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.

Pew: 45% of Younger Users Access the Internet Primarily via Mobile

The US Center for Disease Control tracks the number of mobile-only and mostly mobile households. Today 30% of US homes have no landline with an additional percentage making and receiving most of their calls via mobile. In that scenario the landline becomes a kind of "spamcatcher" reserved for telemarketers and fundraising calls.

The combined number of mobile-only and mostly mobile homes in the US is now above 45%. That's an amazing statistic if you think about it. 

An analogous, emerging statistic is the number of people who primarily access the Internet on their mobile phones. This morning the Pew Internet Project published survey data that show 17% of all mobile phone owners use their phones as their primary Internet access device. However, if the population is narrowed to all mobile phone owners who access the mobile Internet (55% of mobile phone owners according to Pew) the "primarily mobile" percentage jumps to 31%.

In other words, according to Pew, "31% of these current cell internet users say that they mostly go online using their cell phone, and not using some other device such as a desktop or laptop computer." Even more striking, 45% of 18-29 year olds who access the Internet on their phones are in this "primarily mobile" category.

We found previously (n=1,504) that 17.6% of Internet users went online primarily via a non-PC device (smartphone/tablet). Regardless, these numbers will will only grow larger over time. 

Siri and Voice UIs Are Reshaping Consumer Expectations

Ever since Siri was released with the iPhone 4S last Fall -- although it seems much longer than that now -- it has been reshaping expectations both among consumers and to some degree in the enterprise. Few people are aware of all the work going on around virtual assistants and customer care in the enterprise. It's a very dynamic segment and Siri has become a reference point. 

In addition to Siri there are dozens of voice-based intelligent assistants for Android. There are also Siri competitors in the iTunes store, including Assitant (Speaktoit), Evi (TrueKnowledge) and Kngine. But there are probably about 12 - 15 more apps that present themselves as voice tools or intelligent assistants. 

Having a voice UI and/or intelligent assistant is now becoming a strategic capability for smartphones -- even "table stakes." Witness Samsung's new "S-Voice." However, while the Samsung GS III has received rave reviews, S-Voice has emerged as its weak link. LG is also introducing a voice capability for its handsets. It's not clear why they're doing this because Google's speech recognition and voice actions are baked into the Android OS.

Some of the smaller consumer-facing "assistant" companies and startups (e.g., Speaktoit) become near-term takeover targets as carriers and OEMs recognize the new importance of voice as a UI and, beyond voice, the need to offer an intelligent assistant capability to match Siri and fulfill the new expectations it's creating.

Google and Microsoft have yet to move beyond pure voice input and embrace the "personal assistant" metaphor, though Google has been working on something for some time -- often referred to as "Majel," after Star Trek creator Gene Roddenberry's wife. Nuance, which powers Siri, has Vlingo and Dragon Go!, which sit between what Google and Microsoft offer and Siri in terms of capabilities. 

Notwithstanding intelligent keyboards such as Swype (another Nuance product now) and Swiftkey, voice will emerge over the next year or two as the primary interface for most tasks on smartphones. Most iPhone users use only limited functionality on Siri and Apple has been trying to educate them about its full capabilities. By contrast, keyboards are likely to become secondary tools or used in very specific situations: entering numbers or correcting typos. 

As one colleague put it late last year, if speech is the "new mouse" then voice is the new touch.

Survey: 74 Million Tablets in Use in US Today

The Online Publishers Association followed up its 2011 tablet users survey with the release of an encore study (n=2,540 online adults). It contains a rich trove of data about US tablet usage among adults. According to the survey Android and the iPad have roughly equal shares of the US tablet market. This finding is contradicted by other data sources that show more than 90% of all US tablet traffic comes from the iPad. 

The survey found that 31% of the Internet audience (vs. all US adults) owned a tablet today -- or 74.1 million users. Here are a selection of other findings: 

• 90% of tablet users are "very satisfied" or "satisfied" with their tablets
• 60% of tablet owners use the device several times a day, 14 hrs per week on average
• Home is the dominant use location; majority of usage comes between 5pm and 11pm
• Top usage categories: accessing content/information, Internet and email
• 85% of tablet owners are two-screen multitaskers; 66% are three-screen multitaskers.
• 61% of tablet owners have purchased content

Tablet owners have bought plenty of apps but they prefer ad-supported free apps if given the choice. Below is the list of paid-content categories, according to the survey: 

