Point Solutions Like Parking Apps Will Drive Mobile Payments Adoption

Yesterday I spoke with yet another company in the mobile payments space. It faces challenges of awareness and adoption, like most competitors in this segment. Also yesterday Google Wallet upgraded to enable any credit or debit card to be used in conjunction with the app. The problem is there are only six phones in the US, operating on the Sprint network, that are compatible with Google Wallet. Verizon, AT&T and T-Mobile either don't have Google Wallet-enabled phones or aren't permitting its use right now (i.e., Verizon).

Today TechCrunch reports on new funding and a new CEO for QuickPay, a mobile parking app. In addition to QuickPay, I have two other parking apps on my iPhone: Parkmobile and PayByPhone. I love these apps because they enable me to pay for parking very efficiently, without relying on coins or even a credit card (which was a great innovation at parking meters until mobile apps came along). With these apps I can also extend time remotely, which means I don't physically have to go back to the meter. 

The superiority of the experience afforded by these apps vs. the old way of paying for parking is dramatic. This is the kind of scenario (point solutions with specific use cases) that will drive consumer adoption of "mobile payments," which won't be seen by consumers as "mobile payments" (with all the corresponding security fears) but simply as a great convenience instead.  

Once consumers have become accustomed to using mobile payments point solutions such as parking apps, they'll be much more comfortable with mobile payments generally and embrace mobile wallets such as Google Wallet -- provided there's merchant adoption and general availability. 

Travel Goes from #9 to #3 in Mobile Ad Spending in a Year

Millennial Media a couple of days ago released its latest SMART report. This one focuses on the travel vertical (like the one in July 2011). According to the data travel is now the third largest advertiser category on the Millennial network.

In Q1 2011 travel was ninth in terms of advertiser spend, while retail & restaurants was number one. The latter has now slipped to number four.

In terms of the composition of advertisers in the vertical (Chart A below), "booking agents and sites" remains the largest single sub-category. However it now represents a larger percentage of spend than last year (47% in 2011 vs. 57% in 2012). The remainder of the sub-categories are largely the same, although there have been some shifts in the overall share of spend. 

As mentioned, Chart A below reflects the advertiser composition of the travel category on Millennial's network. Chart B is the same data from one year ago.

Finally the actions that travel advertisers were seeking to drive consist mostly of mobile app downloads. That in turn suggests mobile booking and e-commerce or loyalty/CRM functions. Surprisingly, relatively few of advertisers are seeking drive telephone calls, which is a major way that travel companies still do business. 

Mobile to Be 25% of E-Commerce in Five Years? Not So Fast

ABI Research is projecting that mobile devices will account for just under one quarter (24.4%) of all e-commerce by 2017. If "mobile" is defined to include tablets, then maybe. But if we're talking about smartphones largely or exclusively there's a long way to go before that happens.

Despite the fact that the data now show a majority of smartphone users have made purchases on their devices, most people don't routinely engage in e-commerce via smartphones. Security fears and the problem of entering credit card numbers are major barriers to so-called "m-commerce." Tablets by contrast are driving lots of purchase behavior. 

A majority of smartphone owners (80% to 90%) use their devices in stores to check prices and get reviews and product information. However most don't go on to buy -- unless it's through eBay or Amazon. 

As a general matter, if people are going to buy "online," they later go to their PCs and make purchases. Nielsen data, compiled by eMarketer, show that a minority of users (5% of smartphone owners) are buying things directly through mobile devices -- in this case in response to a mobile ad. But these data are also reflective of the general fact that most people don't buy on smartphones. 

According to Nielsen the top mobile "shopping" apps are the following

1. eBay Mobile
2. Amazon Mobile
3. Groupon
4. ShopKick

Amazon and eBay in particular have invested hugely in mobile and it has paid off -- literally. Amazon in particular has your credit card on file and can enable a mobile transaction with a single click.

By contrast, most e-commerce sellers lag far behind these leaders. And to drive the kind of shopping volume that ABI is projecting the "credit card problem" needs to be solved. Large retailers with whom shoppers have direct relationships (e.g., Target, Macys, Wal-Mart) can store credit cards on file and remove friction accordingly. 

