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As World Awaits iPhone 5 Google Reminds Everyone It's the Market Leader

Apple's rivals have been trying to get out in front of the iPhone 5 and the announcement today. Nokia held its Lumia/Windows Phone 8 event last week. Motorola (Google) announced a number of new Android handsets and, of course, Amazon had its big Kindle Fire press conference last week as well. All of these anticipated the iPhone 5 announcement today and tried to preempt it to some degree.

Last night Google's Hugo Barra casually posted some stats on his Google+ page: "Today is a big day for Android... 500 million devices activated globally, and over 1.3 million added every single day."

Android is the dominant smartphone platform in the world -- in case you forgot. And Google wanted to get that stat out there and inserted into the blizzard of articles that will be published today about Apple and the iPhone: " . . . but Android is the market leader with 500 million devices activated globally." 

The iPhone 5, as I said on my personal blog Screenwerk," is a critical release for Apple because Android phones have caught up or in some cases surpassed the device (i.e., LTE support, NFC). The new iPhone today must offer a larger screen and LTE support at a minimum to maintain consumer interest. 

An unintended leak on the Apple site indicates that there will in fact be LTE support. We'll see what else in less than a half hour.  

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

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

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

Here are some screenshots of the new YouTube app: 

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

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

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

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

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

Nielsen: 58% of Teens Own Smartphones

Ahead of tomorrow's iPhone 5 launch -- perhaps they'll call it the "iPhone Cinq" -- there's lots of smartphone data flying around. Today Pew released some new demographic data about smartphone ownership (penetration higher among younger and more affluent users). And yesterday Nielsen discussed smartphone adoption among younger users:

Overall, young adults are leading the growth in smartphone ownership in the U.S., with 74 percent of 25-34 year olds now owning smartphones, up from 59 percent in July 2011. Interestingly, teenagers between 13 and 17 years old demonstrated the most dramatic increases in smartphone adoption, with the majority of American teens (58%) owning a smartphone, compared to roughly a third (36%) of teens saying they owned a smartphone just a year ago.

According to the US Census Bureau there are roughly 21 million teens in the US (according to 2008 data). Pew surveys have shown that 88% of US adults own mobile phones. Pew says that 77% of teens have mobile phones and 23% have smartphones. Nielsen is saying the overall teen smartphone number is much higher: 58% 

If 23% of US teens have smartphones that translates into roughly 4.8 million people. The Nielsen 58% figure equals roughly 12.1 million teens who own smartphones. If we average the two sets of numbers it comes out to 8.5 million teens with smartphones approximately. 

Using population data and the Pew survey figures, that would mean roughly 120 (or so) million US adults owned smartphones in the US today. Beyond this we can add 5 - 10 million more for teens. That would mean today we're looking at something like 125 to 130 million smartphones in the US. 

Millennial Media: Smartphones Now 74% of Impressions on Network

Millennial Media is out with its quarterly device barometer: Mobile Mix. The report tracks the top devices and operating system share on its network. It's based on a different methodology (share of ad impressions) vs. Nielsen or comScore, which both rely on surveys.

It's not a totally "objective" view of the marketplace. But its helpful to identify and monitor trends on a directional basis. The three big trends identified in the document are the following:

  • Increasing percentage of smartphones on Millennial's network (now 74%) vs. 50%+ for the overall mobile market
  • iOS growth and slight Windows Phone growth vs. other operating systems. It appears the iPhone grew at Android's expense, while Windows grew at RIM and "other's" expense
  • The document also shows the growth of "connected devices" (tablets)

Here are the charts that illustrate the above: 

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In the future the tablet market will be a contest between Apple, Google and Amazon. Samsung, unless it decides to price things much more aggressively, will be marginalized -- at least in the US.

 

Amazon's Policy Reversal on Kindle Fire Ads a Smart Move

Last week I wrote Ads to Pollute Lockscreens of Kindle Tablets:

Yesterday it was discovered that all the new Kindle tablet Fire/HD models will feature these Special-Offer ads on the lockscreen. And, according to a statement provided by Amazon to CNET, there's no way to get rid of them. This controversy undermines what was otherwise a very successful launch.

