As we all wring our hands over the slow and uneven development of mobile payments -- and watch the contest between PayPal, Google Wallet, Square, LevelUp, Boku, mobile carriers and others – it's possible that mobile payments might become mainstream in less anticipated ways. Individual retailers and franchises, for example, might be much more successful in motivating consumers to adopt the technology than the major payments players taking a “horizontal” approach.
Starbucks was a trailblazer with its mobile app and wallet functionality in the US. Home Depot recently enabled PayPal to be used in selected stores. And TGI Friday’s has just followed with iPhone and Android apps that include a mobile wallet. The casual restaurant chain has 600 locations in the US and roughly 350 of them are now equipped to let customers pay by app. Startup Tabbedout provides the payments capability in the new TGI Friday’s app.
After the app is downloaded the TGI Friday’s customer opens a tab. She or he receives a code through the app, which is then shown to the server who enters it in the restaurant’s POS system. No card swipe means greater security for the consumer. (I once had my credit card number stolen by a waiter in a high-end restaurant.) A consumer credit card is associated with the app, which is where the payment comes from.
In addition to paying in the restaurant, the app helps users find restaurant locations, see the menu and receive offers. Payments become a kind of hook for a broader set of services and loyalty efforts. While TGI Friday’s is the first restaurant chain to adopt mobile payments (after Starbucks), expect others in the segment to follow relatively soon.
Fast casual and so-called “quick service” restaurants (fast food) will likely duplicate this move in short order. One can easily imagine a McDonalds or Chipotle app with a restaurant locator and mobile payments. Chipotle already allows mobile ordering.
The integration of mobile payments into loyalty apps by major brands is likely to help educate US consumers, “socialize” mobile payments and drive consumer adoption much more quickly than abstract initiatives from PayPal or Google or mobile carriers. The consumer doesn’t have to think about which merchants or stores will accept mobile payments in the single-store scenario. In other words, the consumer “why” of mobile payments is answered much more readily in a specific context, like the one presented by TGI Friday’s.
Mobile payments provider Boku has now completed a deal with Sprint, making it the final major US carrier to enable carrier billing through Boku. The startup operates in more than 60 countries and claims to process "hundreds of millions" in payments accordingly. It has relationships with more than two hundred mobile carriers around the world.
Companies like Zong (now part of PayPal) and Boku got started to enable online users (mostly younger people) to purchase virtual goods in a simple and secure way. They evolved to enable purchase of physical goods offline. While Zong was acquired Boku and smaller payments companies like it risk being marginalized in North America and Europe by banks, credit card issuers and others (e.g., Google, PayPal, Square), which are reaching out to a broader population of users that already have credit cards.
In developing countries carrier billing may be an effective approach for users and merchants in the absence of a more conventional credit card infrastructure. However in developed countries -- with carrier bills already very high -- few individuals (except those without traditional platic cards) will want to load up their carrier statements with additional costs. You may dispute me on this but I firmly believe that in the US, for most adults with existing credit, carrier billing is going to be a non-starter.
Boku cites a Strategy Analytics survey that argues, "consumers are twice as interested in operator billing as using traditional credit/debit cards." I simply don't accept these findings as valid. Another survey (US only) by electronics site Retrevo found the opposite in June of last year:
Companies such as Boku need to branch out into physical goods and move outside of carrier billing to withstand the onslaught from other players with greater brand recognition and momentum. Indeed, earlier this year Boku did an NFC payments deal with Mastercard in the UK as part of an effort to do so.
Most marketers' email campaigns are not optimized for mobile. I observe this all the time in my own experience: the majority of emails I open on my smartphone (iPhone) land on an HTML page that assumes I'm on a PC. Yet PC email opens will be the minority use case very soon according to data released by email analytics provider Return Path.
The company examined 500 client email campaigns in Q4, 2011 through Q1, 2012 and found that 30% of email opens were on mobile devices. Further, it said that mobile was on track to become "the dominant email marketing platform later this year." This makes sense because email is one of the primary activities that people do in mobile. Return Path asserts that 42% of all time spent with mobile is spent on email.
The company doesn't indicate whether iPads are counted as mobile devices here. In that case PC-formatted emails will look OK.
Regardless, the Return Path data and prediction will come as a shock to most email marketers who are well behind in terms of mobile adoption. Citing third party data Return Path said that of all email opens only 2.4% of people opened the same email on their mobile device and a PC. In other words, marketers get one shot at users and that's going to be mostly mobile as of later this year.