However "no-name" e-commerce sellers are not going to be able to participate in smartphone-based commerce unless they address the payments problem, which could be via PayPal or using a solution such as the one offered by Card.io. Indeed, it's far from clear that the ABI prediction will come to pass.

We're probably looking at a situation for the medium term foreseeable future where smartphones are aggressively used by consumers for research and price comparisons but generally not used for conventional e-commerce transactions except in select situations such as I've described. 

Microsoft's Metro UI an Opportunity and an Obstacle

Microsoft did a nice job in reinventing its mobile OS with the advent of Windows Phones. There are ways in which the "Metro UI" is beautiful and strikingly different than iOS and Android. However the UI also represents the greatest barrier to adoption of Windows Phones.

Until people have a chance to use and familiarize themselves with Windows Phones they won't buy them because of the perceived unfamiliarity. Agressive discounting in the US may convince some to do so however. But as long as there are relatively few Windows Phones "out in the world" the impulse to buy them will also be limited.

It's Microsoft and Nokia's version of the "chicken and egg problem." Targeting new smartphone owners is probably the best strategy to gain share for the companies in the near term. Once they have some users they can upsell them to more expensive and high-powered phones. 

Among developers however, Appcelerator has discovered that there's an increasing appreciation for the Metro UI. In a survey of more than 2,000 mobile developers, 44% of them characterized the metro UI as "different and beautiful" compared with iOS and Android. 

That 44% hasn't yet translated into a belief that Windows Phones will succeed -- even in the enterprise, where Microsoft has had historical advantages over competitors. Developers in this survey do think that BlackBerry is essentially dead in the enterprise (which would mean death for the company overall) and thus by default that Windows will be the "third ecosystem." 

Speaking purely for myself, the Windows Phone homescreen is a barrier to adoption. While the "live tiles" are supposed to facilitate quick access to content and enable us to "get back to our lives" I find them awkward and off-putting. I think the modifications of Windows Phone 8 make it worse.

The "inside" of Windows Phone is much better and more pleasing. Regardless, I think the outlook for Windows Phones (and by extension Nokia) remains very mixed at best. Unless or until Microsoft and Nokia can get these phones in people's hands they'll have trouble winning share.

US Smartphone Ownership Now 55%, 'Second Screen' Phenomenon Nearing 90%

According to Nielsen's latest data, 55% of US mobile phone owners now have smartphone phones. Previously comScore reported that fully half of feature phone owners buying new phones were upgrading to smartphones (a majority to Android devices). Nielsen says that two-thirds of new mobile phone buyers are opting for smartphones. It's likely therefore that smartphone ownership will reach at least 60% in the US by the end of Q4. 

Data reflect that the overwhelming majority of smartphone owners access the mobile Internet. Accordingly, smartphone penetration is generally equivalent to mobile Internet penetration. 

The smartphone audience is creeping closer to PC audience levels. By the end of 2012, if smartphone penetration reaches 60%, there will be nearly 150 million users in the US. Nielsen says that mobile audience is 237 million subscribers, while comScore puts it at 234 million. These figures are probably slightly low. A better "base" is closer to 250 million, although CTIA says there are more than 300 million wireless subscriptions in the US (indicating some level of duplication). 

According to Nielsen, time with apps (vs. the mobile web) has increased from 72% to 81%. In other words, people are spending only 19% of their time on the mobile web. This flies in the face of the "cross platform" conventional wisdom which argues: build an HTML5 app instead of native apps because it will provide greater reach.

The amount of time consumed by the top 50 apps has apparently decreased, which means people are spending more time with a wider range of apps. 

Among the top 15 apps, 12 have a "social and/or local component." Straddling the categories are Twitter, Facebook and top photo-sharing site and social network Instagram (bought by Facebook). 

The Nielsen data also reveal the increasing degree to which smartphone and tablet owners now use these devices while watching conventional TV. Large majorities approaching 90% now use their mobile devices simultaneously according to Nielsen. I suspect these numbers are somewhat higher than actual usage, but the findings argue that TV advertisers must be conscious of these "second screens" when creating ad content.  

The data below report that people are doing various things on smartphones and tablets "during the program." However I suspect much of this activity amounts to ad avoidance. Meaningful minorities of people appear to be responding to TV ad content by doing searches or looking up product information. 

