User Experience

Mobile Payments News: ISIS, InMobi-Opera and PayPal Carrier Payment Network

ISIS, the as-yet-unlaunched US mobile payments inititative from T-Mobile, AT&T and Verizon has added new partners to its stable of credit card issuers and banks (BarclayCard, Capital One, and Chase), according to CNET. ISIS has been described as "Hulu for mobile payments."

I have been openly skeptical of the carriers' ability to mount a successful mobile payments intiatitive. But ISIS may turn out to be the tortise to Google Wallet's hare. The latter has been met with carrier resistence (which may be anticompetitive), security problems and limited consumer availability.

Google has been ahead of the market somewhat. But there are now also rumors that Google is internally disappointed with its Wallet initaitive and may be putting less effort into it. If so, it would be premature to "give up" on Google Wallet. 

In two related mobile payents developments, PayPal (through its Zong acquisition) is launching what it calls PayPal Carrier Payment Network; and InMobi and Opera have joined for digital goods payments. The PayPal effort is designed to build on top of the Zong-carrier infrastructure (eBay acquired Zong last year) and expand carrier billing to encompass more types of transactions and larger dollar amounts:

Historically, carrier payment has been utilized primarily by online game developers and publishers to provide a fast and easy way for users to purchase goods directly in-app or in-game. While convenient for consumers, this method of payment has inherent challenges for other digital goods merchants – such as digital books, music, dating and content – to adopt as a primary payment method. Among the challenges is the cost of doing business – sometimes upwards of 40 percent – since transactions are processed through the carrier, merchants must share part of their revenue.

Similary InMobi and Opera announced that the latter will integrate InMobi's payments platform to enable virtual goods payments and purchases through Opera:

InMobi SmartPay will enable Opera users to pay seamlessly for digital goods in key markets around the globe, when they make purchases with some of the leading publishers that partner with InMobi. The two companies are committed to providing choice to consumers, mobile content developers and app developers, by building viable third-party monetization solutions in the mobile browsing and computing space.

Most US consumers have no experience with mobile payments and still need be educated about their benefits. However, large numbers of smartphone owners will eventually adopt mobile payments over time. Four tenents of success will be: simplicity, ubiquity, rewards and security.

The convenience of not having to sign credit card slips will be a welcome imrovement in the retail and restaurant worlds. The abandonment of signature requirements for transactions under $25 in many places has created demand and some experience with a simplified transaction experience. Merchants have incentives to adopt mobile payments as well for greater efficiency at the point of sale and, if don't correctly, greater security too. 

Almost all of these mobile payments systems and platforms back onto a credit card. However, it's still early to pick winners and losers. As I indicate above, Google could wind up a loser and ISIS a winner -- though that's a bit counter-intuitive (given the challenges carriers face in execution generally). There are still others (e.g., Apple) that could enter the race at any point.

Related posts:

GoPago, Boku, LevelUp: The Mobile Payments Space Getting Terribly Noisy

While mobile payments is certain to become a multi-billion dollar market in the next several years, it's getting more difficult to predict who will gain traction. That's partly because there are now so many competitors jockeying for consumer and merchant attention that it's clouding and confusing the market. Indeed, we could see delays in adoption given the absence of any apparent standards or common platforms. 

NFC could be one of those standardized plaftorms however most consumers in North America don't have handsets that are NFC-enabled. It will take one or two replacement cycles (2-4 years) for meaningful NFC-handset penetration to be reached. 

In the non-NFC payments category, this morning JPMorgan Chase-backed GoPago launched. GoPago is a mobile app that offers mobile payments but also provides a range of additional services, including online ordering and a number of small-business marketing capabilities. The company has developed a cloud-based POS system that interfaces and integrates with existing POS systems. If the local business doesn't use a POS GoPago has other ways to work with merchants. The app is conceived as a holistic mobile storefront for SMBs that will enable ecommerce and not simply a payments solution like Square.

The JPMorgan partnership helps GoPago establish credibility and gain notice, which otherwise might elude the ambitious startup. However the JP Morgan backing doesn't guarantee adoption by consumers or merchants, especially given that eBay, Google, Visa, Amex, Intuit, Mastercard, Square and others are similary seeking adoption of their mobile payments tools and systems. GoPago said however that JPMorgan would help market and educate consumers and merchants about the service. 

During the call with GoPago I discussed how the major players (PayPal, Google, Square) had effectively marginalized earlier mobile payments companies such as Bango (which just announced a deal with Facebook) and Boku. Another mobile payments vendor Zong was acquired by eBay. Somewhat ironically, Boku has made a renewed bid for relevance through a just-announced deal with Mastercard that involves its NFC-PayPass system: 

BOKU, Inc., a leading global provider of on-line mobile payments, announced today a partnership that will enhance the shopping experience for consumers by allowing them to make payments, receive discounts and targeted offers, and monitor spending -- all via their mobile phones anywhere MasterCard PayPass is accepted . . .

Offered through a mobile subscriber's mobile network operator  BOKU Accounts with MasterCard Prepaid gives consumers a convenient way to pay while on the go. Account holders use a MasterCard Prepaid card or PayPass-enabled device to make purchases anywhere MasterCard is accepted with a simple swipe or tap . . .

Boku also offers merchant loyalty and marketing tools in addition to payments functionality. Given all that's now happening I remain very skeptical of Boku and its ability to gain much adoption in this very noisy payments market.

Similarly LevelUp (from SVNGR) is trying to evolve into a payments provider as well. LevelUp (which used to be a couponing and loyalty program) links a credit card to a QR code that merchants then scan at the point of sale. LevelUp also offers a physical card in addition to apps. PayPal and Boku also offer physical cards -- which strikes me as strange. Why link a plastic card to another card or a checking account when one can use a credit or debit card at all the same merchants already? It's redundant.