Citing another third party study Return Path reports that 63% of Americans and 41% of Europeans either close or delete emails not optimized for mobile. This shows how high the stakes are for marketers who rely on email -- especially retailers.
Perhaps the second most suprising datapoint from the study, Return Path found that "Apple devices account for 85% of all mobile email opens." What this effectively means is that at some point in Q4 a majority of email opens will happen on iPhones and iPads.
A recently published study from the UC Berkeley Law School about mobile payments and related issues finds some significant consumer resistance -- at least in the abstract. A survey discussed in the report found that "over three-quarters (74%) of Americans said that they are 'not at all likely' or 'not too likely' to adopt mobile payment systems. Just 24% say that they are likely to adopt mobile payments."
Enthusiasm or resistance to mobile payments varied by age. Interestingly the people most enthusiastic about the technology were those in the 35-44 age range -- not the youngest adults. Yet attitudes and behavior are often distinct and surveys don't always reflect what people actually do in concrete situations in the world. Still the data potentially reflect a stiff uphill climb for mobile payments purveyors.
Services like Square and PayPal Here may be exceptions because they don't require a change in consumer behavior. The consumer is still swiping a card; it's the merchant experience which is changed.
A 2012 consumer survey conducted by the US Federal Reserve found that 12% of respondents had made a “mobile payment” within the past year. However “payment” was broadly defined to include online bill paying, m-commerce, charitable giving and money transfers, among other transactions. Online bill paying was by far the most common “mobile payment” activity according to the survey.
(Source: US Federal Reserve Q1 2012, n=1,780 US adults)
Concerns over security and the lack of apparent/clear benefits were the top two obstacles to mobile payments adoption according to the Federal Reserve survey.
The UC Berkeley survey looked at related areas surrounding mobile payments adoption. It explored location tracking and other privacy related issues (i.e., giving merchants information as part of the mobile transaction). Among other things, the survey asked consumers about how much information they were willing to give to merchants and how comfortable they were allowing their movements in or around shopping areas to be tracked by retailers or other entities.
The report says that, "Americans overwhelmingly oppose the revelation of contact information (phone number, email address, and home address) to merchants when making purchases with mobile payment systems. Furthermore, an even higher level of opposition exists to systems that track consumers’ movements through their mobile phones." An overwhelming 96% of survey respondents say they objected to having their movements tracked by merchants or retailers; and 79% said they would “definitely not allow” it, with the remaining 17% saying they would “probably not allow” it.
Again this may be an abstract fear that dissipates if consumers realize concrete benefits from permitting themselves to be tracked or by divulging information. Regardless, mobile payments vendors and merchants will need to overcome the catalog of user fears and offer very concrete benefits to drive adoption. There are a large number of people who not only don't see mobile payments inevitable, useful or convenient but see it as a net negative.
That perception will need to be overcome to mainstream the phenomenon. And that will probably happen by getting a sufficient early adopter critical mass of people who can then proselytize and educate their friends, family and colleagues.
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.
There's plenty of data that shows people are on mobile devices while watching TV. Many Superbowl ads assumed and tried to play off this, largely without success earlier this year. But it may turn out that tablets (iPads) become the primary "second screen" during TV viewing.
According to a Q4 multi-country survey from Nielsen, "88% of US of tablet owners and 86% of smartphone owners said they used their device while watching TV at least once during a 30-day period." In addition Nielsen found that 45% of tablet owners used their devices along with TV "on a daily basis and 26% said they did this several times a day."
While checking email during commercials was a primary activity of the second screeners, the survey also found that there was engagement with TV content and products:
The most frequent tablet or smartphone activity across all countries while also watching TV was checking email — either during a commercial break or during the show. Yet device owners also seem to engage with content related to the TV as well, either by looking up information related to the show or looking for deals and general information on products advertised on TV.
While shows like QVC, American Idol and The Voice are already doing things with simultaneous TV-mobile use, we should see more formal incorporation of mobile devices into shows. (I'm sure there will be lots of interesting and creative implementations to come.) In a more mundane vein, advertisers may start to direct people to e-commerce sites or offer flash sale incentives to mobile users on the couch. It should be a very interesting trend to watch.
