Local Search

Siri-Fandango Tie-in Will Drive More Mobile Movie Ticket Sales

For users who updated their iOS devices to 6.1 yesterday Fandango is now the commerce partner for movie ticket sales via Siri. If you look up movies using Siri you get the Rotten Tomatoes powered list with an option to buy using Fandango. If you don't have the Fandango app on your device you'll be prompted to install it to complete the transaction. 

Fandango has reported that mobile now accounts for more than 30% of ticket sales. That will undoubtedly increase with Siri and iOS integration.

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There are many Siri critics out there but the process of looking up a movie and (now) buying a ticket is pretty compelling. In fact this may well become the primary way that many iOS users buy movie tickets in the future. Once a credit card is on file with Fandango it's going to be faster and easier than conducting the same transaction even on the PC.

In addition, there's Apple Passbook integration post purchase. 

This is yet another "mobile payments" point solution (it's really e-commerce on a mobile device) that will get people comfortable with the idea of using their phones to conduct transactions and pay for things. The convenience and value here are obvious to consumers.  

 

What You Think You Know about Local-Mobile Advertising May Be Completely Wrong

I keep reading very aggressive projections about local-mobile advertising from BIA and others. Rather than grounded in reality today, these forecasts are built on a set of "optimistic" but simple assumptions about how the market will inevitably develop. For example, one assumption is that national ad dollars from brands and retailers that sell locally will pour into mobile and that their mobile ads will necessarily be geotargeted or localized.

While all forecasts must make assumptions about the future, my belief is that many of the assumptions being made about mobile are crude at best or simply incorrect. I'm a big proponent of location-based marketing and have written extensively about how geotargeted ads and ads with localized creative outperform conventional or "generic" national advertising. There's no question about consumer demand for local information. The question is whether and how advertisers can match or exploit that demand.

There remains a great deal of friction and many challenges to overcome before these big local-mobile forecasts can come true. There are also several "unexpected" things that may change the direction of the marketplace. I go into a few of those things below. In truth the majority of the localized mobile advertising today is happening in search. The platform is mature, the demand and the tools are there. The value is obvious to all involved. That's why Google is making the most money in mobile advertising today. (Facebook is also going to make a lot of money in mobile, some of which will be localized.) By contrast, local-mobile display is in its infancy.

There are two mobile ad networks generating and syndicating a large percentage of the local display inventory that you're likely to encounter: xAd and YP. CityGrid is out there and so are Verve, LSN, Telenav/ThinkNear and a couple of others. Marchex is there too with pay-per-call; however much of that is driving mobile callers to national call centers. Among the major ad networks Millennial, JumpTap and AdMob (Google) all offer local targeting. Often that targeting doesn't extend beyond state or DMA-level precision.

The emerging exchanges and RTB platforms all offer location as part of a laundry list of targeting capabilities. Indeed, location is likely to simply become one of many targeting variables on most networks and exchanges.

Coaster Another 'Point Solution' That Will Drive Mobile Payments Adoption

Some people have described the competition for business owners in the mobile payments segment as a "race to the bottom" in terms of credit card processing fees. Indeed, there are now at least 10 mobile payments or POS vendors targeting small businesses that are undercutting traditional credit card processing fees. The include LevelUp, Groupon, Square, PayPal Here, GoPago and others. 

Just yesterday Coaster introduced an iPad POS app that charges bar owners zero credit card fees -- zero. It makes money off charging consumers a small amount for the "premium service." 

Clearly this is not the company's long-term strategy. It's trying to create more bar "inventory" for consumers in the hope of driving app adoption and expanding beyond San Francisco, it's only current market. However the zero credit-card processing fee is a major incentive for bars to sign up and use the system. 

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Coaster is another example of something I've written about multiple times: vertical or point solutions that offer self-evident value to consumers and will drive adoption of mobile payments. My favorite example is mobile parking payments but Coaster is a pretty good example.

By using Coaster smartphone owners can order, pay and tip at bars without giving over their credit cards directly or waiting in line. I've not yet used the app myself. However Coaster offers concrete and obvious value for bar patrons (and bar owners).

These kinds of vertical scenarios or "point solutions" will educate consumers and get them comfortable with mobile payments, paving the way for broader adoption of "horizontal" solutions such as Google Wallet. Exposure to a positive veritcal payments experience will tend to accelerate broader payments adoption. 

By contrast people often don't see the reason or need for "mobile wallets" in the abstract. 

How interested are you in using your mobile phone to pay for things, and replace cash or your credit cards?