There are value-added features for both merchants and consumers in using these systems but those features are probably not enough to justify adoption, especially given that they're being offered by "no name" brands. Here consumer trust is a significant issue and there are only a small number of companies, credit card issuers, handset makers and carriers, that consumers trust (to varying degrees) to handle payments. 

Merchants, especially small merchants, are also being bombarded by marketing services and will be reluctant to implement a system that has little or no consumer scale. It's the classic chicken and egg problem: you need merchants to get consumers and vice versa.

A system like Square is simple and elegant and doesn't require any changes in consumer or merchant behavior. It simply removes much of the friction of accepting credit cards for small merchants. However, the many moving parts and seeming complexity of payments systems like those offered by Boku, GoPago and LevelUp means they will probably be slow to gain adoption -- if they succeed at all.

Report: Amazon Sold 3.9M Kindle Fires in Q4

IHS iSuppli released estimates for tablet market share (using shipments as the operative metric). However in the case of Apple and Amazon shipments is the same as sales to consumers.

Apple previously announced that in Q4 it had sold 15.4 million iPads and a total of 55 million to date. But we didn't know the number of Kindle Fire devices that had sold. Some analysts estimated it was between 4 and 4.5 million. Now iSuppli estimates it was 3.9 million.

With strong Kindle Fire sales in Q4, Amazon zoomed past Samsung to become the number two player in the tablet market. Overall in 2011 Samsung "shipped" more tablets; however shipments does not equal sales to end users. Below are iSuppli's global tablet estimates, showing Amazon with 6% of the market at the end of Q4. 

 iSuppli Tablet chart

I simply don't believe that Samsung has actually "outsold" Amazon. It may have "shipped" more devices but those devices have largely sat on retailer shelves. Furthermore, Samsung's recent announcement of the Galaxy Tab 2 (7"), with Android 4.0, may be another miscalculation. While it appears to be a nice device, a reported $400+ price tag all but guarantees it won't sell. At that price people will opt for iPads.

As I've repeatedly argued in the past no 7" tablet maker can charge more than about $250 now and expect to compete with Kindle Fire. Samsung would likely be taking a loss if it were to do so. Another way to potentially compete and still preserve margins is to get carriers to subsidize tablets. However this strategy has not worked and consumers have largely shunned carrier-subsidized tablets in favor of WiFi-powered devices. (People simply don't want to give any more money to carriers.)

One of the interesting observations that iSuppli makes is that in Q4 people may have been choosing between the iPhone 4S and iPad. In other words, more iPads would have sold if the 4S hadn't just been released. If that's correct some number of people who actually wanted to buy an iPad may have opted instead for the Kindle Fire because of price sensitivity. Indeed, the Kindle Fire is a vastly inferior device but that inferiority is masked to a degree by Amazon's content ecosystem. 

In a related piece of news, Nielsen released some survey data on how parents and kids use tablets: games, education, entertainment in that order. 

http://blog.nielsen.com/nielsenwire/wp-content/uploads/2012/02/children-tablet-usage.gif

The Role of Mobile Apps in Better Enabling Self-Service and Improving Customer Care

Notwithstanding all the sophisticated technology being used today, most customer service just stinks. Most companies still don't understand the relationship between marketing and customer service.

Historically companies have practiced "call avoidance," trying to save money by discouraging live-agent access and sending people to the Web for "self service." The strategy has been about saving costs rather than delivering good service. Sometimes it works and sometimes a customer can't get satisfaction. But then again, sometimes the live agents are indifferent or incompetent.

Indeed, recent survey data from speech services provider Nuance indicate that a substantial number of people actually would prefer to "self-serve" because of long and frustrating hold times as well as other challenges in dealing with call center agents.

Today AdAge profiles evolving approaches to customer care in the airline industry. The article juxtaposes Southwest's people-centric approach with Delta's technology driven strategy. It also discusses how smartphones and apps can be used to improve customer service and reduce costs at the same time:

Consider the frazzled traveler running through security to catch a flight. At Southwest, gate attendants are instructed to keep an eye out for those red-in-the-face customers. Once spotted, Southwest employees are supposed to approach and reassure them, said Teresa Laraba, senior VP-customer services.

For Delta, however, the goal is to save that same traveler time and provide peace of mind by putting his or her boarding pass, flight status and bag-check information directly on his or her smartphone. PCWorld magazine named it the top tech-friendly airline in the U.S.

This discussion is at the center of a recently published report written by my Opus Research colleague Dan Miller. The document is called "Mobile Customer Care: New Paradigms and Practices" (.pdf summary). It devotes considerable time to how smartphone apps can at once do a better job of enabling self service, saving agent costs and time and improving the overall customer care experience.

Here are the key findings: 

Customer care and e-commerce must accommodate mobile - There’s nothing distinctively “mobile” about care but a significant percentage of interactions originate from mobile devices and that provides customers with more options and requires companies to support multiple channels.

Smartphones + the cloud = better user experience – Downloadable smartphone apps offer a demonstration of the power of deep integration between mobile devices and the customer-care infrastructure. Smartphones coupled with cloud-based resources have also put more power into the hands of customers. This is serendipitous and a potential “win-win” for both sides -- if properly executed.

Customers often prefer self-service - Contact centers have long sought to erect barriers to live agent access for reasons of call and cost avoidance. Many consumers, put off by rigid IVR, extended hold times, poorly trained CSRs and repeated transfers have come to prefer self-service in many situations. Moreover, the promotion of speechenabled apps from Apple, Microsoft, Google and Nuance are conditioning the general public to expect to be able to use their voices to get results, not always with the help of live customer service representatives.