Tablets are much more likely, however, than smartphones to generate e-commerce sales. This is why they will be preferred by marketers. They'll be preferred by consumers because of their larger screens.
Make no mistake Google's augmented reality goggles are fascinating and "cool." I applaud Google for developing them (if they have actually been developed; I suspect there's no working prototype yet) but I also wonder if anyone would actually buy and wear them. Of course some people would; but could the product break out of cult status?
The effort, called Project Glass, is an initiative of Google's advanced products team ("Google X"). It represents a form of "wearable computing" and it's very interesting as an extension of the Internet beyond more conventional devices like smartphones.
Putting aside the fashion dimension, which I think is awkward in the images shared by Google, AR glasses might be useful while driving, shopping or in an art museum. However they might equally be distracting and annoying, removing you from the experience of being in the "real world."
There's already a backlash building against living your life with your nose in your smartphone. This would take the smartphone obsession one step further.
Pricing is uncertain. If they were expensive (more than $199) they wouldn't see much uptake I would imagine. And what about advertising? Imagine ads literally popping up in front of your eyes. That would be highly undesirable to say the least. Other issues include battery size and life, as well as data plans and costs.
Glasses are a logical place to put a wearable computer and at some point we will see wearable computers. However I'm skeptical that this product has mainstream appeal. But prove me wrong; I'd love to see it in action.
Nokia, AT&T and Microsoft are about to begin their "do or die" marketing blitz for the Lumia 900. Nokia (or someone on its behalf) has set up a site that tries at once to be humorous, viral and to take down the iPhone with actor-dramatized "hidden camera" videos that purport to show its weaknesses (e.g., "death grip"). The site proclaims "the beta test is almost over" and features former "SNL" actor Chris Parnell.
This site is merely one of a multiplicity of efforts and campaigns on behalf of Nokia and Windows Phones that are about to unfold.
Hundreds of millions of dollars will be spent in the coming year seeking to get North American mobile subscribers to pay attention to the Lumia and consider buying it. AT&T has priced the device at $99 and says it's going to put more marketing dollars behind the launch than any other device, including the iPhone.
Depending on whose numbers you believe, Windows has less than a 5% share of the US smartphone market and an even smaller chunk of "recent purchases."
For all the spending we're about to see I think US Lumia sales will only be modest. I could be completely wrong but I think that when the smoke clears a year from now the postmortem will be (once again) that marketing dollars can only go so far in shaping perceptions and getting people to buy a product.
Last May Tel Aviv-based mobile app/search engine do@ (pronounced “do at”) launched with high expectations. The company raised $7 million against the promise of delivering a search experience to smartphones that was both more efficient and more elegant than Google.
Rather than indexing pages, do@ showed live sites that were optimized for mobile. Sites were initially ranked by default but users had the ability to re-order results. It was a radically different and smart approach to mobile search -- and one that might have been expected to work at some level. However nobody used it, reflecting the power of Google's brand and its prominence on both the iPhone and Android devices.
You can see a video of do@ in action here.
Now the company has re-imagined do@ as a kind of mobile meta-search engine: Everything.me. You enter a query and can search "vertically" in any of the many different sites displayed on the screen. Logos replace Google's blue links.
Because Everything.me gives you access to familiar, branded sites (and some that are less familiar) it has a better chance than do@ did. However, many people have smartphone apps for common mobile search categories: restaurants, travel, shopping/price comparisons. Then, of course, there's Google for "everything else."
Accordingly I think the company is fighting the same battle it was before. And even though this relaunch is a clever adaptation of the company's underlying technology it will face the same challenges of adoption and usage.
Yesterday the Wall Street Journal published what amounts to a round-up of recent Google tablet rumors. None of the information was really new.
Previously Eric Schmidt confirmed that Google would be putting out a "highest quality" tablet at some point later this year. A Google-branded tablet (expected to be 7-inches) is intended to compete directly with the Kindle Fire. It's also a direct response to the failure of other Android tablets to date.
Here's are the quasi-factual nuggets extracted from the WSJ piece:
Earlier rumors suggested that the price might be $149. Either at $149 or $199 a decent 7-inch Google tablet is likely to be highly successful.
The Kindle Fire is actually quite a mediocre tablet compared to the iPad. It's well integrated with Amazon content but that's about it. Email and web surfing are quite painful on the device. Google almost certainly would make a more functional tablet for general purposes. It would also have the benefit of Google's voice actions.