• Magazines -- 10%
• Entertainment -- 8%
• Sports -- 6%
• Weather -- 6%
• Shopping -- 5%
• Newspapers -- 5%
• Fitness and Health -- 5%
• News -- 4%
• Business/professional -- 4%
• Fashion/Beauty -- 4%
• Travel -- 4%
• Finance -- 4%
• Lifestyle -- 3%
• Reference -- 3%

The following were the top product-research categories on tablets:

• Consumer Electronics -- 37%
• Restaurants/Fast Food -- 36%
• Media and Entertainment -- 35%
• Retail and Apparel -- 35%
• Food and Beverage -- 30%
• Sports/Recreation/Hobbies -- 30%
• Travel Service -- 30%
• Personal Care and Beauty -- 28%
• Automotive (incl. Parts) -- 25%
• Health, Healthcare and Pharma -- 24%
• Fin.Services, Insurance, Real Estate -- 23%
• Telecom., B2B/B2C Services -- 22%
• Home Furnishings -- 21%

Generally speaking attitudes and response to advertising are positive among tablet owners, with large numbers using the devices for research and buying. According to the survey, tablet owners spent an average of $359 buying products on tablets in the past year. 

There are also plenty of indications in the survey that people prefer their tablets to other devices for the various activities they're engaged in. 

Tablet Market Exploding: How Is It Affecting PC Usage?

In January of this year the Pew Internet Project released survey data that showed 19% of US adults owning tablets (iPads). That was up from just 10% only a month before in December. Now comScore has 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 now 55 million. These figures seem entirely reasonable. Apple CEO Tim Cook reported 55 million iPads sold to date in February. 

People use the term "tablet" but the market remains largely about the iPad. The only other two models with any traction are the Kindle Fire and the Samsung Galaxy Tab. According to Gartner Apple's share of the tablet market will be 61.4% at the end of the year. IDC says Apple had a 68% share of the global tablet market in Q1 2012.

Both of these figures are incorrect and largely based on shipment estimates. Shipments don't equal sales to consumers. 

Perhaps I should say instead that people may be buying other devices but it still doesn't matter. According to ad network Chitika, based on an analysis of millions of impressions in the US, the iPad "accounted for 94.64% of all tablet based traffic." By contrast Chitika said that the nearest competitor, the Samsung Galaxy tablet, "boasts a lack luster market share of 1.22%."  

Late last week ad network InMobi released its own tablet data, showing gains by the Kindle Fire and total Android tablet ad-impression share of 28%. That argues the iPad controls a 72% share of the total tablet market. 

We're likely to hear an update of tablet numbers this morning from Tim Cook during the Apple WWDC keynote. 

Back to the comScore tablet data: the company says that just over half of tablet owners are watching video on the device, while nearly 10% are doing so every day. 

A year ago in March AdMob found, based on a survey, that 77% of tablet owners were using their PCs less. In addition 28% of respondents said that the tablet had become their "primary computer." Clearly tablet ownership does cannibalize PC usage, while smartphone ownership may complement it. Roughly 80% to 90% of tablets are used mainly at home. 

Once Microsoft puts Office on the iPad it will become a true PC substitute.

Bing 411 and the Free DA Market That Wasn't

Microsoft is shutting down the Tellme-powered 800-Bing-411 line on July 1, 2012 (it was originally supposed to be June 1). Bing 411 was arguably the best of the several "Free DA" services in the market, which was launched by 1-800-Free-411.

In 2004 when Jingle Networks' 800-Free-411 appeared it made enormous sense. It was an ad-supported DA service that captured users' directional intent (just like search) and could deliver ad impressions against those queries. Some analyst firms assumed it would lead to billions in mobile ad revenue (audio ads). We also thought it would be a much bigger deal than it turned out to be. 

I had called it "mobile search for the rest of us." However, the rapid rise of smartphone adoption after 2007 had a lot to do with the demise of Free DA. At one point there were a growing number or competitors in this this market sub-segment: 

• Tellme/Call411
• Goog411
• 800-THE-Info (Verizon)
• 800-yellowpages (AT&T)
• 800-Free-411 (Jingle)
• ChaCha
• kgb (which wasn't free)

Most of these are either defunct or languishing. Goog411 turned out to be the voice tuning and training wheels for Android voice search. Accordingly, Google got the utterances it needed and shut the service down a few years ago.