Customer control defines emerging best practices - This moment creates an opportunity to combine the cost savings of online self service with selective access to live agents where truly needed to resolve more complex problems or provide a higher level of service. Not just a small-screen substitute for the Web, smartphone apps offer more functionality and a potentially better experience than websites or live agents can independently. As we’ve tried to document in this report, there are a number of emerging “best practices” examples: Groupama, Genesys, Nuance, Fonolo, Lucyphone, HoldFree and others.

Time to “Flip the Model” (from B2C to C2B) - An app on smartphone that is tailored to help a person take control of the conversation is ideal. It provides mobile users with tools to indicate where they are, what they’re looking for and how they want to be reached. Brands and enterprises should enthusiastically embrace smartphones (and tablets) as a primary customer service platform

Google: 46% of Holiday Shoppers Used Smartphone for Research Before Buying Offline

Earlier today Google released data from two related studies of US consumer shopping behavior during Q4 2011. The studies were both conducted online and fielded in January 2012. In both cases just over 600 consumers were surveyed. Both studies claim to be representative of their respective populations -- essentially e-commerce buyers who own smartphones (and tablets).

There were a great many datapoints in the material released. However, the bottom line is that consumers are now fully engaged with smartphones (and increasingly tablets) as part of their "online" shopping. Marketers and brands need to reach consumers in appropriate ways in each context -- mindful of the overall movement of users from platform to platform.

As a foundational matter, the internet was used as a shopping tool or research medium more widely than any other according to this research. 

Screen shot 2012-02-13 at 3.36.04 PM

However "the internet" is not a single channel any more. Google and its research partner Ipsos found that consumers shopped and purchased via multiple device categories. 

Screen shot 2012-02-13 at 3.41.58 PM

Beyond this basic insight the patterns quickly get very "non linear." The slide below reflects multiple categories of shoppers, some of whom start online and finish offline and some of whom visit the store only to purchase online or via mobile ultimately.

Screen shot 2012-02-13 at 3.45.17 PM

Google also said that 42% of respondents used more than one internet device simultaneously, while 68% started on one type of device or machine and then kept going or concluded on another (e.g., tablet-->smartphone). Interestingly, the content viewed on each category of device (PC, tablet, mobile) was basically consistent.

Screen shot 2012-02-13 at 3.46.30 PM

There were some differences in behavior, however. In this sample people used PCs much more than other devices to do price comparisons and to look for deals or coupons. And they were more likely to contact a retailer via smartphone.

Though not reflected above, video was heavily used by shoppers for product reviews/ratings, demos and to generally learn about products. But if you want to make video accessible to mobile or tablet users Flash must be avoided of course.

In addition these respondents used both apps and the mobile web to conduct research and to shop. 

I could go on with more but the larger points are made already. People use PCs, smartphones and tablets to shop and buy. Brands must be prepared to interact with consumers at every point in the purchase "funnel," or perhaps more precisely: purchase continuum. That means being aware of how consumers use and interact with devices and offering device-friendly content and user experiences accordingly.

Mobile is no marginal or experimental experience for anyone any longer. Today, Forrester predicted that by 2016 there would be 1 billion smartphones on the planet. At that point the PC will be simply one of several ways that people get online.

And in the not-too-distant future hierarchy of devices and internet access methods it could well rank third out of three. 

Survey Shows Amazon Kindle Fire Subsidy Paying Off in Sales

According to various analyses of Kindle Fire hardware production costs, Amazon is actually subsidizing the cost and taking a small loss on the sale of each device. This was undoubtedly a contributor to Amazon's "disappointing" Q4. The company said it sold millions of Kindle devices without providing any concrete figures.

However the company's strategy has been to use Kindle as a platform or tool to sell other content: e-books, video, music and apps. These are high margin products for Amazon. 

A new survey (including 254 Kindle Fire owners) from ChangeWave argues that the company's Kindle Fire strategy is already paying off. Kindle Fire owners reported that they'll be spending more through Amazon in the next quarter than non-Kindle owners: 

The relatively low cost of the device ($199) was shown to be the biggest driver of sales and the most "liked" feature of the product: 

The chief "dislikes" were: no hardware volume button and no camera. The short battery life was also a complaint. Generally speaking, however, Kindle Fire users seem to be quite satisfied -- though not as satisfied as iPad owners.

Google has vowed to "fight" Kindle Fire and its bid to control the Android tablet market with its own "higest quality" tablet, which may be even more aggressively priced than Kindle. 

Related stories: 

Payments: T-Mobile Boosts Square, Apple Preps for NFC with iPhone 5 (Probably)

Square continues to forge ahead in its remarkably successful run up to either a multi-billion dollar acquisition or IPO. Today, T-Mobile announced that Square credit card readers will be available for SMB customers in select stores in the US. It's the first wireless carrier to offer the mobile payments system to small business customers: 

Today, T-Mobile USA, Inc. reiterated its commitment to small business as the first wireless carrier to offer Square credit card readers from San Francisco-based Square, Inc. in select retail stores. When T-Mobile’s fastest 4G smartphones running on America’s Largest 4G Network are combined with Square, small businesses can accept credit card payments in the U.S. nearly anywhere, anytime, with the money from transactions sent for deposit into their bank accounts the next business day. This easy-to-use solution, paired with T-Mobile’s affordable small business plans, aggregated business applications, equipment financing and trade-in services, and in-store support, allows small businesses to maximize their wireless investment and transform their business.

Square has several competitors using a similar smartphone-plug-in credit card reader for small businesses, including Intuit and the newly launched Payfirma. PayPal also targets the SMB market but doesn't offer a comparable smartphone or iPad card reader. 

