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

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

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

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

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

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

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

So that would include Apple then?

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

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

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

Source: Retrevo (Q4 2011)

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

See related: Obama and Romney Campaigns Adopt Square for Funding

Carrier IQ Scandal Results in 'Mobile Device Privacy Act'

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PayPal Starts to Socialize In-Store Payments with Users

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

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

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

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

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

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

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

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

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

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

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

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

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

Kindle Fire: A Template That Will Burn Google?

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

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

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

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

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

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

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

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

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

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

Tablet Ownership Doubles, Now Critical Channel for Retailers

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

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

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

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

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

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

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

• Call It 'T-Commerce': Almost 50% of iPad Users Have Made Purchases in Past Month
• It's a Four-Screen World Baby

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Comfortable Paying with Smartphone

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

Related posts:

• PayPal Brand Weakness Standing in Way of Otherwise Compelling Vision
• Will 2012 Be a 'Breakthrough' Year for Mobile Payments?
• Verizon Stuffs Google Wallet, Starbucks Proclaims Itself the Mobile Payments Leader
• Google's NFC Payments Push Not Just about Payments
• Mobile Predictions: 2012 Edition 
• Carriers Blink, Invite Visa to Be Part of Payments Cabal 

Siri and the Mainstreaming of the Speech UI

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

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

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

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

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

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

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

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

See related posts:

• Vlingo and Nuance Settle Their Differences Out of Court; Turn Full Attention to the Conversational User Interface
• Siri-based Comparison Shopping Adds Best Buy Catalog

Mobile Internet Kicks PC's Butt in Time Spent

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wal-Mart, M-Commerce and Brand Weakness

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: Retrevo (Q4 2011)

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

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

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

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

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

Apps Beat the Browser, Lift Brands

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

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

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

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

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

Are Android Handsets the New Feature Phones?

It used to be that the "free" phones being given away by the carriers were very low-end feature phones. Not anymore. Now, with a two-year contract, you can get a range of no-cost Android smartphones from AT&T, Verizon or T-Mobile.

Verizon was especially aggressive during the holidays; and this morning I counted no fewer than six pretty decent Android handsets available for free from T-Mobile with a two-year contract. These kinds of promotions have helped power Android's rise. The operating system now represents about 47% of all US smartphones according to comScore. 

I don't have and haven't seen data about upgrade patterns from feature phones. But my guess would be that most smartphone upgraders are going to Android, partly because of the "free" promotions as well as the selection and ubiquity of these devices. 

InsightExpress not long ago pointed out that all smartphone owners aren't the same. They can be segmented by engagement and activity level. And while I haven't seen any data on the behavioral differences between Galaxy Nexus owners (Android flagship) and those who own an LG Optimus (entry level Android handset), there likely are some. 

How else does one explain the NetApplications data now making the rounds. These data, showing browser usage across millions of sites, reveal iOS with more than 3X the mobile browsing share of Android in December (iOS includes tablets here). 

1. Apple/iOS: 52.1%
2. Java/J2ME: 21.3%
3. Android: 16.3%
4. Symbian: 5.8%
5. RIM: 3.5%
6. Other: 1.1%

Given the comScore numbers above these data from NetApplications are fairly dramatic -- and curious. However, the gap isn't nearly as large in StatCounter data (global and North America below): 

In North America, Apple's lead is considerably less than in the NetApplications data; and if one looks at "mobile browser" share -- the data above reflect "mobile operating system" -- Android is ahead of iOS in North America and globally. It's not clear how to explain these differences between the data sets. 

Another piece of data: last month an online and mobile shopping study found that iOS devices accounted for 92% of all non-PC sales. In other words Android users aren't very active in m-commerce. In addition the study reported that "Apple mobile devices also have a larger AOV compared to other mobile platforms ($123 for Apple vs. $101 for Android in December 2011) – and far outstrip desktop orders ($87)." 

Last year Nielsen posted some demographic data on iPhone and Android users and found them more similar than different. But in 2011 the recommendations site Hunch conducted a user survey (n=15K) and found some meaningful differences between Android and iPhone users. Chief among these differences were levels of education and affluence; iPhone users were generally older, more urban, better educated and had higher incomes according to the self-reported data.

Back to the comScore data above. Clearly Android is a more "mainstream" smartphone than the iPhone. Almost twice as many people own Android handsets in the US than the iPhone. However, looking at the rest of the data above, iPhone users are more engaged and active than their Android-owning counterparts on the whole.