Google also has nearly the content ecosystem that Amazon does (i.e., Google Play). It can also afford to subsidize the device because it will make money on search and mobile display advertising.
A $149 Google tablet would undermine Kindle Fire, compelling Amazon to lower its prices. Pricing here is a key variable. Regardless of whether it comes in at $199 or less, a cheap 7-inch Google tablet will be successful. The outlook for a larger tablet and direct iPad competitior would be more murky.
However I would predict that Google will sell millions of these smaller, highly subsidized devices.
Some US-based survey findings were released yesterday that show iPhone 4S owners use Siri regularly but only in limited ways. The survey of 482 iPhone 4S owners by Parks Associates reflected that people used Siri almost daily in many instances to send email, initiate calls and send texts. Other types of "more advanced" activities were not performed as often (e.g. setting up appointments or playing music).
Here's a very high-level overview of the findings:
Previously a ChangeWave survey in December found that Siri was the most "liked" feature of the new iPhone 4S.
Siri is clearly a work in progress; Apple has a "beta" label on it. Apple's chief mobile rival Google is working on its own "assistant" to compete with Siri. The rumor is that will include APIs for third party developers. So Google may out-Siri Siri if Apple doesn't keep moving.
The question now for Apple is how much to develop Siri into a broader utility and search or content discovery tool.
Apple removed Siri's earlier “transactional” capabilities, present in the app before Apple bought the company. Those earlier capabilities hint at what's possible. In other words, tapping directly into third party APIs to deliver content results and transactional pages without the interim step of a "search result." This was Siri's ambition when Apple bought the company. But will Apple press on?
In an ideal world Siri would develop into a kind of universal interface for finding and downloading apps, generating queries within apps on the handset ("Find me a flight from NY to Boston on Kayak on April 18") and perhaps initiating payments.
Clearly there are flaws in Siri's performance and it's imperfect, but it has enormous potential to be more than it is. I'm hopeful that Apple continues to invest in and develop Siri -- to help it realize its pre-Apple vision.
Even though increasing numbers of consumers are starting to transact on smartphones, m-commerce hasn't taken off. Trust, security and credit card entry issues still need to be resolved for most e-commerce merchants (though not Amazon).
But there is another way in which smartphones are helping e-commerce -- so-called "showrooming." That's where consumers visit stores to examine and verify products and then order online (mostly from Amazon). This problem has been especially bad for stores like Best Buy but it's a problem that all traditional retailers are starting to grapple with.
Recent survey data from ClickIQ (via Internet Retailer) confirms this pattern:
29% of consumers who use a smartphone to research a product while in a retail store end up purchasing the item online, many from. . .
Of consumers who used a smartphone to research in-store and then purchase online, 55% were men and 45% were women, says the survey of 406 U.S. consumers who have researched a product while in a store and purchased that product.
Recently the Pew Internet Project issued similar findings about Q4 smartphone shopping behavior.
Here's what the Pew survey data say about what happened after the smartphone/Internet was consulted by consumers in stores:
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.).
The 19% who purchased the product online is 10 points lower than the ClickIQ findings. But both these surveys show that consumer behavior is being affected by access to the Internet in stores, with some meaningful percentage of people buying online after confirming the product is the one they want.
There are a few things that retailers can do to combat this growing pattern:
However it's foolish for retailers to try and prevent smartphone use in stores or rely on unique SKUs that prevent barcode-scanning based comparisons.
According to a sweeping report from the Pew Reseach Center ("State of the News Media 2012"), 27% of the US adult population now gets its news on smartphones and tablets. The report says that "70% of desktop/laptop owners report getting news on their computers. Half of smartphone owners (51%) use their phones for news. A majority of tablet owners (56%) use the devices for news."
Mobile news consumers, especially users of news apps, are more engaged than their PC counterparts: "People spend more time per session with news on mobile devices than they do on computers, and read more articles per session and more articles per month."
The data were collected through various surveys earlier this year. They show that people are accessing news on multiple devices, more frequently. Mobile news consumption appears to generally be "additive" to consumption on the PC, although there's evidence that smartphone and tablet owners are shifting some of news reading to those devices.
Pew also says that "mobile news consumers are even more likely to turn to news organizations directly, through apps and home pages, rather than search or recommendations — strengthening the bond with traditional brands."