Meanwhile MasterCard's Ed McLaughlin may have spilled the beans on Apple's potentially impending move into payments. The next iPhone is widely expected to support NFC and an eWallet. Nokia, RIM and selected Android phones currently support NFC. Google Wallet has so far seen limited adoption because it's only available on one phone through one carrier in the US.

In an interview with Fast Company magazine McLaughlin said the following:

I don't know of a handset manufacturer that isn't in process of making sure their stuff is PayPass ready."

So that would include Apple then?

"Um, there are...like I say, [I don't know of] any handset maker out there," McLaughlin says. "Now, when we have discussions with our partners, and they ask us not to disclose them, we don't."

Apple has millions of credit card accounts on file. Every iTunes user must provide a credit card when an Apple mobile device is activated. That means effectively that in excess of 300 million people around the world have given Apple their credit card numbers, forming the basis for a payments program. Apple said on its last earnings call that there are now 315 million iOS devices in market, with 62 million sold in the last quarter alone. 

Previously Retrevo found that Apple was more trusted than credit card issuers to provide a mobile payments solution. 

Screen shot 2011-06-20 at 9.15.23 AM

Source: Retrevo (Q4 2011)

Other surveys have argued that 2012 will be a "breakthrough year" for mobile payments and NFC. I think 2012 will see an acceleration but not yet a consumer breakthrough. 

See related: Obama and Romney Campaigns Adopt Square for Funding

 

Carrier IQ Scandal Results in 'Mobile Device Privacy Act'

US Representative Edward Markey has released a draft of the new "Mobile Device Privacy Act." The proposed legislation emerged in the wake of the Carrier IQ scandal in which data from mobile handsets were being transmitted to mobile operators without users' knowledge or consent.

The MDPA would require disclosure of any device monitoring by carriers, OEMs or app developers. It would also require the information collected to be identified and consumer consent to be obtained. According to a missive put out by Markey's office:

[The Mobile Device Privacy Act] would require companies to disclose to consumers the capability to monitor telephone usage, as well as require express consent of the consumer prior to monitoring. News broke last month that Carrier IQ software installed on millions of smart phones and mobile devices can track every keystroke of users and send the information back to the software company without user knowledge or permission.

Here are the rules, requirements and enforcement provisions contained in the act in broad strokes:

  • Disclosure of mobile telephone monitoring software, including when a consumer buys a mobile phone; after sale, if the carrier, manufacturer, or operating system later installs monitoring software; and if a consumer downloads an app and that app contains monitoring software.
  • Disclosure to include the fact that the monitoring software has been installed on the phone, the types of information that are collected, the identity of the third party to which the information is transmitted, and how such information will be used.
  • Consumer consent be obtained before monitoring software begins collecting and transmitting information.
  • Third party receiving the personal information must have policies in place to secure the information.
  • Agreements on transmission to third parties must be filed at the Federal Trade Commission (FTC) and Federal Communications Commission (FCC).
  • Outline an enforcement regime for the FTC and FCC, along with State Attorney General enforcement and a private right of action. 

Carriers and others in the industry are likely to cry foul over "new government regulation." However, almost without exception -- Verizon claimed it never used the monitoring software -- US carriers and OEMs used Carrier IQ on their handsets without making any disclosures to consumers.

As with GPS-based tracking and monitoring the law is struggling to keep up with the pace of technology and cultural change in its wake. 

Pew: 64% of In-Store Smartphone Users Decided Not to Buy Right There

Pew is out this morning with some new survey data on smartphones and shopping. The top-level data, from a survey conducted during the holiday shopping window, are nothing new. They reflect the way in which smartphone owners are using their handsets as shopping assistants. The Pew numbers are low vs. other studies that have been done: 

  • 38% of cell owners used their phone to call a friend while they were in a store for advice about a purchase they were considering making
  • 24% of cell owners used their phone to look up reviews of a product online while they were in a store
  • 25% of adult cell owners used their phones to look up the price of a product online while they were in a store, to see if they could get a better price somewhere else

According to Pew, "33% used their phone specifically for online information while inside a physical store—either product reviews or pricing information."

Again, there's nothing new here. Data released by Google, InsightExpress and many others have shown that consumers use smartphones for product and price research in stores. In 2011 Google released survey based data that said the following:

  • 79% of smartphone consumers use their phones to help with shopping (price comparisons, product reviews, locating stores)
  • 70% of consumers use smartphones in a store

In 2010, InsightExpress found that 82% of smartphone consumers were using their phones in stores. 

However the part of the Pew report that's very interesting and relatively new is what happened after the smartphone/Internet was consulted:

  • 37% decided to not purchase the product at all
  • 35% purchased the product at that store
  • 19% purchased the product online
  • 8% purchased the product at another store

What this means, effectively, is that 64% of in-store smartphone users decided not to buy on the spot -- probably because of some piece of information they accessed then and there (price, reviews, etc.). 

Pew further explained that "5% of all cell owners who purchased a product online this holiday season [did so] after looking up its price online from a physical store." This practice, now known in the industry as "showrooming," is of increasing concern to traditional retailers, who are trying to combat it with various strategies.

But the big picture is that most of the people in this study took some other action after the in-store lookup: left the store, bought from another store, bought online, didn't buy at all. What we don't know is what they would have done absent the smartphone information. 

PayPal Starts to Socialize In-Store Payments with Users

I have been fairly skeptical about PayPal's ability to win in the mobile payments space. However the methodology the company is using doesn't require any new devices, next-gen infrastructure or much consumer behavioral change. Today I received an email from PayPal telling me I could use PayPal to pay in stores (HomeDepot).