In April 2011, Marchex acquired Jingle Networks for $62 million in cash and stock. The primary reason Marchex acquired Jingle was not for 800-Free-411 but for its carrier and other relationships and its more recently developed ad network. 

Whether because the services weren't sufficiently promoted or didn't quite work as promised -- again Bing's was quite good at one point -- or whether smartphones simply offered more control and capabilities, it's hard to say why the market never really developed. Certainly the consumer logic was there but the revenues and usage never materialized. 

See related: Bing 411’s Three-Year Run Ends June 1

Why a 'Facebook Phone' Would Almost Certainly Fail

There have been rumors of a "Facebook phone" for at least two or three years. Facebook clearly needs to figure out mobile, so it's logical that Facebook would be talking again about a branded device. According to the New York Times over the weekend:

One engineer who formerly worked at Apple and worked on the iPhone said he had met with Mark Zuckerberg, Facebook’s chief executive, who then peppered him with questions about the inner workings of smartphones. It did not sound like idle intellectual curiosity, the engineer said; Mr. Zuckerberg asked about intricate details, including the types of chips used, he said. Another former Apple hardware engineer was recruited by a Facebook executive and was told about the company’s hardware explorations.

It's worth mentioning that there have already been quasi-facebook phones, from INQ and HTC (Status). The Status had the distinction of being the first phone with a "dedicated share button." By most accounts these phones are not huge successes. The Status appears to be an outright failure. 

Presumably the model for any coming Facebook phone is the Kindle Fire, a highly customized version of Android. Facebook could then have an app store, develop mobile advertising, have a mobile browser and so on. The logic is clear. 

The problem is that a Facebook phone is likely to fail. Most people would not want to "commit" that fully to Facebook and would likely be concerned about privacy and how their contacts and other data were being used or exploited by the software. By the same token, the availability of Facebook apps on major smartphone platforms is going to be sufficient for the overwhelming majority of people. 

There will be a small slice of the population that would appreciate deep integration of Facebook into a handset (those might be younger users). But it will be a minority.

We may ultimately see a "Facebook phone" but I don't think it would be competitive with the iPhone and other Android handsets -- at least not in North America. 

Nielsen: Average Number of Apps per Smartphone Now 41

Last week Nielsen released data comparing US smartphone users' app adoption and usage vs. last year. Nielsen says that the average US smartphone owner in 2012 has 41 apps on his/her phone vs. 32 apps in 2011:

In just a year, the average number of apps per smartphone has jumped 28 percent, from 32 apps to 41. Not only is the 2012 smartphone owner downloading more apps, they are increasingly spending more time using them vs. using the mobile web — about 10 percent more than last year.

Nielsen also says that smartphone owners spend roughly 39 minutes a day using apps (vs. 37 last year). However this finding is much lower than Flurry's earlier declaration that smartphone owners spent 94 minutes per day in apps. It's not clear why these numbers should be so far apart. It may be that Flurry's data are behavioral (analytics based) and Nielsen's figures are based on self-reported survey data -- in which case the former would be more accurate. However, this is speculation. 

Earlier this month comScore released data that asserted "4 in every 5 mobile media minutes" are spent in apps vs. the mobile browser. 

According to Nielsen the top five mobile apps across smartphone platforms are Facebook, YouTube, Android Market, Google Search and Gmail. Finally, the measurement firm added that its surveys show users continue to be concerned about mobile privacy and location sharing: 

[P]rivacy continues to be a concern with the vast majority (70% in 2011 and 73% in 2012) expressing concern over personal data collection and 55 percent wary of sharing information about their location via smartphone apps.

Payments Land Grab Continues: PayPal Annouces More Retailers, Groupon Preps Service

It absolutely makes sense for Groupon to launch a Square-like payments platform for its merchants -- part of its effort to diversify more holistically into local commerce. A payments tool for merchants (first reported by VentureBeat) would also support and complement its recently expanded Groupon Rewards loyalty program.

According to VentureBeat Groupon would seek to gain rapid merchant adoption by undercutting the fees on similar services from Square, PayPal, Intuit and the recently launched Sail. Reportedly there would be a 1.8% transaction fee and $0.15 transaction charge, which are lower than any of the fees from other, competing services. Groupon's payment platform would utilize the iPad and iPhone in a way similar to Square.

In this "race to the bottom," where merchant card fees are concerned, we're seeing the rapid commoditization of payment processing especially at the SMB store level. I was told that companies like First Data are very concerned about this development and are trying to "get closer to the consumer" as a result. 