Survey: mobile payments

Source: Opus Research (August, 2012; n=1,501 US adults)

IAB: Smartphones Aggressively Used for Shopping, Not Commerce

The IAB just released its second mobile shopping report, including its ranking of the most "mobile savvy" cities in the US. Houston, remarkably, comes out on top for a second year. Houston is also the "fattest city in America" according to Men's Fitness magazine.

The mobile shopping study also found surprisingly high numbers of users who owned "connected devices" (tablet and/or smartphone). The numbers here are much higher than Nielsen and comScore figures for smartphone ownership. According to the data the San Francisco Bay Area had the highest smart device penetration at 78%. Among the top DMAs Detroit was lowest with 62%. I suspect these numbers are not entirely representative of the mobile subscriber population and a bit high -- though perhaps not radically so.

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The IAB report, which draws from a variety of survey and data sources, confirms that smartphone users are aggressive and engaged mobile shoppers but they generally don't buy things on those devices (tablets are different). The IAB (citing comScore) reports that 86% of US smartphone owners visited retailer websites or used retailer mobile apps in July.

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The graphic above doesn't entirely make sense (81% vs. 85.9%) but it makes the larger point that most smartphone owners are accessing retail information on their devices.

In stores smartphone owners use their devices to communicate with other people about intended purchases, check prices and product information and look for deals. However only 5% in this survey bought anything with their mobile handsets. 

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The report also confirms that most tablets are not used "on the go," while shopping. However that may change with the advent of carrier-supported 7-inch tablets and the 5-inch Galaxy Note (also obnoxiously known as a "Phablet"). 

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This is just one more set of data that underscore the importance of being "mobile ready" and fully understanding how mobile can be used for customer acquisition and customer service, even in stores. Mobile is an instrument of "showrooming" but it can also be an avenue for customer service and retention among traditional retailers. Yet most are simply not ready

Major Retailers, Etailers Unprepared for Mobile and Tablet Shoppers

Almost daily my inbox is hit with a new study or report that expresses a similar theme: businesses large and small aren't ready for mobile shoppers. However one would expect retailers to have invested and be prepared for the coming multi-screen holiday season. Not so, says an informal usability study from Keynote systems.

Keynote examined major retail and e-commerce sites on iPhones, Android devices and BlackBerry handsets. It found numerous problems and inconsistencies from device to device. The inference is that retailers aren't actually testing their own sites on the various platforms and operating systems.

Some of the problems Keynote identified are minor (copy not optimally presented) but some are major (broken search functionality). Furthermore many of the retailers didn't seem to be addressing the tablet audience. Keynote explained, "We also looked at Target on the iPad 3 and see that they probably haven’t been testing on a tablet and are content to delivering their desktop site to a tablet on good faith." 

Tablets drive actual online conversions, whereas smartphones are mostly used to check reviews, price information and locate and contact stores. Tablet conversions are as high or higher than on PCs and average order value from tablets is higher than on the PC. It's critical for retailers and etailers to address the tablet audience specifically. 

Most retailers appear to believe that their sites will "work" for tablet users. That's true in many cases but a tablet-optimized retail experience would almost certainly drive more online sales and increased user satisfaction.

According to Skava only 7% of retailers currently have tablet-friendly sites. Accordingly this year may turn out to be a missed opportunity for most retailers when it comes to mobile and tablet users. Here's Keynote's conclusion, which is simply common sense: 

Early testing of both mobile websites in preparation for the holiday season would have prepared these top retailers for the judgmental mobile shopper this season. With holiday shopping looming and ready to begin in just days, it seems that these top retailers are already running into hurdles that may affect their holiday sales goals.

Report: Restaurants and Retailers Using Mobile to Drive Customers into Stores

This month's Millennial Media "SMART" report takes a closer look at the behavior and goals of mobile advertisers in the restaurants and retail vertical. Apparel retailers and fast food/national restaurant chains are the two largest categories of advertisers on the Millennial network in this segment.

Citing June comScore data Millennial reported that "Females spend nearly twice as much time on mobile Retail & Restaurant apps and mobile websites as men do."

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The main campaign goal of both sets of advertisers was to drive foot traffic into local stores. Accordingly retail and restaurant advertisers were more interested than average in getting people to store locators and maps on landing pages, as well as exposing promotions (coupons). The were also interested in generating mobile commerce. However unless there's a stored credit card on file there will probably be no m-commerce.  

These restaurant and retail advertisers were much less interested than average in driving application downloads. This apparent lack of interest in getting apps onto the smartphones of their customers and prospects reflects a misunderstanding of the role apps can play in stimulating sales and improving retention and customer service.