This is the first direct communication that PayPal/eBay has made to customers. There are two payment approaches being offered: a card and a user's mobile number + a security pin. Either can be used in the alternative. I wasn't previously aware of the card part; here's how PayPal explains it:

The PayPal payment card is one of the ways you can pay at any participating store locations accepting PayPal. It's a store only spending card linked directly to your PayPal account. The PayPal payment card can’t be used online or as a credit card.

You do not need the PayPal payment card to complete Store Checkout activation. We will automatically mail it to your home address 2-4 weeks after you activate Store Checkout.

Screen shot 2012-01-26 at 2.01.12 PM

The PayPal card isn't required and probably won't be widely used -- maybe it's a "training wheels" transitional product to get users comfortable with the system. The primary method is clearly the mobile + pin approach.

Screen shot 2012-01-26 at 2.01.47 PM

The following are the payment methods that can be associated with a PayPal account: 

  • PayPal Balance
  • Instant transfer from your bank account (if eligible)
  • PayPal Credit (Bill Me Later, PayPal Extras Card, or PayPal Smart Connect)
  • Debit card
  • Credit card
  • eCheck (a delayed transfer from your bank account - may result in significantly slower shipping by seller)

 Here's the list of HomeDepot Stores that are now accepting PayPal (as well as others outside California):

Screen shot 2012-01-26 at 1.43.34 PM

Associating bank accounts and credit cards with PayPal is somewhat painful in the beginning. But if the accounts are already set up then this is a convenient and more secure way to pay than allowing a store clerk to swipe your card at the point of sale. 

I haven't used it yet, but my perception is that it's pretty straightforward. Accordingly it could enable PayPal to gain faster consumer adoption than an NFC-based payments system like Google Wallet. We're in a bit of a land rush period right now, and if PayPal can gain broad acceptance at stores and restaurants it could become one of the winners in the segment. 

I don't know what this looks like from the merchant side -- other than to assume that the new in-store payment system is subject to PayPal's standard merchant transaction fees

From a functionality perspective Google and mobile carriers could do something quite similar: enable consumers to associate credit cards or bank accounts with mobile numbers and a pin. But there's a whole "infrastructure" that PayPal has set up that may not be so quickly duplicated by others (that's a bit of a blind spot for me). 

Regardless this is a bold new step toward educating consumers and mainstreaming mobile payments. 

Kindle Fire: A Template That Will Burn Google?

I've now had my Kindle Fire for about a month. It's the most successful Android tablet on the market (probably to the tune of about 4 million in sales) but much less of an Android tablet than others. As most people know, Amazon operates its own Appstore and users don't have access (w/o an awkward hack) to the Android Market proper.

My grade for device is "B." It's awkward as a web-browsing device. It's really awkward for email; the keyboard is sloppy and there aren't the customary Android alternatives (Swype, FlexT9, Swiftkey). It's good for reading eBooks and watching movies. In general, apps are what redeem its shortcomings as a web-browsing device.

The problem, however, is that not all Android apps are available. Surprise of surprises: Netflix, which competes with Amazon's own video service, is available. But the main New York Times app is not -- presumably because Amazon is selling subscriptions to the Times. I would expect that more Android apps will eventually become available, however.

The following chart was produced by SAI from survey data collected by RBC Capital Markets. It reflects that most people use Kindle Fire as they used the original Kindle: for reading eBooks. 

 Screen shot 2012-01-24 at 7.46.55 AM

Kindle Fire is an aggressive example of something that was always hypothetically always envisioned for Android: extreme customization by device makers and carriers. To that end, BusinessWeek has an article this morning about Kindle Fire and Chinese versions of Android on mobile handsets, which leave out many of the otherwise pre-installed Google apps:

Amazon.com Inc. and Chinese Internet giants Baidu Inc. and Tencent Holdings Ltd. are using Android as a building block for their devices, skipping preloaded applications such as Gmail, Google Maps and YouTube that generate ad revenue for Google, as well as its app store. Amazon’s Kindle Fire tablet, which is gaining ground on Apple Inc.’s iPad, comes with none of those apps.

The article makes the case that if more OEMs follow suit Google will lose revenue, citing a recent Cowen & Company report which estimates that Google makes roughly $7 per Android device sold. However that's not entirely true.

Most of Google's mobile ad revenue is from search -- although mobile display is growing -- and most of Google's query volume is via the browser. It's really only if there's a different "default" search engine on devices that Google will truly suffer. Accordingly, browser-based search is where Google is most vulnerable. However, third party apps that feature ads from Google/AdMob will also continue to money for the company regardless of whether Google-branded apps are on the phone.

Nonetheless, it's a provocative article and interesting to contemplate how many more hardware companies may emulate Amazon. For example, RIM or Nokia could take Android and build UIs that are very customized on top of the software. That's probably something RIM should start doing -- immediately. It would be potentially unique and provide access to the trove of apps that Android Market offers. RIM could even build its own Android appstore like Amazon. Without apps BlackBerry will fail. 

Google, for its part, doesn't want to lose control of the Android ecosystem. It has responded to Kindle Fire's challenge by promising an aggressively priced, "highest quality" 7-inch tablet later this year.

Tablet Ownership Doubles, Now Critical Channel for Retailers

Retailers: if you haven't yet got a tablet app or optimized site, you're behind the curve. Earlier today the Pew Internet Project released data showing that between early December and January the population of US tablet users effectively doubled, from 10% to 19%. This is of course due to holiday gift giving.

If one were to extrapolate these figures out to the entire US population it would mean (by my quick calculation) roughly 45 million people now have tablets (distinct from eReaders). And by some measures Tablet users are more valuable than smartphone and even PC users. 