Meanwhile PayPal yesterday morning announced an expansion of its in-store payments program. Previously it had a single retailer, HomeDepot, now there are 15 more national retail chains:

Abercrombie & Fitch, Advance Auto Parts, Aéropostale, American Eagle Outfitters, Barnes & Noble, Foot Locker, Guitar Center, Jamba Juice, JC Penney, Jos. A. Bank Clothiers, Nine West, Office Depot, Rooms To Go, Tiger Direct and Toys “R” Us. 

I have yet to use the system but it will need to provide substantial efficiency and convenience and/or "value adds" (e.g., loyalty rewards) to consumers to get them to use it vs. traditional payment cards. PayPal ultimately has to "back onto" either a bank account or a credit card. 

My informal understanding is that the HomeDepot trial wasn't entirely successful because of low consumer awareness and low usage accordingly. This broader roll out should help awareness greatly.

Through these retailer relationships PayPal will glean enormously valuable consumer data and purchase history information that it can use potentially as inputs into its PayPal media network targeting capabilities. This data mining hasn't been confirmed to me but I suspect that consumers who use PayPal in stores will have that transaction data factored into future ad targeting if they're using any of the eBay/PayPal properties. 

Just as with the commoditization of merchant payment services, services such as PayPal are creating a potential intermediary or "gateway" relationship between consumers and their credit card companies. Card companies will ultimately be forced to respond -- Amex is ahead of the curve -- with amp'd up loyalty and deal programs themselves. 

We're in an acclearating "land grab" phase of mobile payments. Multiple providers can and will exist but all the coverage, announcements and general "noise" in the market right now has the paradoxical effect of both raising consumer awareness but also delaying adoption of any individual solution.

How Will Facebook Monetize Mobile?

This morning Facebook is trading below its $38 offering price. This reflects investor skepticism about the long-term outlook for the company. Indeed, there are many challenges ahead for Facebook -- one of which is mobile monetization.

This weekend the company bought yet another mobile site, Karma. Karma provides a streamlined way to deliver physical gifts to people through their smartphones, using the Facebook infrastructure. While this latest acquisition is undoubtedly about getting access to the team it is also about the business model and new ways to generate revenue from mobile devices. 

I have argued one reason (clearly not the only one) that increasing numbers of people use smartphones to access Facebook is avoiding the clutter of the PC site and ads in particular. While Facebook has started to show Sponsored Stories in mobile users' newsfeeds it cannot simply duplicate the ad environment online in its mobile apps. Too many ads would alienate users. 

So how does Facebook make money off mobile usage in a way that doesn't make users abandon its apps? Here are a few ideas:

• Local/contextual ads on apps: contextually and locally relevant display ads (if well targeted) could generate meaningful revenue because of the sheer scale of Facebook's mobile usage. But Facebook needs to be judicious in its use of these ads. 
• Offers: coupons in display ads or in the news feed could be quite successful as well. Mobile offers have been in place for some time but it's a free service. Facebook might create a special area or "wallet" for mobile offers that resides within the app but doesn't interrupt usage
• Mobile loyalty: This notion is tied to offers as well. For SMBs Facebook could create a subscription based program where loyalty incentives are distributed online and in mobile: "After three visits, XYZ is free." This would represent formalizing tools and capabilities that are now free
• Facebook credits: Turning Facebook credits into a real (loyalty) currency that can be used for e-commerce online or perhaps in the offline world at stores and restaurants. (More likely it would be earn offline points and use them online.)
• Facebook Wallet: Facebook could try and become a full-blown payments platform like PayPal or Google Wallet. This is more ambitious but it could be accelerated though purchase of a payments startup
• Build an ad network: I believe Facebook will buy a mobile ad network -- its own version AdMob --  to enable monetization via third party sites and apps. All users signed in through Facebook Connect could be targeted as on the PC. I think this "FaceSense" will also come to the PC. 
• E-commerce transaction fees: Karma is an e-commerce app. And there's a great deal of potential for Facebook to get into e-commerce more directly. However, past e-commerce experiments by third parties on Facebook have largely been unsuccessful (except for Zynga). 

Some or many of these ideas could come to pass. Regardless, Facebook will need a range of approaches and revenue streams in place to truly deliver the kind of mobile revenue performance that investors will want and will become imperative as more users access Facebook primarily via mobile devices.