Finally, according to Q3 2011 Nielsen data, mobile ads are the least trusted form of advertising. Paradoxically, however, they tend to be more effective than other ad categories, especially PC advertising. Yet mobile ads have quite a way to go before they reach trust levels comparable to conventional media ads.

Mobile Ad Survey: Coupons Still King, Brands Mostly Missing the Boat

Mobile ad network HipCricket released its latest mobile advertising survey. The poll of 650 US mobile phone owners asked a range of questions about mobile advertising and device ownership. Among the survey respondents, 73% said they owned smartphones while 43% reported owning tablets.

These percentages are higher than US national averages, which are closer to 50% and 30% respectively. Among smartphone owners, the HipCricket survey was comprised of 43% iPhones, 38% Android handsets and 16% BlackBerry devices. 

The survey found that those with higher incomes were the most engaged with mobile advertising: 

• 55% of those who have clicked on a mobile advertisement have an annual income of more than $75,000.
• 29% of those who have clicked on a mobile advertisement have an income of more than $100,000.
• 45% of those with an income of more than $75,000 have made a purchase as the result of a mobile ad.

Younger users (25-34) were also more engaged with mobile ads than the overall group. Among this group, 70% "have made a purchase as a direct result of a mobile ad." In addition 48% of these users "think more positively about their favorite brands after interacting with them via their mobile device," which was "significantly more than any other age group."

Below are a selection of the charts from the survey. The first one indicates the most frequently encountered mobile ad categories. SMS ads come in at a surprising number two, just above ads in mobile apps:  

Just under a third of these users had redeemed a mobile coupon, although a substantial number hand "never engaged" with a mobile ad.

The principal reason survey respondents did not click on or otherwise engage with mobile ads was due to a lack of perceived "relevance." Interestingly there were also several security related fears associated with mobile ads (spam, source uncertainty). This is an education problem for the industry. 

Consistent with many past surveys, offers and coupons were a major incentive for consumers to respond to mobile ads. While many brands and agencies don't want mobile advertising to be "just about coupons," it's clear that offers drive engagement. 

HipCricket also found that most respondents' "favorite brands" were not advertising in mobile. This is clearly a missed opportunity for the brands. 

Finally, the survey found that a large majority of respondents had made a purchase after viewing a mobile ad. 

While self-reported data must always be "taken with a grain of salt," these survey findings reinforce a considerable body of other data in the market showing that for younger, more educated and more affluent users mobile is now a critical medium. Yet brands and major advertisers continue to miss out on a significant opportunity to reach these audiences through their failure to aggressively pursue mobile. 

Facebook Phone Smart or Destined to Fail?

Just like Amazon, Facebook is building a phone. This rumor has been around perhaps for two years but Bloomberg seems to confirm it. The hardware maker is said to be the struggling HTC. Previously HTC released the ChaCha (pictured at right), with a dedicated Facebook button. 

The ChaCha was a failure. Will a dedicated "Facebook phone" equally bomb? The chances are very good that it would see limited demand. 

From Facebook's perspective the logic of its own device is understandable: 

• Mobile is increasingly important to Facebook's future
• It doesn't control a mobile platform or OS
• By controlling the OS (or the presentation layer on top of the core Android OS) Facebook could do a great deal with apps and ads
• A mobile phone would allow for the integration and extension of its online app store into mobile 
• Facebook would have more mobile advertising options on its own mobile platform
• The company could integrate users' networks with the dialer, as well as doing interesting things with chat and mobile video

The problem is that iPhone and Android devices have dedicated Facebook apps. This will be sufficient for all but the most dedicated Facebook users.

The additional integrations and "cool things" that Facebook could do with its own version of Android won't be enough incentive for most people to buy the device. Younger users and first-time buyers making the switch from feature phones to smartphones might be enticed to buy such a device if the price were right. 

The other major issue is privacy and data-mining. I'm making a bunch of assumptions when I say that a Facebook phone would likely collect even more data about individuals and their behavior (calls with contacts, sites visited, apps used, physical movements) than the existing mobile apps or online experience do. Thus concern that "your phone is watching/tracking you" would cause many to stay away and could even lead to regulatory investigations -- depending on how aggressive Facebook wanted to be with tracking/monitoring. 

However I know that Facebook is more cautious about privacy these days and so it might be more restrained. 