According to data released last week by Adobe, based on an analysis of 16 billion visits to top retailer websites, tablet owners spent more money and were more inclined to buy than smartphone owners and PC users:

  • Tablet Visitors spent over 50% more per purchase and were nearly three times more likely to purchase than Smartphone Visitors
  • Tablet Visitors spent over 20% more per purchase and were nearly as likely to make a purchase as Traditional Visitors

Tablet owners had slightly lower conversion rates, however, than PC users. And there is much less traffic coming from tablets vs. PCs. However there does appear to be some "cannibalization" going on.

Here are the top-level findings from Adobe's study (AOV is "average order value"):

Screen shot 2012-01-23 at 1.03.10 PM

There's plenty of other evidence that support's Adobe's finding that tablets are an important new commerce platform: 

Several recent studies have shown that retailers in particular are lagging in their adoption of optimized mobile sites and apps. The Pew data and Adobe findings should be a wake up call to retailers that they have to address tablets as a distinct channel. 

Studies Find Major Brands, Retailers Slow to Adopt and Optimize for Mobile

There are two recent studies that show national brands and retailers lagging in their adoption of mobile or under-investing in mobile as a platform. Brand consultancy L2 just this week released what it's calling "Prestige 100 Mobile IQ." Basically a survey of top brands' mobile presences and their efficacy, the firm found that most top brands were not taking mobile (and tablets) seriously enough, despite increasing consumer adoption.

Roughly 30% of the top 100 "iconic" brands surveyed didn't have a mobile app and 33% didn't have a mobile-optimized website. According to the study 52% had both an app and a mobile site, while 16% had no mobile site or app -- no mobile strategy whatsoever. Overall 44% of the brands qualified as "feeble" from a "mobile IQ" standpoint. 

The top 10 brands with successful mobile sites/apps and strategies, according to the survey, were the following: 

  1. Sephora
  2. Nordstrom
  3. Macy’s
  4. NET-A-PORTER
  5. Bloomingdale’s
  6. L’Occitane en Provence (tie)
  7. Tiffany & Co. (tie)
  8. Neiman Marcus
  9. InterContinental Hotels & Resorts
  10. Estée Lauder

In a related set of findings, ForeSee Results measured consumer satisfaction with leading retailer mobile sites and compared those to online satisfaction scores. ForeSee found that most retailers and ecommerce sites' mobile ratings were lower than those for their PC websites. (Apple was the exception, with a mobile rating that was greater than its PC-experience rating.) 

It's not entirely clear, at first glance, whether these scores mean consumers found the retailers' mobile sites sub-par or whether they simply preferred the PC sites. Let's assume, however, that it's the former and consumers were expressing dissatisfaction with these mobile sites. 

If so, there will be near-term consequences in terms of lost opportunities as well as a negative brand impact among those companies that fail to optimize for mobile. Mobile and tablets are no longer a novelty phenomenon that can be addressed "later." Mobile internet access will eclipse PC internet usage in the next three to five years. Time spent with mobile apps is already greater than time spent online according to calculations from Flurry Analytics. 

 http://blog.flurry.com/Portals/41620/images/Flurry_Browsing_vs_AppUsage_Dec2011-resized-600.png

The "takeaway" from these two pieces of research is that you can no longer simply rely on your PC site. Brands and retailers must have an optimized mobile presence. But it's not enough to have a "mobile presence;" brands and e-commerce sites must deliver a positive mobile experience to their customers, which means all of the following:

  • an HTML5, mobile-optimized site
  • an iPhone app
  • an iPad app
  • Android app (soon for Kindle Fire tablet too)

These investments are rapidly becoming "tablet stakes" and those that fail to "ante up" will suffer. 

PayPal Seeing Enormous Mobile Volume, Can It Cement Its Lead?

Last week it was announced that PayPal was running an offline mobile payments trial with HomeDepot in a small number of stores. And yesterday at CES eBay and PayPal released very impressive mobile payments revenue numbers:

  • PayPal expects $7 billion in mobile payment volume in 2012
  • In 2011 PayPal reached $4 billion in mobile payment volume. This dramatically exceeds the original prediction of $1.5 billion
  • There are currently 17 million (global) PayPal customers using the system to make mobile payments

These figures enable PayPal to lay claim to being the leading mobile payments platform in North America and perhaps globally. I've previously argued that PayPal's consumer brand is too weak to enable it to be one of the big winners in mobile payments. However enough adoption by merchants and extreme simplicity can overcome what I perceive to be its brand weakness to perhaps a substantial degree. 

In HomeDepot PayPal is testing a system that allows consumers to pay for things with their phone numbers and a pin-code. It doesn't rely on the rollout of near-field communications. Such a system could dramatically speed the adoption of mobile payments. Removing the need to physically swipe the card at a POS terminal makes the transaction more secure than it would otherwise be. 

Comfortable Paying with Smartphone

 Screen shot 2012-01-12 at 3.30.23 PM

However most people are ignorant of the benefits of mobile payments and a majority remain concerned about security. A recent Prosper Mobile online survey (n=360) found that 44% of respondents were somewhat or very comfortable with the idea of paying for things with their phones. The other 56% were not. 

Related posts:

Siri and the Mainstreaming of the Speech UI

Companies like Google and Apple are "market makers." They may not be first with a technology but their inclusion or the use of a particular technology can have a dramatic impact on its acceptance and adoption. Siri, as we recently argued, is one such product (along with speech on Xbox). For all its imperfections, Siri has managed to mainstream voice and speech interfaces -- at least in terms of awareness.

Siri performs at a level that has reinforced its usage and focused considerable media attention on speech. As we said in the report "Siri and the New Speech Imperative": 

Voice on the Xbox and the emergence of speech as a front in the “smartphone wars” both create new momentum for voice interfaces and even a kind of “speech imperative.” At a recent search conference someone remarked, “Voice is the new touch.” In other words: a “sexy” new interface that, like touchscreens, could shape consumer expectations of how they should be able to interact with a range of devices and services going forward.