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Finally Millennial reported that restaurants and retail was the number three category in terms of ad spending on its network -- more than automotive, travel or CPG: 

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Google Brings More Speech to Voice Search for iOS

Earlier today Google released an update for its iOS search app, which had been in iTunes approval limbo for seemingly several months. The new app works on the iPhone, iPad and iPod Touch. At first it doesn't appear to be much different from the previous version. However there are two major changes and improvements: voice search with spoken answers and knowledge "cards."

While earlier versions of the Google search app for iOS had speech-to-text input, the new app includes the Siri-like spoken results that Google introduced for Android devices months ago. If Google has a structured result from its "Knowledge Graph" database, the female assistant voice will read it back. If not, Google will simply provide a more traditional list of web links.

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Typically these structured results are presented as "cards." They can include images and other rich information and constitute "answers," where Google is confident of the result. Google introduced this "assistant-powered" voice search capability and knowledge cards in Android 4.1 in early Q2 (we're now up to 4.2). Accordingly the differences between the Google experience on iOS and Android are now less pronounced -- so to speak. 

The one missing piece from the new iOS app (which Google probably cannot execute on iOS) is Google Now. Google Now is the company's predictive search capability that combines users' search histories, time of day, location, calendar information and other signals to provide personalized and other contextually relevant information (e.g., traffic, flight times, nearby restaurants) -- without requiring the user to affirmatively conduct a search.

It doesn't always work. But when it does it's very impressive.

Google is the dominant mobile search provider across platforms, with a nearly 95% share in the US market. In a Q2 consumer survey about mobile search, conducted by Opus (n=503 US iPhone 4S owners), 19.3% of respondents indicated they used the Google search app. The remaining majority (roughly 70%) of users either entered queries in the search box in the Safari toolbar (where Google is the default) or they went to Google.com to search the mobile web. 

Related: Google now says that there are in excess of 700,000 Android mobile apps. That number is now at or near parity with Apple. 

Is Mobile Driving Down the Price of Google CPCs?

Google inadvertently released its Q3 revenues early today. The company reported that consolidated revenues (including Motorola) were $14.1 billion, a 45% increase vs. last year. Google said that Motorola brought in $2.58 billion. However there was an operating loss of $527 million. Indeed it was argulaby the weak link in the Q3 earnings report.

Minus Motorola, Google's revenues were $11.5 billion with 67% of that coming from Google sites vs. its third party network and other revenue sources. Paid search clicks grew roughly 33% vs 2011. However cost per clicks (CPCs) were down about 15% vs. last year. 

While Google has yet to directly address this, the reason for the lower CPCs is likely the growth of mobile search and the shift of some categories of queries to mobile devices from the PC.

Mobile search volumes have grown significantly; however marketers value mobile clicks less than PC search clicks. The main reason is the challenge of proving ROI. Consistently we see that mobile click-through rates (CTR) are higher than on the PC. But "conversions" are much lower. 

Part of the reason may be the infamous "fat finger" problem. But the larger issue is how marketers are defining and tracking conversions. The e-commerce-centric way of thinking about conversions just doesn't work for mobile. Most users don't transact on their smartphones. They go into stores -- where 95% of retail spending happens -- or they follow up on PCs and tablets later to buy. 

Because marketers can't generally track in-store transactions or later PC/tablet conversions they assign a low ROI to smartphone based queries. This in turn causes them to bid less on those keywords.

In the local segment, there's a shift going on from PC map-based queries to smartphones. A Google representative recently said that up to 50% of mobile search queries carry a local intent. And comScore recently documented that trend and argued that map-based search on the PC had peaked and was now in decline: 

In the past six months alone, according to comScore Mobile Metrix, the number of smartphone visitors to Maps websites and apps has jumped 24% to 92 million unique visitors – a monthly penetration of 83% among smartphone users . . .Searches with a Mapping/Navigation intent on the Big 5 Engines are down 34% over the past 15 months, going from 74.8 million to 49.5 million in August. comScore Search Planner shows that search clicks to Map/Navigation sites show an even steeper decline, down 41% to just 55.2 million in August.

We're likely to continue to see a flattening of local search volumes on the PC and a continuing shift to mobile devices (mobile web and apps). Nobody really knows how much local search query volume is flowing through mobile apps. However a January 2012 survey found that half of smartphone owners conducted local search in apps, with Google Maps being the leading app.

Once marketers more fully embrace mobile and get more sophisticated about ROI we should see the price of mobile advertising and mobile CPCs increase. Google of course will be one of the chief beneficiaries of such a development.  

TeleNav Buys Local Ad Platform ThinkNear for $22.5M

TeleNav has been generally in the business of personal navigation devices and smartphone apps. Over the past couple of years the company has also gotten into mobile advertising, taking ads from the YP and xAd networks, in addition to increasingly selling its own ads to brands and franchises. The ads are all location based or geotargeted.