As we move from a market still dominated by feature phones to one controlled by smartphones, by the end of this year, we'll see most people embrace Android as they upgrade. Apparently, however, this doesn't mean that they'll immediately begin displaying radically different behavior, though it does mean at least incremental changes.

Accordingly it might be fair to say that the lower-end Android handsets are becoming "the new feature phones." 

TeleNav Launches in-App Turn-by-Turn Directions for Mobile Developers

Navigation provider TeleNav is launching what it's calling "the first HTML5 browser-based, voice-guided, turn-by-turn GPS navigation service for mobile devices." The new developer-facing service will be available here (soon). The idea is to enable mobile publishers and developers to add a single line of code and then deliver GPS-based maps and voice-guided directions within their app experience to users (via HTML5).

Remarkably, the company says the service will be entirely free and available across mobile platforms (because it's HTML5). It will become publicly available in Q1 2012. However TeleNav is soliciting developers for early testing now. 

The benefits of this are obvious. Currently on Android and iOS, any mapping request takes users out of the publisher app experience to Google-branded maps on either platform. This TeleNav functionality would not only allow publishers to retain users within apps when maps are requested but would provide voice-guided, turn-by-turn directions to locations (retaurants, hotels, shops, etc.) as well. 

I haven't spoken to TeleNav about this or the fact that they're making it free to publishers -- I'm guessing it's a branding/distribution play. But it's a pretty sweet proposition if it all works as the press materials represent. 

Most Mobile Shopping Happening at Home

I've now written a number of posts, yesterday most recently, that point out most mobile shopping and purchase activity is not happening in stores or "on the go," but at home. Data vendor Compete last week released some findings from its most recent smartphone user survey that confirm this. 

What Compete found is that mobile "shopping" (not buying) was largely performed in the home or, to some degree, at work. What's significant here is that people are choosing to use mobile devices (smartphones typically) when they likely have access to a PC. 

A significant minority of people (34.5%) used their devices in stores (price checks, reviews, coupons) and another sizable group (28.6%) shopped while killing time. 

Below are the most common mobile shopping activities. Note that the largest category is "store information" (people preparing to visit a store location). According to Compete "made a purchase" just missed the list with 31.8% of people reporting making a purchase on mobile devices. 

Majority of Mobile Buying Happened at Home During Thanksgiving Weekend

Of all the mobile shopping apps in the market, the company with the most data on consumer-user behavior is undoubtedly Amazon. But price monitoring mobile application ShopAdvisor also probably has a pretty good window into consumer behavior as well.

The company behind ShopAdvisor, Evoqu, released some data (based on its 100K users over the Thanksgiving-Black Friday weekend) that captures the varied ways in which mobile apps are being used by consumers. It revealed three mobile shopping behaviors (based on purchase location):

•  in-store price checkers (11%)
• "couch commerce" buyers (54%)
• deferred purchasers (35%) 

Evoqu said that consumers generally placed products above $156 on "WatchLists" for later research, discussion or price drops. Price-driven alerts later caused purchases of many of the "watched" items. This was also interesting about e-commerce vs. local/offline shopping: mst of ShopAdvisors' users stayed away from local stores during that first weekend: 

Mobile users shop locally, but not so much on Black Friday. The proportion of consumers who used ShopAdvisor to find local products dropped by 50% during the busy holiday shopping weekend. In the week prior to Thanksgiving, 20% of mobile users chose a local retailer to make a purchase, but from Black Friday through Cyber Monday, only 10% of users braved the mall or other local shops.

Here are the top 10 categories by percentage of mobile shopping (not necessarily buying) activity:

1. Toys 13.8%
2. Tablets & media players 7.0%
3. TVs 5.8%
4. Xbox 360 games 5.1%
5. Digital Cameras 5.0%
6. Women's Shoes 4.5%
7. Men's Shoes 4.4%
8. Small Kitchen Appliances 2.3%
9. Watches & Accessories 2.2%
10. Outerwear 1.9%

Assuming that the data above (in-store, couch, deferred) reflect the actual point of purchase, what's interesting is that the minority of mobile purchases happened during in-store shopping, which may have been based in part on crowd avoidance that weekend. Most (at least 54%) happened at home, where a PC was readily available. It may also be that a sizable chuck of the deferred purchases happened at home. It's not clear. 

Regardless, this is another study that shows how assumptions about mobile behavior and actual mobile behavior are often quite different.