Siri's integration into the iPhone 4S has been well received by consumers and is at least partly responsible for the huge sales the iPhone 4S has reportedly enjoyed in Q4. 

 Screen shot 2012-01-12 at 11.45.31 AM

The New York Times today did a short roundup of companies at CES now building speech (and gesture) into consumer devices. On the heels of its indirect success with Siri (as the speech recognition front end) Nuance introduced Dragon TV at CES. Also at CES, Samsung debuted new TVs that allow voice and gesture-based control. Telematics, which offer varying degrees of voice control, are also getting a lot of attention at CES this week.

Apple TV (allegedly coming soon) is also supposed to integrate Siri. Indeed, there's a convergence of speech (and gesture) UIs with APIs and apps across an array of platforms: mobile, TV and in-car. The smartphone experience and its various metaphors are informing a host of consumer experiences beyond phones. 

Benefiting from decades of research and various false starts, Siri has become the breakthrough consumer product that has raised the public's awareness of speech interfaces and their potential. But Siri isn't just about speech it's about combining Nuance's speech capabilities with natural language understanding, which is the other half of it.

We're going to see more and more devices integrate speech as a UI, with all sorts of implications for enterprises across the board.

See related posts:

 

 

Mobile Internet Kicks PC's Butt in Time Spent

Last June mobile analytics provider Flurry released a startling statistic: people were spending more time with mobile apps per day than they were on the PC web. The number of people on the mobile Internet in the US is still smaller than the PC Internet (100 million-ish vs. 218 million). But the implications of Flurry's engagement data are both obvious and dramatic. 

Flurry recently updated its numbers and found the gap had widenend -- in favor of apps. According to the company Americans now spend an average of 94 minutes per day with apps vs. 72 minutes on the PC.

Flurry_App_versus_WebUsage_Dec2011

Here's what Flurry said about its methodology and how it calculated the numbers: 

For the web, shown in green, we built a model using publicly available data from comScore and Alexa.  For mobile application usage, shown in blue, we used Flurry Analytics data, which tracks anonymous sessions across more than 140,000 applications.  We estimate this accounts for approximately one third of all mobile application activity, which we scaled-up accordingly for this analysis. 

Since conducting our first analysis in June 2011, time spent in mobile applications has grown. Smartphone and tablet users now spend over an hour and half of their day using applications. Meanwhile, average time spent on the web has shrunk, from 74 minutes to 72 minutes. Users seem to be substituting websites for applications, which may be more convenient to access throughout the day.

Assuming the calculations are accurate the implications are profound for marketers and brands. In other words, if you're not optimized for mobile and not doing mobile advertising/marketing you're going to miss a significant audience. And that audience spending more time with apps may be your target.

People invariably want to get into the apps vs. HTML5 debate; that misses the point. The real comparison is mobile (apps + mobile Web) vs. PC. The PC audience is largely flat and time online isn't growing. But time with mobile and tablets is.

Smartphones, tablets and one day "smart TV" will be where more and more consumer eyeballs go especially for non-utilitarian tasks. It's a four-screen world; get used it. 

Telenav Introduces Personalized, X-Platform Navigation and Search App: "Scout"

At CES today GPS provider Telenav is launching a new app (and a new brand in a way) called Scout. It's a website; there's also a smartphone app (iPhone for now) and an in-car nav capability. Accordingly, it's coming to Ford vehicles later this year according to the company.

Here's how Telenav describes Scout: "The first daily personal navigator that will be seamlessly accessible across the web, smartphones, and in-car systems – offering users an easy and consistent discovery and navigation experience no matter where they are." 

Indeed, the cross-platform feature and personalization are key differentiation themes: 

Scout opens to My Dashboard, a customizable start screen that allows users to quickly get personalized, real-time commute times to work or home – as well as instant access to local search for easy discovery of new places and saved favorites. My Dashboard was created to solve the need for an everyday navigation tool, even when driving to familiar destinations.

The website Scout.me enables users to conduct local searches (ratings are coming largely from Yelp), create favorite lists, get directions and share content with friends. That content can be later accessed on the Scout smartphone app or in-car.

photo

Scout is free and will provide voice-guided turn-by-turn directions. Telenav also has free and paid apps for the iPhone and Android, which provide the same capabilities and most of the same content and local search features. The Scout app and site are supported by ads from Citysearch and xAd. 

The "Scout" brand as well as its look and features are more consumer friendly than "Telenav," which came out of the enterprise navigation segment.  That was probably the impetus behind the creation of the new site/app, which relies on the same infrastructure as Telenav proper. Telenav is also the provider behind many of the carriers' paid navigation apps. 

My experience with the Telenav app for the iPhone since giving up my Android handset and Google Navigation has been very positive.

Wal-Mart, M-Commerce and Brand Weakness

As you may recall, last April Wal-Mart bought Kosmix for roughly $300 million and turned that into the nouveau social-mobile-e-commerce initiative @WalmartLabs. Yesterday the division of the world's largest retailer acquired a Portland Oregon based mobile agency and app developer Small Society: "A highly respected mobile agency, is joining the @WalmartLabs mobile team. Small Society embodies what has made us successful in 2011 and will help us accelerate that success in 2012."

Stepping back the question is: what is Wal-Mart thinking about its strategy going forward? Sure, it's smart to set up a Silicon Valley shop that incubates social and mobile products. But what is Wal-Mart actually going to do with them? 

Wal-Mart could take on Amazon and try to become a better version of the e-commerce pioneer. While that would take enormous corporate commitment and be risky, the company could leverage mobile and social functionality being developed at WalmartLabs. Alternatively or in tandem it could try and build verticals and new initiatives that cultivate new audiences and shoppers.