TeleNav decided it wanted to get into local-mobile advertising in earnest and has announced the acquisition of ad network ThinkNear. The price was $22.5 million in cash and stock. The ThinkNear team now joins TeleNav.

ThinkNear offers precise geotargeting and what it calls "situational targeting," which is a mix of context and audience targeting:

ThinkNear helps advertisers reach consumers within 100 meters of any location, which is more precise than the zip code and designated market area (DMA) targeting typically offered by most ad networks. The ThinkNear network reaches tens of millions of customers across more than seven billion impressions per month. The precision and scale of ThinkNear allows advertisers to take advantage of the most distinctive aspects of mobile phones, which more than 85 percent of American adults now own.

ThinkNear's targeting technology also enables Situational Targeting, which takes into account where consumers are, what they are doing, and what is happening around them. For example, a sports memorabilia store can target an NFL fan with an advertisement for a nearby sale on branded jackets, blankets and umbrellas while the fan is tailgating on a cold and rainy day. Hyper-local Situational Targeting provides consumers with ads that are more relevant to their real-time needs and interests as they go about their day.

The company also announced that ThinkNear would become Scout Advertising, which includes search and display inventory. (Scout is TeleNav's smartphone app/consumer navigation brand.) ThinkNear sources some of its inventory from the various mobile "exchanges."

Scout Advertising is essentially a more complete and extensive version of the "hyper-local" ad network Navteq (Nokia) was trying to build. However Navteq appears to no longer be in the business of advertising.

In addition to the usual metrics, Scout Advertising can also tell a marketer whether the consumer actually arrived at his/her destination. Thus business models can be click, impression and arrival-based. TeleNav also says that its CTRs are "well above online and mobile industry averages, and over 40% of customers who click on an ad will ultimately take action to drive to an advertiser's location." 

While most ad networks offer geotargeting, with varying degrees of accuracy (but generally not lat-long), TeleNav/ThinkNear join a short list of ad networks that can deliver much more granular location targeting. Indeed, its current (or perhaps former) partners, YP and xAd, are now its most direct local-mobile competitors.

Geofencing Gets New Push With Urban Airship 'Location Messaging'

In-app messaging provider Urban Airship has just introduced a very interesting new product: Location Messaging. This is the fruit of the company's acquisition of SimpleGeo last year.

Geofencing (Placecast) and ad geotargeting (xAd, YP) have existed for some time. However Urban Airship's new product offers very precise location targeted messaging -- with the ability to mix in other audience segmentation data as well:  

  • Preferences: tags based on user-stated characteristics
  • In-app behavior: tags you’ve defined based on explicit and implicit actions users have taken
  • Location history: where they are now and where they’ve been

As a result publishers/developers are able target specific types of users by location. There's a wide array of possibilities in terms of the way this can be deployed, for loyalty or yield management purposes or to stimulate new sales. There are two qualifications: users must have the publisher's app installed and s/he must have opted in to receive push notifications.

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Urban Airship has created 2.5 million "pre-defined geofences" for publishers. However they can also define (or exclude) their own custom geofences. These can be as wide as a metro area (or larger I suppose) or as precise as a park or city block. 

There's lots of hand-wringing going on about publishers being unable to sufficiently monetize mobile. However, mobile push notifications offer a terrific opportunity for brands and offline businesses to drive increased sales -- if used judiciously. Accordingly the company shared some performance data with me. It was impressive. 

Urban Airship said it beta-tested Location Messaging this summer during the Olympics. The company reported on its blog that "The Official London 2012 app . . . utilized Urban Airship Location Messaging to send more than 10 million location-based push messages to people in . . . Olympic venues." In addition, "Nearly 60% of app users had location-sharing enabled and location-based pushes achieved clickthrough rates of around 60 percent."

Urban Airship CMO Brent Heiggelke pointed out that despite the potential effectiveness of Location Messaging brands and marketers must be extremely careful about the content of messages they send and their frequency or risk having their notifications shut off or apps uninstalled by end users.

Does the New YouTube iOS App Foretell a New Google Maps App?

Google introduced a new YouTube app for the iPhone today, ahead of the release of iOS 6 which removes YouTube from the group of pre-installed apps on the device. There are a number of feature improvements over the current built-in YouTube app.

Depending on your perspective, one of those "improvements" will be pre-roll ads. The current YouTube app didn't feature any advertising, thus depriving Google of a potentially significant mobile ad revenue stream. The new app will have ads and pre-roll.