Study: Localization Best Way to Make Mobile Ads Relevant to Users

The IAB has released a fascinating report on mobile shopping and user attitudes. The study wasn't a simply survey. Instead the research involved 260 US adults who agreed to participate in a two-week "mobile diary" project. It thus got an in-depth look at their behavior. Below are some of the findings that I found most interesting and noteworthy.

One finding that illustrates simple assumptions about mobile behavior cannot be made was the fact that most "mobile commerce" activity happened at home:

• At home: 47%
• Out and about: 29%
• At work: 10%

Specifically the study also found that most product searching happened at home and not "out and about." Store location searching did happen mostly on the go. But these findings suggest that behavior many marketers assume is happening on the go is actually taking place at home. 

In a majority of cases "mobile commerce" (shopping) activity was stimulated by the presence of other media. This fact is relatively well known but still needs to be pointed out. Too many marketers think about mobile in a vacuum. Specifically 46% of these users were watching TV or on their computers when they used their smartphones to look up information. 

What stimulated their mobile commerce (shopping) activity? The largest group said that mobile was the "easiest way" to accomplish the particular task. In other words, it was easier for them to do a mobile lookup than it was to go on a PC. Beyond this, mobile advertising was a major "stimulant" of subsequent research or mobile shopping behavior.

One of the most interesting findings, which is an outlier compared to other data in the market, is the overwhelmingly favorable perception of mobile ads, which were viewed by 70% of these study participants as "a personal invitation." That's an incredibly positive finding for mobile advertising. 

Another very interesting finding is that mobile users who click on ads are mostly not immediately interested in buying. They want to learn more about a product or service. Many also want to see related products or services (presumably to see what their options are). 

All this suggests that mobile (display) advertising exists somewhere between pure awareness and direct response. Most people -- at least in this sample -- are not prepared to buy immediately in response to mobile display ads. Search is a different matter because of the directed nature of the consumer behavior vs. display. 

Finally the study indicates that the best way to make mobile ads relevant to users is to localize and personalize them. Personalization is OK, according to the study, with permission (hard to execute for marketers). But localization can more easily be done without capturing personal or behavioral data. 

Samsung Near Bottom of Satisfaction Index for Handset Makers

The University of Michigan's American Consumer Satisfaction Index for May is out. I've pulled two categories: wireless carriers and mobile handsets. The chart immediately below reflects that of the four major US mobile carriers Sprint beats Verizon by a single satisfaction point. They're all clustered very closely together however. 

The next chart is more interesting. It shows consumer satisfaction with smartphone brands. 

Apple comes out on top (83), followed by Nokia, LG and HTC (75). HTC and Motorola are two points behind them. Interestingly, Samsung -- which is now the largest handset maker in the world -- is 12 points behind Apple (71). The only company to score more poorly than Samsung is RIM.

People at the ACSI say that these numbers are predictive of future consumer behavior. A low score implies declining future sales. By the same token a high score should predict positive sales activity. 

Certainly Apple is doing well and RIM is in decline. But Samsung is an anomaly. It continues to see massive sales and would thus appear to defy the predictive wisdom of the ACSI scores. 

Survey: 75% Using Smartphones for LBS Information

On Friday the Pew Internet Project released survey data that showed significant usage of "real-time location-based information" by smartphone owners in the US. Earlier consumer surveys have shown that 90% or more of smartphone owners have used their devices to get "local" or location-based information (at one point or another). 

When you consider that Google Maps is either the top app or one of the top two apps on the iPhone and Android the Pew finding is obvious and not a surprise. Indeed, Pew never clearly defines the cluster of sites, apps or services that constitute the location-based information category. That may be because the question is asked in that way, without further definition, to consumers. 

An additional finding from the survey is that 18% of smartphone owners are using "check-in" services like Foursquare:

In November 2010 Pew said that only 4% of survey respondents were using "geosocial" or "check-in" services. 

We should see "location-based services" hit 100% usage or penetration among smartphone owners, depending on how the category is defined. That's because every smartphone owner is going to eventually use a map or check the weather or look up a restaurant. 

Are Facebook Users Fleeing to Mobile to Escape Ads?

Facebook has again updated its S-1. There are a few reasons for this, including the awarding of additional stock to employees. However there's a very interesting discussion of mobile in the revised document (pointed out by TechCrunch). On page 14 of the document Facebook reiterates uncertainty around its ability to make money off mobile users:

We had 488 million MAUs who used Facebook mobile products in March 2012. While most of our mobile users also access Facebook through personal computers, we anticipate that the rate of growth in mobile usage will exceed the growth in usage through personal computers for the foreseeable future, in part due to our focus on developing mobile products to encourage mobile usage of Facebook.

