Mobile Fix: Payments driving new marketing models?
Simon Andrews, founder of the full service mobile agency addictive!, looks a the latest developments in m-commerce and the accelerated pace that retailers are embracing the method.
Over the past year or so, two key streams of research and thinking have driven a lot of our consultancy work; one around mobile money and the other looking at how retail is being disrupted by mobile. We now think of them as one focus, as it is in retail where the winners and losers in mobile payments will be decided.
This week PayPal countered the Square deal with Starbucks by announcing a partnership with US Payments giant Discover, giving them 7 million retail outlets – almost as many at Visa and MasterCard. Coupled with 50 million PayPal users in the US, this is a big play, but Square is still in the game.
We have questioned the focus on payment methods and wallets and posed the idea that the context of the payment is more important. It’s clear that there isn’t enough space in the value chain to fund all the new entrants, so they need another benefit from facilitating the payment. For Apple we feel the key benefit is their ability to sell more devices and for Google we see that the data could be used to target advertising.
So the idea that PayPal, like Square, could enhance their service by offering location check ins and loyalty schemes to their retailers, makes sense. Because the retailers will want to use this new channel to try and drive more revenue from their customer base- so the data is really valuable. And just like the retailers own mobile wallet we mentioned last week, the more data you have, the more able you are to deliver relevant offers.
Of course this takes them toward businesses like ShopKick and even Groupon, which focus on the offers. So the successful payments players will have better data than virtually anyone else and should be able to leverage this through advertising. But we believe the model is more likely to be around cost per action or even taking a slice of the transaction revenue.
This emerging opportunity is also covered in a good Techcrunch article – where it makes the crucial point that retailers see payment charges as a tax on a transaction that was going to happen anyway, but will happily give a cut of a new transaction.
If you are a small retailer, once upon a time your main ad vehicle was Yellow Pages, where you bought the biggest ad you could afford and hoped it worked. Then along came Google where you paid for a click – and worked out how much a click was worth to you. Now we have the Groupon model where you just pay a proportion of the actual sale.
The opportunity for the people that win the payments war is to do what Groupon has failed to do, and reinvent marketing as a tool that directly drives sales. This creates a huge new revenue stream for the people who drive these sales.
Retail disruption
With eBay reporting that social shopping is going to grow by 44% over the next two years and Amazon offering delivery to your local corner shop, the pace of change in retail is unrelenting.
And my old friends from GroupM have some interesting research showing that the price saving by buying online doesn’t need to be very big to make showroomers walk out and buy online. They found that the majority of shoppers would choose online if the saving was just $5.
NFC and QR
Interestingly neither PayPal, nor the Starbucks/ Square partnership, use NFC. The PayPal service will allows users just to type in their mobile number, along with a pin code, into the credit card terminal.
Speculation about whether the new iPhone will have NFC capabilities is mixed – with the dominant view that Apple will probably prefer to wait for a more mature ecology around payments and NFC. The Passbook service, that feels like the big innovation in iOS6, seems to be based around good old fashioned QR codes.
And a new deal from Microsoft to license QR technology from NeoMedia suggests there is still life in this oldish technology. At the Google Firestarter event we spoke at last week, we heard that Vodafone had been testing QR codes in their press ads and plan to use them in all their ads in the future.
A recent Apple patent application suggests they have plans to use QR and NFC; it describes a comprehensive app that offers lowest price indicators as well as an option to create shopping lists and read or write product reviews when a barcode is scanned.
Gartner have revised the position of NFC on their Hype Cycle, with it now entering the Trough of Disillusionment – suggesting its 2 to 5 years away from prime time.
Jupiter think NFC will be a $1.3 trillion industry by 2017 but we believe that can only happen if we pioneer new behaviours with existing technology like QR and then evolve them as new tech like NFC reaches critical mass.
As the Facebook share price continues to trundle along just below $20, and various insiders sell big chunks of stock, its clear they need to get advertising right. So the emergence of their first mediakit – from 2004 – has proved interesting. They were already doing 3 million page views a day.
The big opportunity for Facebook is probably search. As Business Insider argue they could instantly generate $1 billion in search revenue through a deal with Google – and growing that to $3 billion would be quite easy. But the big prize would be to build their own search engine;
If Facebook is really clever about this, and can figure out ways to use the immense amount of data it already has about its users to make its search tools even more useful, it could actually build a better search engine
Another GroupM friend has eloquently described how big brands and big agencies see Facebook as they look for a better ad model.
New TV
Some new data from Ofcom gives us more insight into how people are using TV right now. The topline isn’t very different, but in the details we see that over a third of the population use their mobiles when watching TV every day and another 29% do this several times a week.
They also tell us that a third of all internet users are watching TV online everyday and a third watch TV clips online. This is primarily about catching up on shows missed, but we can see that people are starting to schedule their own viewing.
And this a very well thought view on the future of TV – mainly looking at the US but the issues are essentially the same – arguing that the future is about 2 screen and simplicity. Ogilvy have a good take on the issue too – suggesting that storytelling remains king and exploring how digital can add huge value.
Tablets & eReaders
The Ofcom Communications Market Report published at the start of the summer surprised quite a few people by reporting that tablet ownership in the UK had grown from 2% to 11% in just 12 months, whilst ereader ownership was at 14%
New data from the US shows what people are using tablets for; with games, social networking and music coming in top.
The Barnes & Noble ereader Nook is coming to the UK, with partnerships with leading UK retailers to be announced. Well it won’t be Waterstones who made a u turn and partnered with Amazon Kindle and WH Smith have the KoBo, so we guess it’s one of the supermarkets, as they are the other big players in book retailing these days.
Sainsbury recently bought ebook reading platform Anobii, and have just announced a digital TV and film service, so we suspect it will be them. We did lots of strategy work for the Anobii launch and recommended that a platform agnostic approach was the only way to have a chance against the Kindle. Maybe the new owners have a new strategy?
FourSquare
As rumours circulate that Yahoo is about to buy FourSquare and take it mainstream, it’s worth looking again at how their model has evolved beyond the check-in and becoming mayor. The new behaviours they have orchestrated will – eventually – go mainstream, as people see the benefits. And given the way that FourSquare captures intent and context we see that the data trail will drive smart offers and advertising. This is a great round up of the FourSquare story.
Quick Reads
Google are signing deals to secure their mobile search revenues – with an extended partnership with mobile browser Opera.
The innovative YouTube ad model, where users can skips ads and the advertiser only pays for those viewed, is now on mobile too.
Enders analyst Ben Evans has a great blog post showing how Apple and Samsung dominate the handset market – and a wonderful chart showing how different their market positions are. Apple sell at around $600 and Android is around half that.
Twitter upset a lot of people this week by flexing their muscles over how developers can use the service. This is a very smart look at the pros and cons of their actions.
Everything Everywhere have been given approval to launch their 4G service – and it could be available as soon as October.
Neil Perkin has written a typically erudite summary of the Google Firestarters event last week, where we spoke about the future of search.
Finally…
Mobile isn’t getting any simpler. The pace of change seems to be speeding up. By Christmas this year we will see the new iPhone – with loads of iPhone 4s being passed onto kids etc – and probably a new Nexus. We should see the Kindle Fire (maybe even the new one) and the iPad 7inch. WiFi is becoming ubiquitous and 4G is here. So millions of people will have faster devices and faster connections – plus new services like Google Now and Apple Passbook.
If you want to really understand how your customers are adapting and evolving their behaviours to take advantage of these new opportunities, you need a mobile strategist. Forbes have called out 9 reasons why you need one. And we can probably help too….
Click here for your full Mobile Fix (complete with links to background articles).