Although the rumors have been around for a long time, Facebook probably saw Amazon's success with Kindle and Kindle Fire and decided there was little or nothing to lose in making its own device. I just don't think many people will be very interested. 

Update: On the Facebook Q2 earnings call this afternoon CEO Mark Zuckerberg said that it didn't make a lot of sense for Facebook to create its own phone. But we'll see early next year. 

New Millennial Media Effort Tracks Ads to the Point of Sale

Auntie Anne’s Pretzels, the Coca-Cola Company, mobile ad network Millennial Media and Sparkfly have teamed up to test mobile advertising with tracking to the point of sale. Here's how it works:

1. Millennial Media will serve a targeted ad with a deal
2. Consumer clicks on the ad and is taken to a landing page with an offer to be redeemed at Auntie Anne’s (the landing page/offer has a unique code)
3. Consumer clicks “Redeem Now” or saves the offer (offers involve food items and Coke beverages)
4. In the Auntie Anne’s store consumer shows the 4-digit code to the person operating the register
5. Cashier enters the code into the system and the results are reported back to Auntie Anne's and Coke

Sparkfly is integrated with multiple POS systems and enables the purchase/redemption to be reported accordingly. That gets combined with Millennial’s analytics and the client gets a "cradle to grave" view of what happened with the campaign.

This methodolgy isn't new; offers with tracking codes have been used ocassionally in PC-based ad campaigns for some time (search, display). And tracking to the POS or check-in is going on now in mobile. But this trial may establish a model for others to emulate.

Millennial said in its press release that the campaign will run in Atlanta and will feature a range of different ads to test messaging and creative:

The mobile ad campaign will be running during the heart of Back-to-School shopping season. The mobile ad creative will test different combinations of Auntie Anne’s and Coke items for purchase at ten Atlanta-area Auntie Anne’s locations, and each ad unit will contain a unique redemption code from Sparkfly that enables the item-level tracking of individual consumer sales and the revenue impact of the promotion.

If this kind of methodology and approach becomes more standard in mobile campaigns it will not only give marketers a much better sense of "what works" they'll get more accurate data about conversions. Currently smartphone "conversions" are perceived to be much lower than tablets and PCs. That's generally because offline conversions aren't being tracked.

Widespread adoption of offline tracking might also usher in more CPA billing models as well. 

Tablets Market Share: Shipments vs. Activations Part Deux

In the wake of yesterday's Apple earnings release -- including that it sold 17 million iPads -- Strategy Analytics has taken a crack at estimating the Q2 global tablet market. As with Gartner and IDC, Strategy Analytics' calcluations are based on "shipments," which generally do not accurately reflect consumer sales in the marketplace. 

Strategy Analytics reported that a total of 24.9 million tablets were "shipped" in the second quarter. The resulting market share distribution was as follows: 

• Apple/iOS: 68.3% (vs. 62% in Q2 2011)
• Android: 29.3% (vs. 29.3%)  
• Microsoft/Windows: 1.2% (vs. 4%)
• Other: 1.2% (vs 4.7%)  

Despite the fact that the Kindle Fire has sold several million units and the Samsung Galaxy Tab (7-inch) before it has enjoyed some modest success, there's no chance that 30% of the tablet-owning public are using Android tablets. In a year or so we may have a different market, espeically given the fast start for the Nexus 7, but for now it's almost all still about the iPad. 

Good Technology's Q2 Data Report shows actual tablet activations in the enterprise market. (There's comparable empirical evidence on the consumer side as well.) What it reveals is that "iPads dominated tablet activations with 94.5 percent of total activations for the quarter (down from 97.3 percent in Q1 2012)." Comparatively, Android tablets accounted for 5.5% of activations, up from 2.7% in the previous quarter.

Good actually attributes Android enterprise tablet growth to the Samsung Galaxy Note, which is closer to a giant smartphone than a tablet. Regardless, we're likely to see Android start to genuinely gain tablet market share in the coming quarters -- driven by 7-inch devices if not across the board. 

Apple Has "Bad" Quarter but Sells 17 Million iPads

I was in a meeting when the Apple quarterly results came out this afternoon. As you've read, the company had revenue of $35 billion and profit of $8.8 billion. Still, this was below most analysts' expectations. Shares fell 5% in after-hours trading accordingly.