Building new audiences and expanding beyond its value-conscious/price sensitive demographic is a major Wal-Mart company objective. It sees Target as a big threat in the US, which has much greater appeal to "upscale" and younger shoppers. 

This quickly brings us to the Wal-Mart brand. Yes, it's a global brand -- but it's a brand like McDonald's: low quality, high volume. Wal-Mart has also been tainted in some quarters by its discrimination class action litigation with employees. Accordingly, with certain demographic segments (affluents, higher education) Wal-Mart is seen as an exploitative employer that peddles low-quality products. 

Wal-Mart is equally often seen as destructive of local communities and small business. It's not uncommon to see grass-roots efforts to keep the store out of communities (e.g., San Francisco). This kind of anti-Wal-Mart outrage doesn't exist with other retailers, and Target in particular. 

This negative brand image and reputation is directly at odds with the mission and self-image of @WalmartLabs and will be a major impediment to success -- either via a direct challenge to Amazon or any other "2.0" initiatives that carry the Wal-Mart brand.

However, Wal-Mart could use its own brand and potentially find success over time in a head-on challenge to Amazon and other e-commerce retailers if it did the following things:

  • Created sites/apps that offered great (capital G) user experiences
  • Competed aggressively on price with free shipping all the time
  • Made a very public and sincere commitment to customer service and backed it up with action
  • Did a better job of community relations with sincere commitments to local communities
  • Integrated stores and online in a smart, channel-agnostic way

If the company were to succeeded across the board on these fonts Wal-Mart might be able to not only appeal to new audiences but it could improve the standing of the brand overall. However, any sort of specialty, vertical or category specific initiative would need to carry a new brand. 

While there's great potential in @WalmartLabs I don't think the necessary corporate-level commitment is really there. 

Will 2012 Be a 'Breakthrough' Year for Mobile Payments?

Mobile industry consultant Chetan Sharma conducted a 2012 predictions survey among "executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain." The complete findings are available here. Many of them are interesting, but in total they indicate to me that most insiders have no great clarity on the direction of the market.

What's most interesting to me about the survey is the discussion of mobile payments. Respondents thought that mobile payments will be the "breakthrough category" of 2012. But they also believe that banks and credit card companies will dominate the emerging segment:

Screen shot 2012-01-04 at 7.38.08 AM

Screen shot 2012-01-04 at 7.38.16 AM

While it's logical to assume that banks would control mobile payments -- they control the infrastructure -- I don't agree that the "financial guys" will define the segment. For the most part the credit card companies and operaters are not going to be able to deliver a compelling user experience -- especially the operators. 

Visa, Amex and MasterCard will be the "Intel inside" of mobile payments but the user-experience front end will be delivered by someone else in my opinion (like Square). Some consumer surveys indicate that, right now, credit card issuers are more trusted than others in the emerging ecosystem (other surveys show the opposite). Credit card issuers and banks are a known quantity; they're familiar to consumers.

However mobile payments are still mostly hypothetical for most people because few have had any practical experience with it. Once various "solutions" appear and people engage with them the landscape of survey responses will likely change to favor those with the best user experience (and/or most favorable terms on the merchant side). 

Screen shot 2011-06-20 at 9.15.23 AM

Source: Retrevo (Q4 2011)

Square contradicts the "banks will dominate" assumption. The company is an amazing success already, largely because it created an elegant user experience for both merchants and consumers. This is not something that would have been done by a credit card company or bank. Ultimately a credit card company, financial entity, Intuit or eBay will buy Square, however. 

In the next few years, there will probably be a few mobile payments entry points for consumers on top of a couple of payments infrastructure ecosystems. Unless there are common standards, however, there won't be many consumer-facing players.

I don't think this means that Visa or Amex will dominate, though they will have to be involved. I also don't think that PayPal will win in the segment. I would have bet on Google in the past but the operators (at least Verizon) seem inclined to block the company's mobile wallet. Amazon and Apple are dark horses but still have considerable potential because of their installed bases of credit card accounts. 

As with the example of Square I think there's still room for startups in mobile payments, provided they don't ask users and merchants to change behavior or adopt new proprietary systems. However unlike some of the larger or more established companies they must overcome the "cold start problem" (building usage among consumers and merchants simultaneously). 

In my view this year is still about developing the ecosystem and infrastructure and not a "breakthough" year for payments. That will come in 2013 or 2014 in terms of mainstream consumer adoption.

Apps Beat the Browser, Lift Brands

It has taken some time, and longer than I would have expected, but more people are now using apps to access content on mobile devices than are doing so with a mobile browser according to comScore's most recent data release. While the number of people who "used downloaded apps" and "used browser" are almost identical this is the first time in comScore's tracking that apps have surpassed browser usage. 

The data are survey based. They likely underestimate the relative role of apps in the overall smartphone user experience. 

What these comScore data mean effectively is that mobile apps have a reach that now slightly exceeds the mobile browser on smartphones. But in terms of time spent or engagement mobile apps have for some time dominated mobile browsing (and even PC browser time according to Flurry Analytics). 

http://blog.flurry.com/Portals/41620/images/chart_mobileapp_vs_web_consumption-resized-600.png

Flurry also estimated that during the Xmas to New Years Day period, more than 1 billion apps were downloaded around the world. 

http://blog.flurry.com/Portals/41620/images/Flurry_HolidayWeek_Xmas-NewYears_AppDownloads_Top20Countries-resized-600.png

Separately research has confirmed that apps can have a dramatic, positive impact on brand favorability metrics. Accordingly brands' attention to apps as interactive marketing tools should increase dramatically in 2012. And we should also see much more mobile display advertising used to build app awareness and generate downloads.