The fact that Amazon won't allow consumers to "buy out" of the ad clutter is terrible and will turn off many people (though not all). It's a horrible policy. It's also one of the factors, it now appears, that allowed Amazon to so aggressively price these devices -- and undercut iPad's pricing so significantly. 

Over the weekend, based on the outcry it appears, Amazon did the right thing and reversed itself. The company will now allow users to pay a one-time fee of $15 to opt-out of lockscreen ads and Special Offers. Amazon provided the following statement to media outlets in announcing the reversal: 

With Kindle Fire HD there will be a special offers opt-out option for $15. We know from our Kindle reader line that customers love our special offers and very few people choose to opt out. We're happy to offer customers the choice.

It's not clear at all that Amazon customers actually "love" Special Offers or whether they simply tolerate or ignore them. However the irony here is that the availability of the opt-out option will likely mean that more people will feel comfortable with the ads, knowing that they can turn them off.

Otherwise the other "option" would have been to not buy one of these devices. Amazon has taken that objection away. 

Ads to Pollute Lockscreens of Kindle Tablets

According to multiple surveys (including one recently run by Opus Research) majorities of people are happy to endure advertising in exchange for free services. Ad-supported smartphone apps, for example, are much more popular than their ad-free paid counterparts.

Yesterday Amazon introduced an aggressive new array of new Kindle tablets. The specs -- and especially the pricing -- are impressive. It turns out, however, that there's a catch: ads ("Special Offers"). 

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Previously Amazon had subsidized the cost of its lowest-priced Kindle eReader with Special Offers on the lockscreen. If it turned out that you didn't like the ads, you could "buy out" of them.

Yesterday it was discovered that all the new Kindle tablet Fire/HD models will feature these Special-Offer ads on the lockscreen. And, according to a statement provided by Amazon to CNET, there's no way to get rid of them. This controversy undermines what was otherwise a very successful launch.

The fact that Amazon won't allow consumers to "buy out" of the ad clutter is terrible and will turn off many people (though not all). It's a horrible policy. It's also one of the factors, it now appears, that allowed Amazon to so aggressively price these devices -- and undercut iPad's pricing so significantly. 

Let's hope that Amazon is shamed by negative PR into allowing consumers to opt-out or buy out of receiving these ads. Alternatively let's hope that the marketplace speaks and that consumers stay away. 

Competing Narratives: Mobile Ads Outperform PC vs. Mobile Clicks Are Bogus

There are now competing mobile advertising narratives that directly contradict each other. First, there's the widely supported meme: "mobile ads perform better than PC." Accordingly, there are numerous data sources showing higher CTRs and conversions from mobile vs. PC-based advertising.

Most recently data from the xAd-Telmetrics-Nielsen “Mobile Path to Purchase” study documented very high conversion rates in several verticals -- around 50% or higher in restaurants, autos and travel as the graphic below illustrates. 

Source: xAd-Telmetrics-Nielsen (8/12), n=1,500 US adults

On the other hand there are now a few surveys or studies that argue a substantial number of mobile ad clicks are unintended. For example, in January 2011, Harris Interactive (on behalf of Pontiflex) issued survey findings arguing that nearly 50% of mobile clicks were unintended: "47% of mobile app users say they click/tap on mobile ads more often by mistake than they do on purpose." 

Earlier this week came in some ways a more startling claim, based on an analysis of 6 million mobile ad clicks across 10 mobile ad networks by app marketing company Trademob. The company argued 40% of mobile ad clicks were entirely wasted: either accidental or fraudulent. The company's methodology and conclusions are detailed in a white paper (via registration).

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Source: Trademob (9/12); based on analysis of 6 million mobile ad clicks

If one assumes that the Pontiflex survey and Trademob analysis can be generalized, together they argue that nearly half of all mobile ad clicks are completely wasted or worse. Trademob doesn't really discuss the other 60% of clicks that are supposedly not accidental or fraudulent. Are those converting? Are they not wasted?

A 60% conversion rate would be dramatically better than anything happening online. I'm sure, however, the remaining 60% of clicks do not represent conversions in the Trademob study. They're simply presented as "regular" clicks, with no data about conversions. 

