32% own e-readers. Some own both. Pew says its survey was based on a representative sample of 1,005 adults (18 and over). It was conducted in early January -- so after the holiday.
The iPad is still the dominant tablet, driving roughly 76% of all North American tablet traffic according to ad network Chitika. The following traffic-share figures were captured just after the holiday:
There are roughly 242 million US adults according to census data. If we can extrapolate the Pew survey data to the entire US population of adults it would mean that there are roughly 102 million tablets and 77 million e-readers in the market, owned by 121 million adults.
Notwithstanding some anomalous comScore data, the overwhelming body of evidence is that tablets are much more commonly used for e-commerce purchases than smartphones. Consumers shop on smartphones but much more commony buy on tablets.
Tablets will out-ship PCs this year. Pew says its survey revealed that 75% of US adults own PCs (desktops or laptops). That number is flat.
We may reach a point in late 2015 when there are an eqivalent number of tablets and PCs in the US market. The web design and marketing implications of this are obvious. But when one combines the number of smartphones and tablets in the market, they exceed the total number of PCs already.
We anticipate that grocery stores will be on the forefront of indoor location and especially indoor or place-based marketing. They have enormous amounts of data about their customers (via loyalty programs), they've got mobile apps, increasingly sophisticated email marketing and brand client-advertisers that want to influence in-store shoppers.
Shopping lists are the most common in-store smartphone use case in grocery stores. The second most common is seeking coupons (often from grocery store apps). Accordingly the indoor consumer smartphone usage in grocery stores is already well established.
All of the above variables represent a potent combination and one that probably means we'll see much faster and more aggressive adoption of indoor location and marketing than even in other retail segments.
Accordingly we were struck by the announcement earlier this week that inMarket was rolling out iBeacon-powered indoor location in Giant Eagle and Safeway grocery stores in three markets: San Francisco, Seattle and Cleveland Ohio. The company says that its iBeacons will be in many hundreds of stores by the end of the year.
Most media outlets covered the "iBeacon's continuing momentum" angle. Indeed, iBeacons are small, cheap to install and are backed by Apple. However we're at least as interested in the grocery store adoption angle.
The video (below) introducing inMarket's "mobile to mortar program" showcases a range of use cases for its iBeacon offering:
Point Inside is also very active in the grocery space and has a number of advanced implementations in market. We'll be presenting some of these types of case studies at Place 2014 in New York in June.
Euclid is one of the better known indoor-analytics providers in a new but increasingly competitive and crowded segment. There are well over 150 companies involved directly or indirectly in "indoor location," most of which have some sort of analytics component.
While some companies are closely identified with a particular technology (e.g., Estimote with BLE), most companies can use or do use multiple technologies to gain access to indoor smartphone positioning. It's not unusual to find companies using at least two or three technologies such as WiFi + BLE. Euclid still relies on WiFi exclusively but will likely be expanding in the future to include BLE (assuming it continues to gain momentum).
This is comparable to how outdoor positioning and mapping relies on GPS, cell tower and WiFi triangulation as a hybrid approach to compensate for the limitations of each technology.
Today Euclid took a bold step by introducing a free indoor analytics product aimed at the mid-market (e.g., specialty retailers). It's called Euclid Express and it's mostly a self-service offering. Euclid co-founder Will Smith told me that during the beta period his company has enrolled more than 400 new customers. Competitors will undoubtedly see it as a "land grab."
The product assumes an existing WiFi "infrastructure" in the store locations. If not Euclid will provide a low-cost WiFi set up.
The objective of Euclid Express is to remove friction and barriers to adoption -- including price. It offers a range of indoor analytics data, including:
All this data is provided in real-time.
Euclid's advanced product has more features and costs $100 per month per store location. The Euclid Express dashboard offers users the option to upgrade to the advanced product. Euclid's Smith also touts his company's privacy practices (anonymous, aggregate data) and argues that privacy is now a product differentiator for the company.
Below is video from the Place Conference in October: Digital Analytics for the Real World.
Push notifications and mobile marketing platform Urban Airship released data last week that shows how push messaging can boost engagement and app-user retention. The company, which provides notifications functionality for publishers and app developers, compared how opted-in push messaging users behaved vs. those who had not elected to receive notifications in six verticals.
Those verticals were: retail, media, entertainment, gambling, sports and games. The study covered 2,400 apps and more than 500 million push messages during a six month period. At a high level Urban Airship found:
The company also reported that on average just under half of app users opted-in to receive push notifications. Though this is logical and may be intuitive, this is the first time the impact of push notifications has been documented empirically to my knowledge.
The engagement and retention differences among those who received notifications vs. app users who did not varied by industry. But in all cases engagement and retention were boosted, sometimes dramatically.
It may be that those opting-in were more favorably inclined toward the publisher or app and thus were predisposed to be more engaged with the content. However I think it's beyond dispute that push notifications, if used judiciously and correctly, can boost app engagement.
The problem is that most requests to allow notifications come immediately upon download and often before someone has had an opportunity to see the value of an app or of notifications. I routinely opt out because I fear they'll be abused by publishers and I don't want to be constantly interrupted.
Publishers, retailers and marketers should do a better job of explaining the benefits of turning on push messages for the end and perhaps not request an opt-in immediately upon download. It would also be interesting to know, for the 50%+ who did not opt-in, what were their thoughts and rationales.