Although people are getting news on multiple devices, 82% of survey respondents get their digital news primarily on a computer. Pew adds, however, "But much of that may mainly come from the computer being their only digital option . . . 43% of all desktop/laptop owners [do not] own another device."
Pew observed that for people with multiple devices some amount of their news consumption is shifting, "[A]s we have seen with other technology shifts, consumers are drawn to newer forms and may even make them their primary mode, but they are not abandoning older forms altogether. Instead their news experience widens and deepens."
Smartphone owners who read news on their handsets are evenly split, "46% still get most of their news on the desktop/laptop; 45% get most on their smartphone." For iPad and Kindle Fire owners, "47% still get most of their digital news via desktops or laptops, while a third, 34%, have already transitioned to consuming most of their news on the tablet."
On the PC Web most news publishers were largely "disintermediated" by search (Google). Their brands were diluted and weakened as they were presented among hundreds of news sources for a given story. They were often out-maneuvered by aggregators and others more skilled at SEO. Mobile news apps and the move away from search as universal content gateway (in mobile) gives publishers an opportunity to reestablish a more direct relationship with the consumer -- and with that capture more digital revenue.
JD Power and Associates yesterday put out its 2012 handset customer satisfaction survey findings, covering both smartphones and non-smartphones. The iPhone won the smartphone category (for the "seventh consecutive time"); LG and Sanyo were at the top of the non-smartphone handset category.
HTC was second in the smartphone category. Android market leader Samsung was third but "below industry average."
JD Power used a range of criteria to measure satisfaction, which were slightly different in each category. For smartphones the weighted criteria were: performance (35%); ease of operation (24%); features (21%); and physical design (20%).
The iPhone rankings are not a surprise. The much more interesting aspect of these survey results is the low score of Nokia. On both lists it was second from the bottom.
If this survey were conducted in Europe or developing markets Nokia might get higher marks. But the low scores in the US survey reflect the poor performance of its existing products and the weakness of its brand. That brand weakness is further diminished by the scores themselves.
It will be very challenging, even with its new Lumia Windows Phones, for Nokia to "climb out of the basement." Indeed, the existing weakness of Nokia in the US/North American market creates a "deficit" for Lumia devices as both Nokia and Microsoft seek to market them to North American consumers.
Related: iPhone Grabs Camera Market From Sony
Today the iPad pre-orders arrive and the iPad becomes available in stores. Yesterday reviews of "The New iPad" come out and overall they're very positive. Based on the success of iPad pre-orders, financial analysts have boosted their estimates of iPad sales for 2012. Some are now saying that Apple may sell a combined total of 65 million iPads or more this year.
One question is whether this lead will be so overwhelming that rivals will be shut out. So far the only successful Android tablet is the Kindle Fire and that success is largely based on its price. It's an inferior product, whose sales could be affected by the reduced price iPad2 ($399).
Yet IDC has projected that the iPad will be overtaken by Android tablets in 2016. IDC estimated that Amazon sold 4.7 million tablets in Q4 of last year.
The chart above reflects "shipments" and not actual sales. The logic behind this forecast showing Android overtaking the iPad is based on a simplistic analogy to the iPhone, and Android's growth over a period of years to a dominant market-share position. However, as several others have pointed out, the better analogy might be the iPod, which established a dominant market share and was never challenged.
In the US, Apple maintained an exclusive iPhone relationship with AT&T for three years after launch. That allowed Android to develop huge momentum. People were more inclined to buy an altenative smartphone than change carriers. The iPad has no such carrier constraints.
There have so far been well over 100 Android tablets and all but the Kindle and Nook have fallen flat. It's unlikely there are any new tablets on the horizon that will have great success -- Google's rumored 7" inexpensive tablet could be an exception. As I've written before, Android tablet OEMs are "boxed in" on pricing by Kindle on the one end and the iPad on the other. The lower-priced iPad2 makes their lives even harder.
The next test for the iPad will be the arrival of Windows 8 tablets, the first of which will probably show up for holiday shopping at the end of the year. But for at least three quarters the iPad will have little or no competition. That could enable Apple to sell 45 or 50 million more tablets.
Several years ago I met with someone working for PayPal and we talked about how the company could more deeply penetrate the small-business market. We talked about various ideas but everything seemed "hard." Cut to the arrival of Square; the solution is now obvious.
