Yesterday the Wall Street Journal reported that carrier-backed and NFC-based mobile payments venture ISIS would begin rolling out nationally:
The nearly three-year-old venture, known as Isis, plans to announce Wednesday that it will launch the payment service nationwide later this year after nine months of testing . . .
Isis said that the pilot tests' findings will be incorporated into the latest version of the system. Among other things, the test showed that active users tapped their phones for payment more than 10 times a month. Two-thirds of active users chose to receive offers and messages from specific brands, according to the test results.
While mobile payments will eventually be widespread -- different global markets are seeing varying rates of development and adoption -- the near-term future of mobile payments in the US looks less like ISIS and much more like OpenTable's new (vertical) payments offering.
The NY Times yesterday reported that the restaurant reservations app will soon incorporate no-frills mobile payments:
The payment process, still in testing, will be straightforward, Matthew Roberts, chief executive of OpenTable, said in an interview. At the end of a meal, the diner would open the OpenTable app and pay the check with the tap of a button. The diner can review the check, adjust the tip and finish the payment.
“There’s no scanning, there’s no bar codes, there’s no geeky stuff,” Mr. Roberts said. He said that OpenTable would not take a cut of each transaction if a diner paid with the app. The restaurant would be charged the typical interchange fee for a credit card transaction. The simple transactions through the app are another way to attract people to use OpenTable, which charges restaurants for reservations made through the service as well as a monthly service charge for using its equipment.
In individual store and specific vertical contexts mobile payments are starting to take hold in the US. That's because consumers see concrete value or convenience in using mobile apps to pay (parking is my favorite example). Arguably the most successful example of mobile payments in the US to date is the Starbucks app.
As a general matter, however, credit cards remain very easy to use and there's no common standard or experience available across merchants. Most US consumers don't see a justification for mobile payments in the abstract. But "in the moment" or in very specific situations consumers can recognize their value.
The transition to NFC-based payments will probably still take years in the US market -- unless the next iPhone enables them (ISIS wants to expand to iOS). But there's a significant, immediate opportunity for vertical apps like OpenTable to cultivate consumer mobile payments usage. Mobile payments through the OpenTable app also may create more loyalty and frequency vs. competitors such as Yelp or TripAdvisor.
I believe that these very concrete use cases will help train consumers to trust and adopt mobile wallets/payments, which will eventually pave the way for services such as ISIS or Google Wallet. However it will be 3 - 5 years before there's strong, national consumer usage (and merchant adoption) of these "horizontal" payments offerings.
By contrast people will be using OpenTable payments as soon as OpenTable flips the switch.
Dan Miller and I took a briefing with Jumio this morning. Jumio is an authentication and identity management platform (mischaracterized originally as "augmented reality"). The company has been around since 2010.
It has two major products that rely on the same technology. Netswipe helps facilitate transactions on mobile apps and Netverify enables accurate remote identity authentication for fraud prevention. I'll focus on the former but the latter is very impressive and worthy of its own discussion later.
Jumio works in the same way that Card.io did. Using an SDK developers embed the Jumio solution within their apps. When the consumer is ready to complete a transaction or check out (book a room, flight or make another kind of purchase), she merely scans the desired credit card and enters the CVV number manually. The transaction takes a fraction of the time that would otherwise be required if she were to key in 16 digits, enter her address information, etc.
If you've already got your credit card and related information on file (see, e.g., Amazon, iTunes) there's less of a need for this approach. However developers should offer it to new customers as a way to generally eliminate barriers for consumers, and capture credit card details for faster checkout next time.
Jumio competitor Card.io was acquired by PayPal one year ago, leaving Jumio as the lone independent vendor of this type card-scanning technology. Every mobile publisher and developer should be using Jumio or Card.io to improve conversion rates and the customer experience. Beyond mobile transaction-abandonment, frustrating users reflects poorly on the brand according to many studies.
Accordingly, every mobile developer should be using a mobile card-scanning solution as one way to remove friction from mobile transactions. It's not clear why they might not, except for perhaps for ignorance, lethargy and inertia. I could also imagine this approach as an alternative to card swipes in stores, although that's less necessary.
Jumio has adopted a flat-fee SaaS model. Customers pay a fixed monthly fee for an unlimited number of transactions.
It's rare instance where consumer and merchant interests are entirely aligned. But here they are: more secure and faster transactions for the merchant and consumer, as well as fewer charge backs and fraud. It's kind of a "no brainer."
Below is a promotion video that explains the Jumio Netswipe offering:
Facebook announced its Q2 2013 revenues a few minutes ago. Overall the company beat analysts' expectations with $1.81 billion in total revenue. Advertising supplied $1.6 billion of that total with payments and fees providing $214 million.
The big suprise was mobile, which was responsible for 41% of total ad revenue (or $656 million) -- up from 30% last quarter. Here are the mobile numbers:
The company said on its earnings call that it's investing in "mobile, measurement and product innovation." The company said it has the most effective mobile ad products and is in a position to lead the mobile ad market. Indeed the company is second only to Google now in mobile advertising revenue.