Quarterly device sales were as follows:

• iPhones: 26 million
• iPads: 17 million
• Macs: 4 million
• iPods: 6.8 million  

All the numbers came in under expectations except for the iPad; 17 million is a new quarterly record (vs 11.8 million last quarter). To date Apple has sold 83.8 million iPads on a global basis.

Sales of iPads will probably cross the 100 million threshold by the next earnings announcement. If not, then certainly by the end of the year.

CEO Tim Cook said that iPhone sales were likely depressed by talk of the forthcoming iPhone and consumers waiting for the new model.

EU Request for Google Mobile Changes May Go to Heart of Jelly Bean Innovations

One of the chief innovations Google is bringing to its "Jelly Bean" Android update involves local search and related functionality through Google Now. I've written fairly extensively already about these new features on my Screenwerk blog and Search Engine Land. In short, the new Android OS offers information "cards" (structured data) in response to a range of query types, especially local.

This is at once an evolution of the Google search experience for mobile devices and an effort to better compete with Apple's Siri. The information (search result) is more attractively presented and substitutes for the traditional page of search results, which still can be found by scrolling to the bottom. In addition to the image above right, below are a few example screenshots:

This new presentation is more consistent with what mobile users want ("answers") and offers a better experience overall than a conventional page of "blue links." The potential problem for Google is that this approach goes much further in the direction of substituting "Google's own content" for third party information, which is at the center of Europe's antitrust dispute with Google.

The issue of of Google showing its "own content" at the top of search results or in a preferential position is one of four "concerns" raised by the EU in May along with an invitation to settle. Because it goes to the heart of Google's control over the search results page and the company's ability to experiment and innovate with new content presentations, it's one of the most potentially challenging issues for Google to negotiate with the EU. 

Google has been trying to avoid a formal antitrust action by European regulators. But just as it was negotiating to settle the case, EU Competition Commissioner Joaquin Almunia, last week, asked Google to make "broad changes" to its mobile services. While it's not clear specifically what he is asking for, the path adopted by Jelly Bean -- which completely marginalizes third party content in a range of cases -- exacerbates one of the EU's fundamental "concerns" about Google.

Google is not going to want to be locked into any specific search results page in mobile. It will demand the ability to change the look and feel of the page and to innovate around the way it presents content. But to the extent any such innovations don't involve equal exposure of third party information the Europeans will probably have strong objections.

The next couple of weeks should determine whether Google will be able to negotiate a settlement or whether the company will face a formal antitrust action (and potentially billions in fines) from the EU. 

Marketers and Publishers Better Quickly Get Used to 7-Inch Tablets

The early success of Google's Nexus 7 tablet sales, on the heels of Kindle Fire's success in Q4 last year, establishes that the 7-inch tablet category is here to stay. Before Kindle Fire there were no successful Android tablets of any size. Kindle Fire's combination of rock-bottom pricing ($199) and Amazon content helped drive several million in unit sales. Now Google's new device is off to a blazing start.

The company just released its first TV commercial for the tablet (a very Apple-like spot). 

As I previously discussed, the new Google tablet (starting at $199) is vastly superior to Kindle Fire. It now puts enormous pressure on Amazon to pull a rabbit out of the hat with its "2.0" release. Yet Amazon wants to release "five or six" new mobile devices (mostly tablets) of various sizes.

Apple is rumored to be releasing a smaller, lower cost tablet later this year. This is a defensive move for to prevent the iPad from being under-cut by lower-priced, almost-as-good products. A 7-inch iPad (or larger iPod Touch), combined with the Nexus 7, will likely dampen Amazon mobile device sales unless quality is dramatically improved. 

Regardless, the rise of the 7-inch tablet category now creates additional options for consumers and additional complexity for advertisers and to some degree publishers. I suppose it's an argument for "responsive web design."

With Kindle Fire 2, Nexus 7 and the coming Apple 7-inch tablet (and the accompanying low price of these devices) we should see 7-inch tablets sell millions of units. Many people will now have smartphones, small tablets for travel and "on the go," and 10-inch tablets for home. PCs will largely be used for "work" or become secondary devices for most consumers. 