How is it possible to reconcile the two competing narratives and sets of data? The weight of data support the idea that mobile clicks and conversions are greater than on the PC. However that might still be reconciled with the mistaken/accidental CTR argument.

The real problem with the Trademob study, however, is that it may reinforce complacency.

Most marketers are well behind consumers when it comes to mobile adoption and usage. Some CMO reading coverage of the Trademob study might well conclude that -- just as he suspected -- mobile isn't quite "ready for prime time." That would create further delay and discourage mobile investment, resulting in lost opportunity for the company. 

There are myriad ways to control for and protect against false or accidental clicks. Advertisers can protect themselves by paying on a CPA or PPCall basis for mobile leads or conversions. But they can also do call tracking and use other methods to minimize false clicks. 

Regardless, it would be a serious mistake to take this Trademob survey as definitive or reflective of all mobile ad campaigns. 

ComScore: iPhone Now 33% of US Smartphone Market

With Android increasing its dominance around the globe, the US market seems to be something of an anomaly. Measurement firm comScore reported this morning that Apple has gained share in the US.

The iPhone now represents one out of every three smartphones in the market. Android also grew its share slightly, while Windows has continued to lose share according to comScore: 

  • Google: 52.2%
  • Apple: 33.4%
  • RIM: 9.5%
  • Microsoft: 3.6%
  • Symbian: 0.8%

The firm also said that 114 million US adults own smartphones, representing just under 49% of the mobile subscriber population (using a base of 234 million). Nielsen, Pew, Flurry Analytics and others have found, however, that more than 50% of US adults own smartphones.

Flurry asserted recently that more than 70% of US adult mobile subscribers owned smartphones.

EU Clears UK Mobile Payments JV 'Project Oscar'

EU regulators have reportedly cleared the mobile payments joint venture between the three dominant UK carriers (Everything Everywhere [T-Mobile + Orange], Vodafone and O2) of competition concerns. The smallest of the UK carriers, Hutchison Whampoa-owned 3, had complained about the competitive implications of the service. 

The joint venture, called Project Oscar, was supposed to be ready in time for the Olympics. The project had been in a bit of a state of limbo pending the European Commission’s approval, which has now been "unconditionally" granted. 

In many respects Project Oscar is a mirror of the US's ISIS (AT&T, T-Mobile and Verizon). Unlike ISIS, however, Oscar doesn't preclude any of the UK carriers from developing their own mobile payments systems. ISIS by contrast is intended to be a consumer brand, which will prove challenging to build, and would compete with any individual carrier payment initiatives. 

Like ISIS Oscar will use payment cards and not carrier billing. It will be accessible to third party financial institutions and retailers and is intended to work with all credit, debit and loyalty cards. Oscar will provide a payments infrastructure that can then be utizilized by the individual carriers involved (and potentially others) to create their own mobile payments services. 

Oscar and the services it spawns will also compete with Google Wallet (eventually) and PayPal, among others. 

Will Amazon Lower Prices (Again) With Kindle Fire 2?

Amazon is holding an event next Thursday to introduce a second-generation Kindle Fire as well as a new 10-inch version in all likelihood. The company is also expected to "refresh" and upgrade its lower-end Kindles as well. There's considerable speculation about all this going on right now.

I'm less interested in talking about device "specs" (the subject of most of the current discussion) than pricing. 

The current Kindle Fire succeeded -- caught fire if you will -- because of the price ($199) and the association with Amazon. Since that time the device has "sold out." In reality sales have slowed dramatically in recent months. Objectively Kindle Fire is quite a mediocre tablet for use cases other than consuming Amazon content. 

Indeed, Google's Nexus 7 emerged a couple of months ago to dramatically improve upon Kindle Fire. Nexus 7 is a much better 7-inch tablet at the same $199 price point as Kindle Fire. In a head-to-head match up there's no question of which tablet to buy: Google Nexus 7.

Apple is also expected to introduce a 7-inch iPad Mini next month, along with a new iPhone. The two launches will be separate in all likelihood. The iPad Mini should also be quite appealing to those interested in a smaller tablet. And it will probably be priced competitively (around $200ish). The 7-inch tablet category will thus become a battle between Apple, Google/ASUS and Amazon. Samsung may work its way in with new devices, however.