Apple just reported a $35.3 billion quarter, which was somewhat better than a year ago and beat financial analyst expectations -- largely on the strength of iPhone sales. The company also announced profit was $6.9 billion (vs. $8.8 billion a year ago). Sales outside North America accounted for 57% of revenue.
The company sold 31.2 million iPhones (vs. 26 million a year ago). But it sold fewer iPads than expected:14.6 million. Mac sales were down but Macs outperformed the PC industry as a whole, which is slumping badly.
Below are two charts that show the distribution of revenues by segment/geography and by product line (figures in $billions):
Unit sales of iPads were a concern for many financial analysts. The company sold 14.6 million tablet devices compared with 17 million last year and more than 19 million last quarter. While this implies market share erosion or shift away from the iPad, today Chitika released data showing that in North America at least, the iPad's web traffic share had grown since April and now stands at just over 84%.
While Apple continues to generate huge quarterly revenues growth has slowed or declined in some cases. Accordingly there's enormous pressure from investors to bring out new products or create new product categories: TV, wearables, etc. On the earnings call Apple CFO Peter Oppenheimer said, “We are on track to have a very busy fall" though he wouldn't elaborate.
New iPads and iPhones are expected to be introduced. There may even be "surprise" products such as the rumored iWatch.
The term "phablet," used to describe devices that operate like a phone but approach the size of small tablets, is horrible. But what may be more horrible is that Apple is reportedly considering creating one, potentially mimicking Samsung's strategy of a range of devices of differing screen sizes.
Samsung is throwing a lot of mobile device spaghetti at the refrigerator, metaphorically speaking, to see what sticks with consumers. One might even describe its strategy as "incoherent." Nonetheless Apple may be moving toward introducing more devices with various screen sizes. That's according to an article in the Wall Street Journal:
The tests with suppliers seem to suggest that Apple is exploring ways to capture diversifying customer needs when many mobile device makers offer smartphones and tablets in various sizes.
In addition to potentially developing a device in-between the iPhone and current iPad mini, Apple is also apparently experimenting with larger screens for iPads. Most of these prototype experiments probably won't come to market.
The huge-screened Samsung Galaxy Note has proven popular; however it's unclear how many units have sold. Indeed, Samsung has been the primary creator of market demand for larger-screen smartphones. And now Apple is feeling pressure to respond with a larger-screen iPhone. However that's not likely to be the 5S, due out later this year.
It might make sense for Apple to offer two iPhones: one with the current screen (small) and one with a 5-inch screen (large). However beyond that it makes little sense for Apple to go.
When Steve Jobs rejoined Apple as CEO 1997 one of the first things he did was to simplify Apple's product lineup, which had become cluttered and confusing to consumers. This is the danger if Apple tries to follow Samsung and create multiple device screen sizes.
Consumers do want a larger-screen iPhone but they haven't been asking for multiple devices of incrementally larger screens. It's also not clear that anyone wants or cares about a larger iPad. Maybe one with a slightly larger screen would be interesting but that would need to entirely replace the current iPad.
It makes sense for Apple to have four devices at most: iPhone (two screen sizes perhaps), iPad Mini and iPad. Beyond this the product lineup becomes muddled and confusing. And to the extent that Apple seeks to imitate Samsung's approach it may indicate the company has lost confidence in its vision.
Nokia's results this morning are something of a Rorschach test. You either see them as evidence that Nokia has stalled and Windows isn't going to save the company or you can see some momentum and success -- as a promise of more future success.
Nokia's Q2 revenue was €5.7 billion ($7.5 billion), which was down vs. last quarter (3%) and last year (24%). Lumia sales were up 32% vs. last quarter to 7.4 million units. Overall the company sold 61 million phones, almost 90% of which are not smartphones however.
Nokia said the 7.4 million Lumia unit sales reflected strong demand for the Windows Phone based handsets. However in North America the company sold roughly 500,000 devices vs. 600,000 last quarter. Accordingly demand in North America is flat, while Windows remains under 5% in terms of market share. Nokia has had more success in Europe and other markets where its brand is stronger.
Yet Nokia has now pulled into the number three smartphone slot after Android and iOS. BlackBerry reported selling 6.8 million phones last quarter. Becoming number three was an expressed goal when Nokia selected Windows as its exclusive OS. However the question now becomes can it do better?
My view is that Nokia will be compelled -- notwithstanding contractual exclusivity with Microsoft -- to adopt Android at some point in the not-too-distant future or remain stuck in what amounts to neutral.
Update: The Verge reports that Nokia CEO Stephen Elop was concerned that if the company chose Android that it would lose to Samsung. Thus it chose Windows Phone as its exclusive OS. That has been a very mixed experience for Nokia, obviously. I believe that Nokia with its brand and marketing resources would have been in a position to challenge Samsung for Android dominance.
But the early window of opportunity, so to speak, has now closed for Nokia.