Here are some screenshots of the new YouTube app: 

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 Below is a side-by-side comparison of the current and new YouTube apps for the iPhone:

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The new app is nice and a bit simpler visually. But what's more interesting is what it suggests about another potential Google app for the iPhone: Maps. The question is whether (or more likely when) Google will introduce a more complete mapping app for iOS.

Just as it does with the pre-installed YouTube app, Apple iOS 6 will remove Google completely from mapping on the iPhone, replacing it with Apple's new mapping application. That could mean a potentially significant loss of local query volume for Google -- unless the company dramatically improves its HTML5 mapping experience and/or releases a new iOS Google Maps app. 

There's a small possibility that if Google were to submit a new Maps app to Cupertino it might get blocked as trying to replace a core feature of the device. However there are numerous third-party mapping apps that already exist for the iPhone so I doubt it. In the event Google did submit a new iOS mapping app it would ironically mean a much better Google Maps experience for the iPhone than has been the case to date. In all probability it would also include Google Navigation, which had been missing or withheld from maps on the iPhone. 

Google's dilemma is that it uses Maps and Navigation for Android as something of a competitive differentiator vs. the iPhone. If Google were to provide the same functionality to Apple it would potentially remove that particular incentive to buy Android devices. 

Nokia and Others Form 'In-Location Alliance' to Promote Indoor Positioning

Nokia is spearheading what's being called "The In-Location Alliance." The purpose of the new quasi-trade group is to "drive innovation and market adoption of high accuracy indoor positioning and related services." The assumption is that more accurate indoor positioning will create new markets and new revenue opportunities.

According to the press release out this morning: "The Alliance will focus on creating solutions offering high accuracy, low power consumption, mobility, implementability and usability. It will create an ecosystem that stimulates innovation, enhances service delivery, and accelerates the adoption of solutions and technologies that optimize the mobile experience."

There are 22 companies listed as founding members: Broadcom, CSR, Dialog Semiconductor, Eptisa, Geomobile, Genasys, Indra, Insiteo, Nokia, Nomadic Solutions, Nordic Semiconductor, Nordic Technology Group, NowOn, Primax Electronics, Qualcomm, RapidBlue Solutions, Samsung Electronics, Seolane Innovation, Sony Mobile Communications, TamperSeal AB, Team Action Zone and Visioglobe.

The release also indicates the alliance will promote open standards and systems to allow for broad participation by non-member vendors and third parties.

There are a number of companies already operating in the indoor positioning segment, including Google, Microsoft, Wifarer, Point Inside, Aisle411 and others. Interestingly none of them are on the list above. No carrier is part of this inagural group either. However, the alliance is inviting any and all interested parties to join. 

Notwithstanding the promise of new business models, that's one of the central questions: how will some of these companies make money? The superficial response is "deals and advertising." Privacy is also another major issue. However I suspect that can be addressed with an opt-in approach, much in the way that Apple does with iPhone apps requesting to use location. 

Apple Expands Siri, Gets Into Local With Maps

With today's keynote announcements coming out of the Apple developer conference the company has expanded Siri's range of capabilities, including into navigation and local search. The latter accompanies the introduction of new Apple Maps, which entirely replace Google's mapping product as the default provider on iOS devices. 

When Apple bought Siri it did a wider range of things than what Apple introduced a year ago with the iPhone 4S. Siri's original plan was to integrate numerous third party APIs and allow Siri to be a front end for task completion across a range of categories. As of today that earlier vision is partially restored.

There now more datasets available to Siri (sports, movies, app search, local search). Users can also, once again, make OpenTable restaurant reservations. In addition users will be able to find/launch apps using Siri.

 

With Apple Maps the company now enters the local search market in a big way. Without having the benefit of having used the product, I can only speak in the abstract. However it appears very competitive. There are a wide range of data providers that Apple appears to be working with across a broad array of international markets, including TomTom, Yelp, Localeze, Acxiom, Urban Mapping and Waze. 

Assuming a relatively good product, Apple would quickly become the number two player in local-mobile search. And having Siri as the front-end to this experience will potentially reinforce Siri usage and introduce people to the broader concept of Siri as a search tool or potential Google substitute in many instances. While Siri already could already offer directions and find nearby businesses it didn't provide a very good local search experience overall. 

To see how widely seen and used Siri was as a search tool, we recently conducted a survey (n=503, 6/12) of iPhone users and asked them:

Which of the following do you use MOST OFTEN to search the web on your phone?

  • I visit Google.com to search --  44.9%
  • I use search in the Safari toobar -- 26.4%
  • I use the Google mobile app -- 19.3%
  • I use Siri to search the web -- 11.1%
  • I use Bing and/or Yahoo -- 6.6%

According to these results more people use Siri to search than use Bing or Yahoo. Siri could inch up that ladder if people begin to understand how the tool can be used beyond the relatively narrow range of functions it has been used for to date -- and if Apple rewards people with good results.