In terms of features and usability, it's extremely unlikely that the Kindle Fire 2.0 will trump either the Nexus 7 or the iPad Mini. Beyond Amazon's content ecosystem it's chief weapon is pricing -- perhaps its only real weapon now. And in an effort to gain some advantage vs. Google and Apple might we see Amazon lower the price of the new 7-inch Kindle Fire and introduce a cheaper 10-inch tablet (vs. iPad)? 

It's quite possible -- even probable. I wouldn't be surprised if Amazon priced the Kindle Fire 2 at $179 and offered a more expensive model with more memory. A 10-inch model might start at just under $400 (to beat the iPad 2 price). Again, price was the main driver of Kindle Fire sales. 

Amazon either breaks even or loses money on each Kindle Fire sold but then makes money on content sales and e-commerce thereafter. Accordingly it can afford to be aggressive on pricing. But it can't go much lower than it already has with Kindle Fire. 

In any case Kindle Fire 2 is going to be a much tougher sell in a more crowded and competitive market. 

Update: CNET is reporting that there won't be a 10-inch Kindle Fire to directly challenge the iPad but two 7-inch versions instead. 

Samsung, Windows Phone 8 and Tepid Consumer Demand

Whether or not responding to the recent Apple patent victory in US federal district court, Samsung has said it will be first out of the gate with a Windows Phone 8 device. The new device, announced yesterday, is called "Ativ S" and will be out before Nokia's first Windows Phone 8 handset. Indeed, Samsung will be formidable competition for Nokia with the new OS. 

Meanwhile an analyst at Bernstein Research argues that US consumers simply aren't interested in the Microsoft mobile OS: 

“Our research shows that for many years, poor sales of Windows-based phones stem from a deep and stable lack of consumer interest for the product. Despite numerous and repeated efforts of manufacturers (Nokia, but also Samsung and HTC) and Operators to develop an alternative to Android and Apple based on Windows, and despite the launch of numerous phones based on Windows with strong features, reviews and marketing support, the operating system remains cornered to less than 5% market share in smartphones.”

Currently Windows Phones' market share in the US is 3.8% according to the most recent comScore figures

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A consumer survey conducted by Opus Research in April indicated something quite similar in terms of demand for Windows Phones:

My next mobile phone will likely be . . .

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Source: Opus Research, April 2012 (n=1,504)

These responses won't necessarily translate into sales figures -- Android is obviously leading the market -- however they do indicate a level of interest or demand for the various handsets and operating systems.

Both Microsoft and Nokia have high expectations for Windows Phone 8. It's not clear what will happen if consumer demand fails to materialize. 

Time Spent with Mobile Exceeds 10% Yet MMA Calls for Only 7% of Ad Budgets

The Mobile Marketing Association has conducted a study about mobile ROI whose chief recommendation appears to be that advertisers should spend 7% of their ad budgets on mobile. Currently average spending on mobile advertising is about 1% of budgets.

That's all fine, except that time spent with mobile (if that's the guide) is already in excess of 10% of all time spent with media. Perhaps the MMA didn't want to be too aggressive and call for 10% of ad budgets. 

The following chart from Mary Meeker indicates a 1% ad spent and 10% time spent with mobile media.

The next chart is from Flurry Analytics and relies on some of the same Mary Meeker data, but also Flurry's own app analytics and other third party data. It argues that consumers now spend 23% of their media time with mobile. 

Finally ad network InMobi argues that 27% of daily consumer media time is spent with mobile -- more than TV (which is doubtful). 

Accordingly, if one accepts these data as accurate, 10% is the floor and 27% the ceiling in terms of media time spent with mobile. According to most sources mobile media time now surpasses everything else except TV (and the PC Internet in some studies).

In that context it appears that asking for 7% of ad budgets seems like a very timid request. 

Millennial: Tickets Third Most Popular M-Commerce Category

Millennial Media is out with another vertical report. Last time it was travel; this morning the ad network released a report on Entertainment. It was generated in conjunction with comScore. From my perspective, there were two pieces of interesting data in the document -- although the case studies in the report are also interesting.