Indeed, the device market is moving much faster than publishers and marketers. Publisher content and ads generally don't look particularly good on the 7-inch form factor. Tiny mobile banners are barely noticeable and landing pages look awkward filling only part of the screen. In addition, right now there are only a few apps optimized for 7-inch tablets. Smartphone apps look OK but often appear stretched or out-of-proportion.

All this will have to change -- and relatively quickly.

The PC market, where the attention of most publishers and marketers is still largely concentrated, is not going to grow. And by Q1 of 2013 there will be millions more tablets in people's hands. In fact, I believe that there will be 100 million tablets in the US market much more quickly than anyone is predicting: by the end of 2014.

With sales driven by competitive prices many of these will be 7-inchers, which don't play well with ads and content designed for smaller smartphones and which can't render apps, content or ads created for 10-inch tablets.

The Coming Google-Apple Local Mobile Duopoly

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Outlook for Amazon Smartphone Murky

The rumor that Amazon was going to build a smartphone has been around for some time. However it has returned and gained new momentum of late, with the recent acquisition of 3-D mapping service UpNext. And an article last night from Bloomberg seems to confirm that Amazon will introduce a handset or handsets -- made by Foxconn, the company that makes the iPhone and iPad:

Foxconn International Holdings Ltd., the Chinese mobile- phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said

Let's now assume that Amazon is making a smartphone -- a Kindle smartphone -- what is the outlook for such a device? One would assume, like Kindle Fire, that it will be built on a highly customized version of Android, with the same type of Amazon content integration as seen on the Amazon tablet. 

The Kindle Fire was a sales success because of the strength of the Amazon brand and channel and the inexpensive price tag ($199). Amazon's brand won't be as much of a factor in the smartphone arena. An Amazon smartphone will have to compete on the strength of its features and on price. It's hard to imagine that Amazon will be able to compete on price because many Android phones are already very cheap or free (carrier subsidized).

Content (as in Amazon books, movies and music) also doesn't factor as significantly as a differentiator on smartphones it as potentially does on a 7-inch tablet. What matters on smartphones is the availability of apps. There's already a Kindle app for iPhone and Android; so users already have access to much of Amazon's content (though not cloud-based music or movies). And the Amazon app store is an incomplete version of Google Play (the Android market). In other words, the competitive advantages that helped drive Kindle Fire sales don't exist at all or won't exist to the same degree in a smartphone context. 

The only way I could see an Amazon smartphone succeeding vs. other Android phones or the iPhone is if the phone were absolutely top-of-the-line and Amazon were practically giving it away (sub-$100). Otherwise I think we'll see a tepid response by consumers.

Beyond this, depending on what kind of finally shows up, I'm sure Amazon will be pulled into the maelstrom of mobile patent litigation. 

Marketers Confused about Mobile, but Increasingly Building Sites and Apps

Despite all the promises of digital marketing, data and analytics most marketers remain confused about how to manage the increasing complexity of digital channels, devices and tactics -- let along integrate them coherently. In particular, two recent surveys from email marketing services provider StrongMail and IBM show that marketers and CMOs conceptually embrace mobile marketing but are generally stumped by tactics.

The IBM survey was conducted in 2012 and had a sample size of roughly 350 "marketing practitioners." The StrongMail survey was conducted in Q1 and had 802 respondents, described as "business leaders." Just under half (46%) of the StrongMail respondents technically qualify as small businesses, with fewer than 100 employees. The IBM survey was more representative of enterprises and had respondents from multiple countries.

Among StrongMail survey respondents, only 55% had an existing mobile presence or were engaged in any form of mobile marketing. And 57% said they'd been doing it for only a year or less. Although 43% of those without a mobile presence or strategy planned to implement one within the next year. 

What did they plan to do? In roughly equal numbers the StrongMail respondents planned to build mobile sites (30%) and mobile apps (26%), followed by SMS/MMS marketing (15%). Impressively, 70% of StrongMail survey respondents planned to increase their mobile budgets in the next 12 months. But there's a difference between "talk" and action. 