Bing 411 and the Free DA Market That Wasn't

Microsoft is shutting down the Tellme-powered 800-Bing-411 line on July 1, 2012 (it was originally supposed to be June 1). Bing 411 was arguably the best of the several "Free DA" services in the market, which was launched by 1-800-Free-411.

In 2004 when Jingle Networks' 800-Free-411 appeared it made enormous sense. It was an ad-supported DA service that captured users' directional intent (just like search) and could deliver ad impressions against those queries. Some analyst firms assumed it would lead to billions in mobile ad revenue (audio ads). We also thought it would be a much bigger deal than it turned out to be. 

I had called it "mobile search for the rest of us." However, the rapid rise of smartphone adoption after 2007 had a lot to do with the demise of Free DA. At one point there were a growing number or competitors in this this market sub-segment: 

  • Tellme/Call411
  • Goog411
  • 800-THE-Info (Verizon)
  • 800-yellowpages (AT&T)
  • 800-Free-411 (Jingle)
  • ChaCha
  • kgb (which wasn't free)

Most of these are either defunct or languishing. Goog411 turned out to be the voice tuning and training wheels for Android voice search. Accordingly, Google got the utterances it needed and shut the service down a few years ago.

In April 2011, Marchex acquired Jingle Networks for $62 million in cash and stock. The primary reason Marchex acquired Jingle was not for 800-Free-411 but for its carrier and other relationships and its more recently developed ad network. 

Whether because the services weren't sufficiently promoted or didn't quite work as promised -- again Bing's was quite good at one point -- or whether smartphones simply offered more control and capabilities, it's hard to say why the market never really developed. Certainly the consumer logic was there but the revenues and usage never materialized. 

See related: Bing 411’s Three-Year Run Ends June 1

How Will Facebook Monetize Mobile?

This morning Facebook is trading below its $38 offering price. This reflects investor skepticism about the long-term outlook for the company. Indeed, there are many challenges ahead for Facebook -- one of which is mobile monetization.

This weekend the company bought yet another mobile site, Karma. Karma provides a streamlined way to deliver physical gifts to people through their smartphones, using the Facebook infrastructure. While this latest acquisition is undoubtedly about getting access to the team it is also about the business model and new ways to generate revenue from mobile devices. 

I have argued one reason (clearly not the only one) that increasing numbers of people use smartphones to access Facebook is avoiding the clutter of the PC site and ads in particular. While Facebook has started to show Sponsored Stories in mobile users' newsfeeds it cannot simply duplicate the ad environment online in its mobile apps. Too many ads would alienate users. 

So how does Facebook make money off mobile usage in a way that doesn't make users abandon its apps? Here are a few ideas:

  • Local/contextual ads on apps: contextually and locally relevant display ads (if well targeted) could generate meaningful revenue because of the sheer scale of Facebook's mobile usage. But Facebook needs to be judicious in its use of these ads. 
  • Offers: coupons in display ads or in the news feed could be quite successful as well. Mobile offers have been in place for some time but it's a free service. Facebook might create a special area or "wallet" for mobile offers that resides within the app but doesn't interrupt usage
  • Mobile loyalty: This notion is tied to offers as well. For SMBs Facebook could create a subscription based program where loyalty incentives are distributed online and in mobile: "After three visits, XYZ is free." This would represent formalizing tools and capabilities that are now free
  • Facebook credits: Turning Facebook credits into a real (loyalty) currency that can be used for e-commerce online or perhaps in the offline world at stores and restaurants. (More likely it would be earn offline points and use them online.)
  • Facebook Wallet: Facebook could try and become a full-blown payments platform like PayPal or Google Wallet. This is more ambitious but it could be accelerated though purchase of a payments startup
  • Build an ad network: I believe Facebook will buy a mobile ad network -- its own version AdMob --  to enable monetization via third party sites and apps. All users signed in through Facebook Connect could be targeted as on the PC. I think this "FaceSense" will also come to the PC. 
  • E-commerce transaction fees: Karma is an e-commerce app. And there's a great deal of potential for Facebook to get into e-commerce more directly. However, past e-commerce experiments by third parties on Facebook have largely been unsuccessful (except for Zynga). 

Some or many of these ideas could come to pass. Regardless, Facebook will need a range of approaches and revenue streams in place to truly deliver the kind of mobile revenue performance that investors will want and will become imperative as more users access Facebook primarily via mobile devices.