One was about mobile purchase categories. The other was Millennial's "post click" campaign data for the Entertainment category. This data reflects the objectives advertisers are trying to accomplish with their campaigns. 

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The report said that "convenience" was the chief motivation for buying something on a mobile device (vs. online or in-person). Roughly two-thirds (63%) of smartphone owners cited this as the rationale for m-commerce. Convenience (vs. price) is typically the major reason for buying online as well.

Between 20% and 35% of US smartphone owners have ever made a mobile purchase according to several studies released in 2011 and 2012. Paralleling the data in the chart above, digital content (books, movies, apps, music) leads m-commerce overall. However we will see a broader range of e-commerce transfer over to mobile over time. 

The problem of entering credit card information is a major barrier to mobile commerce today. Those vendors that have stored credit cards (in other words direct relationships with consumers [i.e., Amazon]) will see much more volume than those asking consumers to enter 16 digits. A majority of mobile e-commerce efforts will need to find some third party solution (e.g., working with PayPal, Amazon or solutions such as Card.io) if they want to generate sales from smartphones. Tablets are a different matter; entering credit card information is not as much of a barrier on those devices. 

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The chart above reflects campaign objectives, comparing entertainment companies (including movie producers and theaters) with Millennial's overall customer base. As might be expected, driving to a video view (e.g., movie preview) is the most common campaign objective. 

Video (assuming a decent WiFi or network connection) is a very effective ad format in mobile. This is especially true for movie previews, which are regarded as content and not ads by most consumers. 

In addition to video views, the other two most common campaign objectives were: driving to a social media page/site and "m-commerce" (buying tickets). Those consumers that have movie ticket apps installed (e.g., Fandango), with a stored credit card, are going to be increasingly likely to buy tickets via smartphones over other methods. 

Smartphones Now Dominant, Growth Accelerating

In the US smartphone penetration crossed the 50% threshold earlier this year. And two new reports show that smartphone growth and dominance are accelerating.

The first is a forecast from IHS iSuppli, which projected that 54% of mobile handset shipments in 2013 would be smartphones. This would mark the first time that smartphone shipments will dominate feature phones. It wasn't supposed to happen for three more years. 

Part of the popularity of smartphones is driven by "culture," as well as the convenience and value of having a smartphone. But smartphone adoption is also being driven by price. Subsidized smartphone pricing in the US often makes the devices as cheap to buy ($49 - $99) as feature phones.  

Separately, Flurry Analytics said in a recent report that 78% of US mobile phone users now own smartphones (iOS or Android devices).

 

This caught my attention because this figure (78%) is obviously much larger than the Nielsen and Pew numbers that show 50%+ smartphone adoption. Pew, comScore and Nielsen extrapolate from survey samples to calculate the total number of smartphones in the US market.

I exchanged emails with Flurry seeking clarification of this 78% figure and what it represented. Flurry confirmed my interpretation was correct.

The company is saying that 78% of US adults with active mobile devices are on iOS or Android devices. Flurry says that its data are based on actual usage and its population of device owners globally is in the hundreds of millions. 

Flurry now says there are 165 million active smartphones in the US today. That compares to a PC Internet population of roughly 220 million. 

Survey: Mobile Payments Face Uphill Battle

My view about mobile payments is the following: once people have a positive concrete experience of using mobile payments they'll be sold, so to speak. Most people haven't had those experiences yet. Accordingly there's skepticism or indifference about mobile payments in the US. This, despite more than 20 companies scrambling in a kind of land grab that anticipates a glorious future right around the corner.

Several consumer surveys in the past 12 months indicate Americans are concerned about security and privacy or don't see the need for mobile payments: "see no benefit," "easier to pay with cash or credit cards" are some of the obstacles facing mobile payments adoption. Roughly 70%-75% of survey respondents say they aren't interested.

I'm the first to point out that attitudes and behavior are often two different things. The survey data are surprisingly consistent. Also consistent are findings that consumers in the 25-55 age range are typically the most interested in mobile payments. More educated, urban and usually more affluent consumers are also typically more interested.