Square has blazed a trial that has been followed and copied by Intuit and now PayPal, with PayPal Here, a similar but triangular dongle that also fits into smartphones and iPads. In Q4 last year Square announced that it was processing $11 million in payments per day.
How will PayPal's service differentiate from Square? PayPal Mobile VP David Marcus (who came via the Zong acquisition) explained in a blog post:
So, you’re asking, how is this different from other small business mobile payment solutions? The key differentiator is that it comes from PayPal, a trusted brand in the online payments industry with more than 100 million customers around the globe and years of proven payment innovation, driving growth for millions of businesses globally. PayPal Here comes with our world-class fraud management capabilities, and our 24×7 live customer support. In addition to accepting more payment methods, PayPal Here offers a simple flat rate of 2.7% for card swipes and PayPal payments. Merchants are also given a business debit card for quick access to their funds and 1% cash back on eligible purchases – which means if you use the debit card, your fees are actually just 1.7%!
In other words:
Square's transaction fees currently stand at 2.75%. However I suspect Square will respond to PayPal's reduced rates.
Beyond the (somewhat smaller) transaction fees, if PayPal Here can deliver on its promises of security and customer support it could impact Square's growth opportunity. Yet Intuit has had a competitive solution for some time, and that hasn't really affected Square. More likely, PayPal's entry into the market will grow the overall payment-dongle market and affect banks and existing vendors that make money from merchant accounts and credit card processing.
Separately, payments startup BOKU received another substantial infusion of capital to focus more on the offline market. Companies like Zong and BOKU initially focused on virtual goods and online transactions. However the real action is offline -- a market that is many times larger than e-commerce and virtual goods.
The $35 million received by BOKU brings to roughly $75 million (per TechCrunch) the total funds raised to date. Spanish telco giant Telefonica is one of the investors in this latest round.
In the SMB segment, the growing number of payments options and startups will likely create confusion. PayPal and Square (and maybe Intuit) are the companies that will be able to rise above that noise given their brands. While Square doesn't have the same brand equity as Intuit and probably PayPal, it does have more momentum than either in the SMB mobile payments segment.
See related posts:
Mobile payments companies, apps and trials are launching so quickly -- a new company appears seemingly every week -- that it's tough to keep track of them all. Despite all the activity most consumers are basically ignorant about the entire mobile wallet phenomenon. Among those that are aware, many are simply not interested; 53% to be precise, according to a mid-2011 Retrevo survey, with another group (26%) who don't know enough to respond yea or nay.
Nonetheless there's a kind of land grab going on, as companies compete for commercial relationships, visibility and mindshare. There are basically three or four major categories of players: the carriers, the credit card issuers, the major independents (Google, Apple, eBay) and the startups. In almost every case the wallet or payments app/tool/platform backs onto a credit card account.
There's also a good deal of spin in the space. For example, LevelUp (the successor brand of check-in service SCVNGR) recently claimed to be "the nation's second largest mobile payment network (behind Starbucks) with 100,000 users across 8 U.S. cities." But that ignores Square, which is the true breakout company in mobile payments.
Source: Retrevo (Q4 2011)
Ultimately mobile payments will be relatively mainstream (probably in 5-7 years). But in the interim consumers and merchants must do the work of adopting a solution before that can happen. The motivation is there on the merchant side; less so for consumers.
Major retailers, grocers and brands will adopt mobile payments for the data, efficiency and potential loyalty and marketing opportunities. Smaller merchants will only adopt mobile payments if there's greater convenience, simplicity and/or reduced costs, which is starting to happen.
For consumers usability, trust and security are major issues. There have been several surveys indicating consumers have many concerns about mobile payments and don't necessarily see the benefits. (Time savings, convenience are benefits but people haven't yet experienced them.)
Ironically the users most concerned about mobile payments are some of the most sophisticated ones. That's according to a recent US consumer survey from Radius Global Market Research (2012, sample size not disclosed):
Interestingly, the segment most likely to make purchases via smartphone, consumers under 35 and those identifying as digitally savvy, are also the most likely to be concerned with security and fraud issues. Fifty-four percent of consumers under the age of 35 are concerned with fraud. That figure rises to 62% among digitally savvy consumers.
Again: 62% of "digitally savvy consumers" are concerned about security with mobile payments. By comparison the survey found that "only 14% say security and fraud don’t influence their future likelihood to make those purchases."