Study: Localization Best Way to Make Mobile Ads Relevant to Users

The IAB has released a fascinating report on mobile shopping and user attitudes. The study wasn't a simply survey. Instead the research involved 260 US adults who agreed to participate in a two-week "mobile diary" project. It thus got an in-depth look at their behavior. Below are some of the findings that I found most interesting and noteworthy.

One finding that illustrates simple assumptions about mobile behavior cannot be made was the fact that most "mobile commerce" activity happened at home:

  • At home: 47%
  • Out and about: 29%
  • At work: 10%

Specifically the study also found that most product searching happened at home and not "out and about." Store location searching did happen mostly on the go. But these findings suggest that behavior many marketers assume is happening on the go is actually taking place at home. 

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In a majority of cases "mobile commerce" (shopping) activity was stimulated by the presence of other media. This fact is relatively well known but still needs to be pointed out. Too many marketers think about mobile in a vacuum. Specifically 46% of these users were watching TV or on their computers when they used their smartphones to look up information. 

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What stimulated their mobile commerce (shopping) activity? The largest group said that mobile was the "easiest way" to accomplish the particular task. In other words, it was easier for them to do a mobile lookup than it was to go on a PC. Beyond this, mobile advertising was a major "stimulant" of subsequent research or mobile shopping behavior.
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One of the most interesting findings, which is an outlier compared to other data in the market, is the overwhelmingly favorable perception of mobile ads, which were viewed by 70% of these study participants as "a personal invitation." That's an incredibly positive finding for mobile advertising. 

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Another very interesting finding is that mobile users who click on ads are mostly not immediately interested in buying. They want to learn more about a product or service. Many also want to see related products or services (presumably to see what their options are). 

All this suggests that mobile (display) advertising exists somewhere between pure awareness and direct response. Most people -- at least in this sample -- are not prepared to buy immediately in response to mobile display ads. Search is a different matter because of the directed nature of the consumer behavior vs. display. 

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Finally the study indicates that the best way to make mobile ads relevant to users is to localize and personalize them. Personalization is OK, according to the study, with permission (hard to execute for marketers). But localization can more easily be done without capturing personal or behavioral data. 

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Survey: 75% Using Smartphones for LBS Information

On Friday the Pew Internet Project released survey data that showed significant usage of "real-time location-based information" by smartphone owners in the US. Earlier consumer surveys have shown that 90% or more of smartphone owners have used their devices to get "local" or location-based information (at one point or another). 

When you consider that Google Maps is either the top app or one of the top two apps on the iPhone and Android the Pew finding is obvious and not a surprise. Indeed, Pew never clearly defines the cluster of sites, apps or services that constitute the location-based information category. That may be because the question is asked in that way, without further definition, to consumers. 

Location based info and geosocial services_smartphone owners

An additional finding from the survey is that 18% of smartphone owners are using "check-in" services like Foursquare:

Smartphone owner geosocial and location based information use

In November 2010 Pew said that only 4% of survey respondents were using "geosocial" or "check-in" services. 

We should see "location-based services" hit 100% usage or penetration among smartphone owners, depending on how the category is defined. That's because every smartphone owner is going to eventually use a map or check the weather or look up a restaurant. 

Facebook Has Bought Gowalla, Instagram and Now Glancee

A couple of days ago local-social startup Glancee announced that it was being acquired by Facebook:

We started Glancee in 2010 with the goal of bringing together the best of your physical and digital worlds. We wanted to make it easy to discover the hidden connections around you, and to meet interesting people. Since then Glancee has connected thousands of people, empowering serendipity and pioneering social discovery. We are therefore very excited to announce that Facebook has acquired Glancee and that we have joined the team in Menlo Park . . . 

Glancee, which is really just a 2.0 version of the original Loopt, adds to Facebook's growing arsenal of mobile assets. The social network has identified mobile as both an area of vulnerability and opportunity. In the Facebook IPO roadshow video COO Sheryl Sandberg calls out mobile as "a key area of growth for Facebook." 

What she's talking about is revenue rather than usage. The company already has more than 500 million active mobile users. And Flurry Analytics recently said that social networking activities now consume as much daily mobile app munitues as games, the former number one category. Much of that activity takes place within Facebook. 

The purchase price of Glancee was not disclosed but we can assume it was an "acquhire," rather than a technology acquisition -- though there may have been a bit of technology that motivated the purchase.

Glancee was part of a group of "passive" or "ambient" location startups that include the over-hyped Highlight and a dozen others. I have argued in the past that ordinary people (as opposed to those in the tech industry) don't want to continuously broadcast their locations even to close friends and colleagues. Accordingly these friend finding and pseudo-dating apps are destined to fail unless the offer some other angle or utilitarian functionality. 