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We just completed a survey (n=1,501 US adults), which asked whether people were interested in using their phones as mobile wallets, instead of cash or credit cards. The results are very consistent with other surveys from UC Berkeley Law School, the US Federal Reserve and others.

About 29% of respondents (a decent number) say they have varying degrees of interest. Those who are most enthusiastic, however, are a tiny minority (6.8%).

Again, as people start to have real experiences of mobile payments, I believe these numbers will start to rise. But these findings reinforce the notion that there's a mountain to climb. Providers must educate consumers, reassure them on security/privacy and offer them tangible benefits for trying and using mobile payments systems.

An exception to all this is Square and its various imitators (PayPal Here, Intuit's GoPayment, PayAnywhere, etc.). In most of these scenarios the consumer isn't doing anything new; there's a familiar card swipe. The change is all on the merchant side. However as consumers develop familiarity with and start to trust these providers that becomes the basis for trying some of their "more exotic" payment services, where there is a behavior change (e.g., Pay with Square, PayPal Mobile apps).

While we believe that the mainstreaming of mobile payments is "inevitable," the timing and the specific services/platforms that will mainstream them have very much yet to be determined.

Study: 19% Said Retailers Without Mobile App 'Old Fashioned'

Apigee released new survey findings about mobile attitudes and usage in anticipation of Holiday 2012 shopping. The survey polled 2,200 US adults this month and was conducted by Harris.

It found that 57% of respondents "would consider" buying holiday gifts on their mobile devices. Currently the number of Americans who've made an "m-commerce" purchase stands at about 35%, according to 2012 survey data from IPSOS.

In order, Apigee survey found the following to be the most likely m-commerce categories:

  • Books – 32%
  • Electronics – 31%
  • Gift cards – 27%
  • DVDs/Blu-ray discs – 26%
  • Clothing – 24%
  • Toys – 20% 

The survey didn't ask about specific retailers but all of the above categories (maybe clothing excepted) are popular on Amazon, which continues to be the single biggest beneficiary of mobile commerce (perhaps after Apple iTunes).  

Apigee also asked consumers about the perceived benefits of using mobile (apps):

  • Browsing for deals wherever you are – 50%
  • Performing price comparisons inside a store – 48%
  • Using a mobile device to find a retail store – 40%
  • Redeeming electronic coupons – 38%
  • Secretly shopping without a spouse/significant other knowing – 25%
  • Buying embarrassing or personal items without using a work computer – 14%
  • Sneaking shopping time in at work – 12%

Just over half of the survey respondents had a negative reaction to the idea that a retailer wouldn't have a mobile presence or offer a mobile app. Most damning, 19% said "it makes me think the retailer is old-fashioned" and 7% said it might hurt their loyalty to the store. Younger users were mostly likely to have a negative attitude toward retailers without mobile apps.

Clearly e-commerce isn't the only reason to offer a mobile site or mobile app. There are many other reasons, including getting shoppers into stores, CRM and providing better customer service in the store (or overall). 

I wrote earlier this week about a GroupM survey that offers some very interesting insights about mobile showrooming and in-store shopping. That study suggested ways that retailers can integrate mobile into a larger strategy to lure and keep shoppers in stores and combat the showrooming challenge. 

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

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

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

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

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

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

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

Google Introduces Ad Skipping for Mobile YouTube Video

On the YouTube PC site users are permitted to skip pre-roll ads after 5 seconds. This is a brilliant compromise between the need to better monetize YouTube video streams and Google's general commitment to the user experience and performance-based ads. 

If users don't like the ads they skip; if they're interested they watch. The advertiser only pays for those who watch the ad after the initial 5 seconds.

It's a great system and Google has now extended it to mobile YouTube video. Google argues the approach is better for everyone and advertisers get much more value by allowing consumers to self-select the ads they watch: 

With TrueView, we’ve developed a model where user engagement matters -- people can skip ads they aren’t interested in after five seconds. Giving viewers choice over ads they watch has led to a better, more engaged viewing experience, benefiting the entire YouTube community of users, advertisers, and content creators.

The argument is persuasive to me. It also forces creative types in agencies to really work to make ads more interesting and entertaining. The epitome of that is the previous Old Spice campaign ("The man your man could smell like"), which was a huge "viral" success. 