We have historically not shown ads to users accessing Facebook through mobile apps or our mobile website. In March 2012, we began to include sponsored stories in users’ mobile News Feeds. However, we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users (DAUs) increasing more rapidly than the increase in the number of ads delivered. If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.

(emphasis added.)

The only mobile ad unit currently used by Facebook is Sponsored Stores, which put brand and advertiser messages in the user news feed. These units have proven to be successful on the PC but could become annoying to users on mobile devices. I have not yet seen any of these ads myself. 

One reason why mobile usage is growing so rapidly for Facebook is a result of general smartphone adoption among Americans. There are also things about the user experience in mobile that are superior to the PC: the ability to take and immediately upload pictures, for example. 

There may be another reason why usage is migrating to mobile: ad avoidance. People may be choosing the mobile version of Facebook over the PC site precisely because there are fewer ads; it's a "cleaner" experience. If my theory is correct then Facebook has a major problem on its hands. As Facebook puts more ads in mobile to make money it risks alienating users if the company is not very careful and thoughtful. 

Mobile ads on Facebook will have to add value, be compelling (offers) or highly relevant (local) in order to work. For this reason I expect Facebook to make a major mobile ad-network acquisition. This would be for the "infrastructure," the expertise and the inventory. It would be analogous to what Google did with AdMob.

Facebook Has Bought Gowalla, Instagram and Now Glancee

A couple of days ago local-social startup Glancee announced that it was being acquired by Facebook:

We started Glancee in 2010 with the goal of bringing together the best of your physical and digital worlds. We wanted to make it easy to discover the hidden connections around you, and to meet interesting people. Since then Glancee has connected thousands of people, empowering serendipity and pioneering social discovery. We are therefore very excited to announce that Facebook has acquired Glancee and that we have joined the team in Menlo Park . . . 

Glancee, which is really just a 2.0 version of the original Loopt, adds to Facebook's growing arsenal of mobile assets. The social network has identified mobile as both an area of vulnerability and opportunity. In the Facebook IPO roadshow video COO Sheryl Sandberg calls out mobile as "a key area of growth for Facebook." 

What she's talking about is revenue rather than usage. The company already has more than 500 million active mobile users. And Flurry Analytics recently said that social networking activities now consume as much daily mobile app munitues as games, the former number one category. Much of that activity takes place within Facebook. 

The purchase price of Glancee was not disclosed but we can assume it was an "acquhire," rather than a technology acquisition -- though there may have been a bit of technology that motivated the purchase.

Glancee was part of a group of "passive" or "ambient" location startups that include the over-hyped Highlight and a dozen others. I have argued in the past that ordinary people (as opposed to those in the tech industry) don't want to continuously broadcast their locations even to close friends and colleagues. Accordingly these friend finding and pseudo-dating apps are destined to fail unless the offer some other angle or utilitarian functionality. 

Facebook may choose to use some of Glancee's capabilities as part of a new version of its app. But my guess is that Glancee, like Gowalla, will be completely shuttered and that Facebook won't turn its app into a ambient friend finder. That would complicate the privacy picture for Facebook -- though I expect geofencing and geotargeted advertising to be part of what Facebook eventually develops for mobile marketers.

We're likely to see more acquisitions from Facebook as the company continues to build up its mobile capabilities. What the company hasn't figured out is how to make money in mobile, commensurate with its mobile usage. It now pumps Sponsored Stories through its users' news feeds, having just introduced mobile advertising. However that by itself won't fulfill the mobile ad revenue imperative about to be imposed on Facebook by its IPO.

Why TGI Friday’s Might Drive More Mobile Payments Adoption than PayPal

As we all wring our hands over the slow and uneven development of mobile payments -- and watch the contest between PayPal, Google Wallet, Square, LevelUp, Boku, mobile carriers and others – it's possible that mobile payments might become mainstream in less anticipated ways. Individual retailers and franchises, for example, might be much more successful in motivating consumers to adopt the technology than the major payments players taking a “horizontal” approach.

Starbucks was a trailblazer with its mobile app and wallet functionality in the US. Home Depot recently enabled PayPal to be used in selected stores. And TGI Friday’s has just followed with iPhone and Android apps that include a mobile wallet. The casual restaurant chain has 600 locations in the US and roughly 350 of them are now equipped to let customers pay by app. Startup Tabbedout provides the payments capability in the new TGI Friday’s app.