For those still not doing anything, the top three answers to the question "Why aren't you leveraging mobile marketing?" were the following:

• We see value in mobile but haven't yet determined the right strategy: 37%
• Lack of resources/staff: 22%
• Lack of funding/budget: 12%

Confusion over strategy and tactics similarly plagues the marketers at the larger organizations surveyed by IBM. In answer to the question, "Which three of the following market factors will be the biggest challenge for your organization over the next 3 to 5 years?" they responded that the proliferation of channels and devices was the biggest challenge: 

Like the marketers in the StrongMail survey, the emphasis in the IBM survey was on mobile sites and apps. In response to the question, "Which of the following mobile marketing tactics is your company using or planning to use?" they said: 

In this case, however, mobile email, SMS and local ad targeting were also being (at least conceptually) embraced. In the StrongMail survey the top current marketing methods reported were the following:

• Mobile websites: 70%
• Mobile apps: 55%
• QR codes: 49%
• SMS/MMS: 40% 

Interestingly only 13% of the mostly small business respondents in the StrongMail survey said they were using "location-based mobile marketing." And among those not currently doing any mobile marketing, only 3% indicated they were planning to implement it. 

By contrast the larger companies represented in the IBM survey were more interested and bullish about location. This is almost the opposite of what you might expect. SMBs could be expected to be more interested in location-based mobile marketing while one would anticipate that enterprises would be more skeptical. But the opposite appears to be true, drawing inferences from the data in these two surveys. 

Nexus 7 Beats the Pants off Kindle Fire

I've been using the new Nexus 7 Google tablet since I obtained one at the Google developer conference late last week. I also own a Kindle Fire, which I use regularly for reading and watching movies. After just a short time it's clear that the Nexus 7 beats the Kindle Fire, the best-selling Android tablet to date, by a mile.

Outside of the Amazon content universe the Kindle Fire offers a generally sloppy and lackluster tablet experience. Whether you agree depends on your expectations and whether or not you own an iPad. Some people argue that Kindle Fire, as a basic Kindle upgrade is great for the price. But as an owner of two iPads, my view is that it offers a poor overall experience beyond the borders and boundaries of Amazon's media and shopping content.

Beyond this, I'm not a fan of Android tablets in general. I owned the Samsung Galaxy 10.1, which was a real clunker next to the iPad. That's partly because there were and still are so few tablet apps for Android. Indeed, none of the 10-inch competitors to the iPad have sold well. By contrast Kindle Fire sold because there’s no Apple entry in the 7-inch category. But its rock-bottom $199 price and the Amazon brand were the big drivers of sales, which have now slowed.

Yet the Kindle Fire tablet is an Android device in a technical sense only; it marginalizes Google. Accordingly Google felt compelled to act and the company has now taken direct aim at Kindle Fire with its new 7-inch tablet, built by Taiwan computer maker ASUS. It’s priced identically at $199 (although there's a $249 version with more memory). Google has also followed Amazon’s lead and made content from its "Google Play" store a major part of the Nexus 7 experience.

After a week of very heavy use, I'm very pleased with the performance of the Google device. If I think of it as a tablet it still falls short of the iPad by a considerable margin. However if I think of it as a larger smartphone it's great.

It fits easily in your hand and the larger (than a smartphone) screen makes almost everything better about the experience. There are still relatively few tablet apps, and the 7-inch size is awkward in certain respects. Steve Jobs referred to it as a “tweener." It doesn’t fit in your pocket like a smartphone but doesn’t offer the full-screen experience of the iPad. However smartphone-optimized apps and mobile websites don't look as awkward on a 7-inch screen as they do on a 10-inch Android screen.

Unless you're a loyal Amazon Prime customer and/or a very heavy Kindle user, in choosing between the Fire and the Nexus 7, there's no question about which device to buy: the Nexus 7.

It offers such a superior experience for virtually everything you'd do on a tablet -- and you can download the Kindle reader Android app. Indeed, the full range of Android apps are available from Google Play. On the Amazon tablet you get a subset of Android apps (no Google Maps for example).

Google should have a very successful product in the Nexus 7. The one major challenge is that right now there’s no retail distribution. Google is selling it directly through the Google Play store. And while there’s a huge installed base of Android users who are the primary market for this device, Google will need Best Buy and other retailers to offer the Nexus 7 before it can realize its full sales potential.

Tablets Demand Attention As Separate Device Category

Last week mobile ad network inMobi released tablet survey findings, drawn from 9,600 respondents in seven international markets. US responses were just under 1,000 (904). The company asserts that "tablet use has risen quickly to 29.5 million U.S. users, 11% of the total U.S. population." 