In mobile, ads are either relevant, entertaining or their opposites. Forcing a broadcast, "interruption" model on mobile users doesn't make much sense. You'll just annoy or alienate your audience. Hopefully other mobile video ad providers will follow Google's lead; however I doubt it.  

Study: Most Showroomers Will Abandon Stores if Price Difference Is 5% Less Online

Electronics retailer Best Buy just reported this week that Q2 profits dropped by 90%. That's partly attributed to the weak economy and partly to the phenomenon of "showrooming," where shoppers look at products in stores and buy them later online. That phenomenon has always existed but it has been "exacerbated" by the rise of smartphones and in-store price comparisons. 

As more people buy and carry smartphones they're more inclined to use them in traditional retail environments.  

Consumer surveys have indicated anywhere from 50% to 80% (or more) of US mobile consumers now use their phones in stores for product and price information, as well as comparison shopping. Amazon and eBay have been big beneficiaries of this trend, but especially Amazon. Traditional retailers have in some cases suffered and in a few instances (i.e., Best Buy) showrooming has become something of a crisis.

Agency GroupM recently released some survey findings and analysis addressing the phenomenon of showrooming. Roughly 1,000 US adults were surveyed and asked about shopping scenarios and attitudes. 

As one might expect, the larger the price difference between in-store items and online prices the more likely buyers said they would be to abandon the store. But somewhat surprisingly GroupM found that even a 2.5% discount could have a significant impact on store abandonment: 45% of survey respondents reported they would leave the store. If prices were 5% lower online, 60% of respondents said they would leave. 

There is a difference between self-reported survey data and actual behavior. But the GroupM findings reflect the new consumer mindset.

GroupM identified the profile of a likely "showroomer": younger, female, heavy online shopper and lower income. It also found at the other end that 10% of respondents (loyal to the retailer) wouldn't leave the store regardless of online price discounts. However there's a "marginal showrooming" group that is somewhat price sensitive but can be influenced to "stay in the store."

Factors that GroupM identified to help retailers combat showrooming included the following: 

  • Good service and in-store sales help
  • Channel agnosticism, so if an item isn't in the store it can be ordered online and shipped via the same retailer
  • Retailer apps that offer useful information, including inventory 
  • In-store loyalty programs
  • Better online marketing to create additional incentives to come into stores (e.g., deals)
  • Price awareness that helps ensures prices remain within striking distance of online retailers which may have lower costs  

Providing good in-store service, which extends to retailer apps, is a key variable here and one that might cause retail executives to balk. They have generally been de-skilling their workforces for years. However they'll suffer the consequences of poor service and indifferent consumers if they don't do something.

Beyond this, a multi-faceted approach is called for, one that implies a great deal more sophistication than what's on display for most traditional retailers today. 

PayPal Does Distribution Deal with Discover for Massive Reach

PayPal today announced a deal with Discover Card that will potentially bring its mobile payments services to more business locations than any of its rivals, including Square. The potential reach is reportedly seven million merchants.

The new in-store payments capability should be live by Q2 of next year. Consumers will be able to pay by swiping a PayPal card, that in turn backs onto a credit card or checking account or PayPal account balance. In that instance PayPal is no different than using a conventional credit or debit card. However for some subset of merchants (but still perhaps millions) consumers will be able to enter a mobile phone number and a security PIN on the retailer POS terminal (as in the Home Depot implementation). 

That mobile + PIN scenario is potentially faster and more secure than a card swipe. Today there are roughly 16 major retailers that have implemented PayPal in stores. However number is expected to grow by the end of the year in advance of the Discover rollout. 

Yet PayPal/eBay will need to educate and aggressively market the service to consumers if it hopes to drive adoption. There will also need to be incentives and rewards to get consumers to try the system. Even though the mobile + PIN approach is more secure than a card swipe consumers often express security concerns about mobile payments. There's a perception they're less secure.  

The deal with Discover now vaults PayPal back to a leadership position in mobile payments. However mobile payments isn't a zero-sum game. There won't be a single winner. Several major competitors can operate and succeed. Beyond PayPal and Square the question is: who will be the other winners?

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