Facebook may choose to use some of Glancee's capabilities as part of a new version of its app. But my guess is that Glancee, like Gowalla, will be completely shuttered and that Facebook won't turn its app into a ambient friend finder. That would complicate the privacy picture for Facebook -- though I expect geofencing and geotargeted advertising to be part of what Facebook eventually develops for mobile marketers.

We're likely to see more acquisitions from Facebook as the company continues to build up its mobile capabilities. What the company hasn't figured out is how to make money in mobile, commensurate with its mobile usage. It now pumps Sponsored Stories through its users' news feeds, having just introduced mobile advertising. However that by itself won't fulfill the mobile ad revenue imperative about to be imposed on Facebook by its IPO.

Without Apps Local-Mobile Search Queries Won't Beat the PC in 3 Years

BIA/Kelsey has just put out a prediction that local-mobile search will surpass local search on the PC in 2015. The following year (2016) BIA "expects mobile local search to exceed desktop local search by more than 27 billion annual queries."

There's a certain logic here -- 40% of mobile search carries a local intent (per Google) and mobile is growing faster than PC search -- but I think the crossover date is farther out than three years from now. (In developing countries it may be much sooner.) The press release doesn't mention apps and I suspect the prediction is largely or entirely about query volumes coming from the search bar on the mobile browser (which is 95% Google).

Source: Performics, 3/11

To achieve the local query volumes projected and surpass PC search equivalents by 2015, however, apps would need to be included in the calculation. Right now nobody really knows how much "search" and local search is happening in the context of apps. Nobody is actively tracking it. However, the recent Local Search Study from 15Miles, comScore and Localeze suggests that a substantial percentage of local-mobile search is happening within apps.

The survey of 4,000 US adults found that 49% of smartphone and tablet owners are using apps to find local information. I speculated that half of "local search" query volume, which might otherwise be on Google or other search engines on the PC, might be going through apps on smartphones. It's a leap but one not without some merit.

According to 2011 US survey data from Performics (chart above), 60% of mobile search users conduct fewer than 20 mobile searches per month, while 40% do 20 or more searches monthly. There are other data and surveys I could cite; this is just one. It illustrates, however, that there's a significant gap currently between PC and mobile search today. On the PC, comScore said last year that US adults conduct an average of 107 search queries per month.

If we use Google's 20% PC local search number, it would mean that in March there were roughly 3.7 billion local searches on the PC in the US. If we use Yahoo's 30% figure it would be more like 5.5 billion. The average of the two is 4.6 billion monthly local queries. (I believe these figures probably under count PC local intent search volumes.) If there are now roughly 125 million smartphone users in the US and roughly 90% of them use search, that means in any given month 112.5 million people are searching for stuff. If we assume they're all doing 20 queries a month (near the top end of the Perfomics range) that comes to 2.25 billion mobile queries monthly in the US. However only a subset of those are local.

If we use Google's 40% (of mobile search is local) figure, then roughly 900 million mobile search queries have a local intent on a monthly basis. (This number is likely higher than what's actually happening in the market given the assumption of 20 searches per month on average.) And again this doesn't account for local search queries happening in apps, which is probably hundreds of millions at least.

Indeed, "search" takes many forms on mobile devices, and much of it isn't running through a traditional search engine like Google. Yet mobile queries on Google are also growing rapidly. While overall mobile search volumes will continue to grow and while they could grow from 900 million to more than 4 or 5 billion monthly queries in three years I just don't see that happening unless we count app-based query volumes as part of the equation.

Will Payments Apps Become Next-Gen Local Directories?

Despite all the activity and hype in the segment, mobile payments and mobile wallets have been adopted by relatively few consumers in North America to date. It's well below 10% of the smartphone population according to data I've seen. Lack of availability, lack of awareness and consumer security fears are among the reasons.

Despite slow consumer adoption of mobile payments, companies such as Square, PayPal and Intuit are making major inroads on the merchant side. For example, Square is processing millions of dollars of payments per day at local businesses.

Its main product relies on a traditional card swipe, so the consumer does nothing new and needs no new apps or equipment. PayPal and Intuit have essentially copied Square's product. In particular PayPal's brand awareness and footprint have helped the company generate significant, immediate demand for the new PayPal Here product. 

These and other mobile payments apps (e.g., Levelup) include directories of merchants using their payments systems. It leads me to think these payments apps could become the next generation of LBS or local directory apps. It's natural for them to try and build out more comprehensive local listings, as well as get more deeply into offers and deals (not to mention analytics and CRM). 

It also makes sense for a company like Foursquare, which already has a large user footprint, to acquire or create a mobile payments capability itself -- as a complement to its positioning as a loyalty tool for SMB marketers.