By comparison, in January of this year the Pew Internet Project released survey data that showed 19% of US adults owned tablets (mostly iPads). And comScore released data showing that roughly 24% of smartphone owners also have tablets. If we extrapolate these numbers, the Pew data suggest that there are roughly 42 million tablet owners in the US (as of January 2012). The comScore data argue the number is closer to 56 million.

The inMobi number is too small, while the comScore number is probably too large. Pew is likely closer to the actual number of tablet users in the US at this point. However, by the end of the year it could be closing in on 70 million. 

The inMobi survey data are from a report entitled, The Role of Connected Devices in the Consumer Sales Journey. Below are some of the top-level findings: 

General consumption habits

• Over 60% of US tablet owners spend at least 30 minutes each day accessing media content on their tablets
• 52% use a tablet to fill what previously would have been “dead time.” 
• 29% of US tablet users said they have reduced reading books in print.
• 29% of tablet owners claimed they reduced surfing the internet via their PC and/or laptop.
• 48% of respondents agree that tablets’ appealing design and accessibility make it is easier to access media content than on a PC or laptop.

Shopping and e-commerce 

• 22% of tablet users claim they have shopped less in physical stores since purchasing a tablet
• 55% of tablet owners make purchases on their device in an average month. 

According to the survey data, "tablets have become the preferred device at home and smartphones are preferred on the go." These devices play different roles in the "purchase consideration cycle." Tablets are used in a "lean back" mode in the evenings and on weekends, almost exclusively at home. 

A recent tablet-centric e-commerce report from Monetate also observed that tablets are used primarily at home, as a PC substitute, and offered the following advice:

With increases in website traffic from devices such as the iPad and Kindle Fire, e-commerce businesses must treat customers using tablets as a unique audience segment. Tablet users expect a different experience that takes advantage of their devices’ features, such as touch/swipe functionality and screen rotation.

Accordingly it's not enough to simply assume the PC site will translate onto tablets. While non-flash PC sites often render relatively well on tablets they typically fail to take full advantage of the tablet opportunity.

Monetate: Non-PC Devices to Grab 25% of Traffic in Less than a Year

E-commerce optimization firm Monetate has published its latest "E-commerce Quarterly" report. The report addresses a number of issues including social commerce. For purposes of this post, I'll focus on the mobile and tablet findings.

The data in the report are drawn from "analyzing a random sample from over 100 million online shopping sessions on 100-plus major e-commerce websites." Here are some of the major findings: 

• 88% of website visits now come from PCs, down from 92.1% in the prior quarter.
• Tablet traffic increased 348% in one year, while visits from smartphones increased 117% during the same time period.
• More than 6% of all website visits now come from tablet users; 95% of this traffic is from iPads.

Website Traffic Sources

Q1 2012 Conversion Rates by Device Category

Compare similar data from Marin Software. Directionally they're almost identical to the Monetate findings.

What both the Marin and Monetate conversion findings lack, however, is data about offline conversions. If those were tracked and factored in I suspect we'd see mobile conversion figures outstrip the PC and potentially tablets.

Monetate's focus is strictly on e-commerce conversions. But most people don't buy conventional products on their smartphone, though they may do things like banking transactions or buy apps or rent movies. 

The use cases for smartphone are different than PCs and tablets, which are mostly used at home and often as a substitute for the PC. According to Monetate's report:

It seems clear that smartphone users are either doing more comparison shopping or are dissatisfied with the user experience. In fact, a recent study from comScore Inc., Shop.org, and The Partnering Group revealed that 43% of smartphone owners have used their mobile device while in a store for a shopping purpose.

Monetate also argues, despite that at-home usage of tablets, that there's a different user expectation vs. the PC experience:

With increases in website traffic from devices such as the iPad and Kindle Fire, e-commerce businesses must treat customers using tablets as a unique audience segment. Tablet users expect a different experience that takes advantage of their devices’ features, such as touch/swipe functionality and screen rotation.

This argues in favor of tablet apps as well as a tablet-optimized HTML5 site. Finally, the firm predicts that at current growth rates, "website traffic from PC users will dip below 75% in less than one year" -- meaning that smartphones and tablets will represent 25% of site traffic.