Another 2012 consumer survey from Market Strategies International (n=2,000) found that consumers considered their own banks the most trustworthy to deliver mobile payments solutions:
The fact that PayPal ranked higher than Amex and Mastercard surprised me here. I had previously argued that the PayPal brand would stand in the way of an otherwise compelling vision for mobile payments. Perhaps I'm wrong and consumers' simple familiarity with the PayPal brand provides the company with a major boost over no-name competitors and even credit cards.
Regardless of the provider, consumers will need to be provided with "zero liability" assurances to use mobile payments. In addition, any solution adopted by large numbers of people will need to be simple and generally ubiquitous. We're still a long way away from that.
Today the Pew Internet Project put out some research arguing pretty unequivocally that consumers don't want to be tracked or targeted even if it might mean that the ads and content they see are more "relevant" or aligned with their interests. A survey released at the end of last month by Upstream and YouGov (US and UK respondents) also contains a warning of sorts to publishers and developers about advertising overload.
In this survey consumers expressed frustration over the volume ads and promotions they were receiving. Two-thirds said they received too many ads, while slightly less than a quarter of respondents said they saw the "right amount" of advertising.
Consumers found ads on their phones to be the "most unacceptable" vs. other media channels or devices. This is consistent with lots of survey data that show consumers are ambivalent or hostile to mobile advertising. However mobile ads typically outperform PC advertising, which is a paradox: people don't want it yet they respond to it.
Q: Which ONE of the following electronic devices would you find it MOST unacceptable to receive unwanted advertising on?
Interestingly these survey respondents were much less hostile to ads on their tablets. In fact, they more were accepting of ads on their tablets than they were ads on their PCs. However when a version of the question was asked in a more positive way, PC or laptop where the top choices.
Q: How you would prefer to receive an offer or promotion through an electronic device that you use / own?
In terms of positive features that consumers said would make them respond to advertising, the top answers were:
Q: Which, if any, of the following would make you MORE likely to respond positively to marketing messages?
In terms of ad units or types, email was the most favorably received among several categories that included SMS, paid search, display, QR codes and augmented reality. By implication email advertising was the least intrusive of the types presented to these respondents.
Q: Which, if any, of the following types of message would you be likely to respond positively to if you received these adverts or promotions?
In the Pew survey consumers were willing to sacrifice ad and content relevance to avoid tracking and targeting. Put another way, they declined the idea of improved relevance through tracking and personalization. In the YouGov survey respondents said they would be most inclined to respond to ads "clearly tailored to their personal interests" and that were specific to their locations.
The two surveys taken together reflect that consumers want advertising and content that is relevant but doesn't rely on data mining. In mobile -- where consumers were least interested in ads -- there's a higher burden of relevance than on the PC. But that can be achieved in ways that don't require behavioral targeting or data mining but rely on location and context.
Marketers and publishers must be careful to respect user desires for privacy as they try and fulfill the demand for relevant and "tailored" information. This is a bit of a tightrope to walk. However the industry must walk it.
Next Wednesday Apple will reveal the iPad3 (and potentially a new Apple TV), with an improved display and Siri among other features. Mobile ad network InMobi released consumer survey data last week finding that 29% of respondents were intent on buying the new iPad, with half of those reporting they don't currently own a tablet. Many people (44% of those intending to buy one) also said they wouldn't consider another brand.
Whether or not these survey findings turn out to be accurate they reflect the momentum and mindshare of the Apple tablet, which has sold nearly 60 million units on a global basis. However, when the first iPad was introduced in Q1 2010 it was met with considerable skepticism and predictions of failure. It was seen as an "unnecessary" product, delivering a "watered-down" Internet experience; it was also "too expensive" and "wouldn't fit in your pocket."
A year later Dell also predicted that the iPad wouldn't succeed in the enterprise. However in Q3 2011 Apple reported that 93% of the Fortune 500 were testing or deploying the iPad. By comparison Dell recently announced that it's exiting the consumer PC business. This juxtaposition is essentially a metaphor for state the PC industry as a whole.
Increasingly, instead of buying a second computer or laptop, US (and non-US) households will choose tablets. While there's still growth in the enterprise PC market the consumer PC market is flat-to-declining. Many analysts expect Apple to sell 50-60 million iPads this year. When iPads are considered "PCs" (which they are not), Apple becomes the largest "PC" vendor surpassing HP.