In honor of the blazing US summer and road trips, xAd and Telmetrics have released more data from their "Mobile Path-to-Purchase Study," this time on consumer behavior in the "Gas & Convenience" category. The study, which combined a mobile user survey (n=2,000) and consumer behavior data (n=6,000), was conducted by Nielsen earlier this year.
As might be expected the study reflects the very mobile-centric nature of the category, which includes convenience store visits, gas purchases and minor automotive service (i.e., oil changes).
Below are the study's key findings:
Interestingly, the study reported that "Gas & Convenience searchers spend an average of 6 minutes per mobile search session," which is 50% more than "the average Retail mobile search session."
The study also found that Gas & Convenience users were very open to influence and receptive to mobile advertising, especially if the ad pertains to a nearby location and/or offers a deal or coupon.
As the global market for smartphones matures, it is clear that the default keyboard platform is going to be key for product differentiation. That's why it is so interesting that up-and-coming Chinese OEM, TCL Communications Technology Holdings Ltd, has expanded its licensing agreement with Nuance, making Swype the default keyboard for its line of Android-based smartphones sold in the U.S. In its latest report of device shipments, TCL claims sales volume of smartphones grew 126% in June, when compared to the same month last year, exceeding 1.3 million units. Of the nearly 21 million phones sold globally in the first six months of 2013, over 18 million were sold outside the Chinese domestic market. 4.3 million were smartphones, selling under the he Alcatel OneTouch brand as well as TCL's own Idol X branding.
Like Samsung, TCL is a well-diversified consumer electronics manufacturer with a major presence in the flat-screen TV market. Its management expects the geographic expansion of its smartphone sales to fuel growth and profits in the coming years. If it does so, it will be at the expense of Samsung, HTC and Google's own Motorola brand. Matt Revis, Vice President of Dragon Devices at Nuance, points out that the company had its choice of a number of less expensive alternatives to Swype to support touch-based input, including the "free" default keyboard that ships with the Android operating system.
"This is representative of a situation where you have a company that is positioned to grow globally and looking for an innovation partner to make it a category leader," Revis explained. "They are working with Nuance."
Indeed, it is a signal event for Nuance and Swype, which is already available for free download from Google Play. While Nuance would not provide revenue estimates for the licensing agreement, the impact can be expected to be significant, given TCL's ambitious growth expectations in the coming year. A virtuous circle has been established whereby an aggressive manufacturer recognizes that innovation will be key to growth and has recognized the need to cement a relationship with a firm that has been steadily investing in improving the technologies that support touch-based and multimodal input - both through internal development and acquisition.
Against the backdrop of a sweeping reorganization at Microsoft, intended to promote greater collaboration and faster time-to-market, hardware tracker IHS reported that PCs "delivered the worst second-quarter performance in 11 years."
The firm said that global PC shipments were down 7% vs. a year ago. IDC reported in Q1 that PC shipments were down 14% year over year. I suspect that when the IDC and Gartner hardware figures are released we'll see greater declines for Q2 than what IHS is reporting.
IHS said that during the first half PC sales, globally, suffered "a harsh 11.2% contraction compared to the same six-month period a year ago."
Tablets and smartphones have clearly eaten into the PC market and put downward price pressure on PCs. PC replacement cycles are getting longer. A more intangible thing has also happened: PCs have ceased to be shiny new objects coveted by consumers.
They've become instead pure utilitarian items without the ability to evoke the device-desire they once had.
While countless retailer apps and mobile websites are designed specifically to deliver an "omnichannel" experience -- tracking a customer through the lifecycle of a purchase -- retailers are missing out on opportunities to engage customers through in-store technologies, says a new report by EKN Research.
A survey of more than 60 large retailers found just 13% of retailers are offering in-store features for mobile apps indicating a significant gap in leveraging the use of smartphones or mobile devices for customer engagement.
In terms of providing the infrastructure for ubiquitous connectivity, only 1 in 5 retailers currently offer free in-store wi-fi, with 42% of retailers having no intention of ever offering free wi-fi in stores.
Mobile technologies may offer new opportunities for customers but many retailers are not willing to make the investment. The report finds that IT spending on store technologies will remain relatively flat in the next three years, representing 31% of the total IT budget in 2013. Though the share is expected to increase to 35% by 2016.
"In 2013, increasing store operations efficiency remains retailers’ top goal from investments in store technologies. Running an efficient store should be table stakes for mature retailers, and their top goal should focus more directly on improving customer engagement. EKN views this as evidence that the focus hasn’t yet shifted for a majority of the retailers."
This news comes on the heels of a recent comScore report that found consumers are open to communications from retailers on their mobile devices with 47% of shoppers willing to have a retailer to send a coupon to their smartphone when they are in-store or nearby.
And previous data suggest a majority of mobile users are accessing retailers' websites for in-store sales or customer service functions.
We'll be exploring the current pulse of retailers and in-store marketing technologies at our upcoming Place Conference this October in San Francisco.