After the app is downloaded the TGI Friday’s customer opens a tab. She or he receives a code through the app, which is then shown to the server who enters it in the restaurant’s POS system. No card swipe means greater security for the consumer. (I once had my credit card number stolen by a waiter in a high-end restaurant.) A consumer credit card is associated with the app, which is where the payment comes from.

In addition to paying in the restaurant, the app helps users find restaurant locations, see the menu and receive offers. Payments become a kind of hook for a broader set of services and loyalty efforts. While TGI Friday’s is the first restaurant chain to adopt mobile payments (after Starbucks), expect others in the segment to follow relatively soon.

Fast casual and so-called “quick service” restaurants (fast food) will likely duplicate this move in short order. One can easily imagine a McDonalds or Chipotle app with a restaurant locator and mobile payments. Chipotle already allows mobile ordering.

The integration of mobile payments into loyalty apps by major brands is likely to help educate US consumers, “socialize” mobile payments and drive consumer adoption much more quickly than abstract initiatives from PayPal or Google or mobile carriers. The consumer doesn’t have to think about which merchants or stores will accept mobile payments in the single-store scenario. In other words, the consumer “why” of mobile payments is answered much more readily in a specific context, like the one presented by TGI Friday’s.

Do People Really Want Carrier Billing for Offline Purchases?

Mobile payments provider Boku has now completed a deal with Sprint, making it the final major US carrier to enable carrier billing through Boku. The startup operates in more than 60 countries and claims to process "hundreds of millions" in payments accordingly. It has relationships with more than two hundred mobile carriers around the world. 

Companies like Zong (now part of PayPal) and Boku got started to enable online users (mostly younger people) to purchase virtual goods in a simple and secure way. They evolved to enable purchase of physical goods offline. While Zong was acquired Boku and smaller payments companies like it risk being marginalized in North America and Europe by banks, credit card issuers and others (e.g., Google, PayPal, Square), which are reaching out to a broader population of users that already have credit cards. 

In developing countries carrier billing may be an effective approach for users and merchants in the absence of a more conventional credit card infrastructure. However in developed countries -- with carrier bills already very high -- few individuals (except those without traditional platic cards) will want to load up their carrier statements with additional costs. You may dispute me on this but I firmly believe that in the US, for most adults with existing credit, carrier billing is going to be a non-starter. 

Boku cites a Strategy Analytics survey that argues, "consumers are twice as interested in operator billing as using traditional credit/debit cards." I simply don't accept these findings as valid. Another survey (US only) by electronics site Retrevo found the opposite in June of last year: 

Companies such as Boku need to branch out into physical goods and move outside of carrier billing to withstand the onslaught from other players with greater brand recognition and momentum. Indeed, earlier this year Boku did an NFC payments deal with Mastercard in the UK as part of an effort to do so. 

Report: Mobile Email Opens to Pass PC by Q4

Most marketers' email campaigns are not optimized for mobile. I observe this all the time in my own experience: the majority of emails I open on my smartphone (iPhone) land on an HTML page that assumes I'm on a PC. Yet PC email opens will be the minority use case very soon according to data released by email analytics provider Return Path.

The company examined 500 client email campaigns in Q4, 2011 through Q1, 2012 and found that 30% of email opens were on mobile devices. Further, it said that mobile was on track to become "the dominant email marketing platform later this year." This makes sense because email is one of the primary activities that people do in mobile. Return Path asserts that 42% of all time spent with mobile is spent on email. 

The company doesn't indicate whether iPads are counted as mobile devices here. In that case PC-formatted emails will look OK. 

Regardless, the Return Path data and prediction will come as a shock to most email marketers who are well behind in terms of mobile adoption. Citing third party data Return Path said that of all email opens only 2.4% of people opened the same email on their mobile device and a PC. In other words, marketers get one shot at users and that's going to be mostly mobile as of later this year.

Citing another third party study Return Path reports that 63% of Americans and 41% of Europeans either close or delete emails not optimized for mobile. This shows how high the stakes are for marketers who rely on email -- especially retailers.

Perhaps the second most suprising datapoint from the study, Return Path found that "Apple devices account for 85% of all mobile email opens." What this effectively means is that at some point in Q4 a majority of email opens will happen on iPhones and iPads.