Mobile display advertising outperforms PC display according to considerable research from InsightExpress and Dynamic Logic. Beyond this, ads on the iPad and other tablets further outperform conventional mobile dislay advertising. Engagement with tablets is higher than PCs and consumers have shown a willingness to buy things through tablets in far greater numbers than they have on smartphones. There's also mounting evidence that people are spending more time with mobile devices and tablets than on the PC Internet and even with TV (in some geographies), according to recent data from Flurry and InMobi.
The totality of all this data leads to the inevitable conclusion that PCs will be outnumbered by smartphones and tablets within a year or two. PCs and the PC-Internet experience will merely be one form of Internet access and not the primary way people access the Internet (except at work). We truly are in a "post-PC" era. (That was a Steve Jobs marketing slogan that is becoming factually true.) Microsoft hopes to change the trend with the introduction of Windows 8 of course. But Windows 8 will also work on tablets. Moreover its consumer success, however, is far from certain.
Publishers and advertisers that fail to recognize these trends and act on them in the near term will be at a significant disadvantage. (Flash should be abandoned right now, for example.) Indeed, publishers and advertisers should shift the bulk of their attention and development resources away from the "PC Internet" and toward smartphones and tablet-optimized sites. Mobile and tablet site design should guide PC website design (as recently happened with the redesign of Kayak.) This is especially true for certain categories such as retail and travel.
The notion that mobile is just an extension of the PC-centric Web, which still prevails in many companies, is completely misguided.
If Facebook has its way "advertising" will be a thing of the past. Facebook wants brands to tell engaging "stories" instead, and turn all us passive "fans" into passionate brand advocates. Facebook wants brand and marketer content to be as good or better than any content or messages that your friends or family might generate. The content is the ad campaign and vice versa.
At Facebook's FMC event in New York today the company introduced its highly anticipated "premium ads," which include mobile distribution. Mobile ads will not be separate from ads/content on the PC site; they will be an extension of the same campaign. There won't be a separate media buy or separate targeting (at least now).
New "premium ads" and existing "sponsored stories" will be distributed in Facebook's mobile apps as well as through its site on mobile browsers. These pieces of content or "ad units" will simply show up in users' mobile news feeds based on Likes and friend Likes, etc.
One of the company's ambitions is to remove complexity from advertising on Facebook. A Ben and Jerry's marketing executive is quoted in a promotional video saying, "We really don't have to worry about separate media." Accordingly the same brand post/story will thus appear in the "organic" feed, as a mobile ad or as a conventional Facebook Ad on the right rail.
Also earlier this week, Twitter revealed it's very similar plan for mobile advertising.
Promoted Tweets will now show up in users' feeds in mobile. Initially only those advertisers you follow will be allowed to promote tweets in your feed. However, over time, the program will expand to allow all advertisers to reach non-followers as well.
These two parallel programs may help one another and speed adoption (or at least testing) of mobile marketing by brands (and to a lesser degree small businesses). The widely discussed danger for both, however, is that mobile consumer-users might potentially feel spammed by brands and advertisers that are inept or too aggressive. This danger is greater for Facebook than Twitter.
Another potential issue is how all these new mobile impressions will impact mobile ad pricing. There's already an imbalance of supply and demand: too many mobile impressions chasing too few advertisers today. More competition generally equals lower prices for buyers. AdAge discusses that question in an article published on Monday.
The suggestion in the article is that like online, where social networks flooded the market with cheap display impressions, there's a similar potential risk in mobile. Prices are already coming down because there's too much supply: "That ad kitty will stretch even thinner when Facebook starts selling mobile advertising against its more than 425 million monthly active mobile users," speculated AdAge.
Facebook and Twitter ads are unique to those platforms, however. In effect these new mobile ads won't simply be fungible new impressions, interchangeable with those of a dozen other mobile networks. Facebook and Twitter compete more directly with each other than with Jumptap or Millennial or InMobi.
However it's quite possible that brands could choose to invest in Twitter and Facebook and divert resources (money, time, attention) away from other mobile display networks. Might that compel the other networks to lower prices to compete? Apple lowered prices considerably in response to competitive pressure on iAd from AdMob and others.
While the entry of Twitter and Facebook into mobile could push prices down for other ad networks, that outcome is not guaranteed of course. But we should know soon enough.