Google mobile payment service

Today there was an interesting article in BusinessWeek that confirmed what we were expecting since Eric Schmidt announced support of NFC in the latest revision of Android OS late last year.

The article talks about how

A single NFC chip on a mobile phone would hold a consumer’s financial account information, gift cards, store loyalty cards, and coupon subscriptions, say the people familiar with Google’s plans. Users may also be able to make online purchases from their phones. By scanning a movie poster, for instance, a consumer might read reviews and use the Google service to purchase tickets.

(For those who don’t know, NFC is the Near Field Communication technology which enables communication in close quarters between a cell phone and another device (active) or an RFID (passive) tag).

On the front end this means that Google will be developing a wallet application. This application will do something like the following:

  • Store customer information like Credit Cards, Paypal, Google Checkout, Facebook Credits, SocialGold stuff etc.
  • Provide an interface for users to use a payment source to pay a bill. The amount of the bill might be automatically send from the receiver or might be entered by the user. The user will have a chance to add a tip
  • The user will then tap the device
  • Tie all this payment information with coupons and ads shown to a user on their phones etc. This will enable end-to-end tracking of ad ROI for users.
  • Enable loyalty programs etc although tying loyalty program to a fragmented payment market might be ineffective

(How will this flow work when users are dining at a nice restaurant and the payment does not happen at a checkout counter?)

At the storefront, Google will need to provide an internet connected device (see my previous article Google to hand out devices to local businesses . They will likely work with the existing processors in the beginning). This device will likely do the following:

  • Handle Credit card transactions (This will likely disrupt the processors – they are going to fight this tooth and nail – interesting to see how this shapes up)
  • Manage the communication with the phone based wallet app

(How will this interact with the POS systems, and who will retail what data? I think Google will eventually release a simple POS system as well with this)

If Google gets really ambitious and wants to get a bigger piece of the pie, they will need to take on the existing payment providers like Visa etc.:

  • Become a massive credit card processor (This massive aggregation is going to challenge the payment networks like Visa, MC etc. and they will likely work against Google)
  • Develop a currency like Facebook credits (Jambool acquisition?) to benefit from control of the end-to-end payment process
  • Provide reporting, customer support, account management for all the local businesses.

This is going to be quite an undertaking for Google. This development does open a lot of interesting strategic questions for companies like Facebook, Paypal etc. But that is subject for another post.

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Local market upheaval

Local markets have been tough for high-tech companies. If you talk to investors or entrepreneurs, you typically hear a sad story of distribution issues, technology issues, costs etc. What you rarely hear are issues related to value proposition to local businesses. You don’t hear of whether a local business found a service indispensable or even valuable as if  a local businesses should be happy to provided any service at all.

These companies (e.g directory listing, web sie creation, coupon listing,  self-service location-based companies etc.) have mostly focused on targeting larger number of customers and getting a good conversion factor instead of the customer value proposition.

With the advent of social media these businesses are going to have a tough time staying relevant. Businesses will demand more and more measurable ROI. With location-based and mobile computing there are going to be more and more ways to deliver these services in a cost-effective ways.

This of course is great news for local business owners who will get a pick of services that deliver real ROI to them and finally we will new billion dollar companies developing by focussing on adding value to customers.

Posted in checkins, Social Networks | 3 Comments

OpenTable – ROI?

Great piece by Mark Pastore owner of Incanto, a nice italian place in San Francisco.

Mark makes a couple of really important points in his nicely written post:

1. With OpenTable, restaurants no longer own the relationship with customers. This means that the customer loyalty is to OpenTable and  in essence businesses are paying OpenTable to create a loyal customer for OpenTable. Once OpenTable has that customers, businesses need to keep paying OpenTable for access to that customer.

2. OpenTable is expensive. Mark talks a lot about typical margins at restaurants of about 5%. with these margins he finds it difficult to justify the payments to OpenTable.

The overall point that Mark makes is that network based businesses that own customers (like Yelp, GroupOn, MerchantCircle or OpenTable etc.) are not great for local business. This is because if a network owns the customers, business will be held hostage by the power of the network.

Could not agree more!!!!

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Google to hand out devices to local businesses

Recently Techcrunch had a piece on Google giving away 8M devices to local businesses to facilitate checkins, reviews and more…Now to be honest, I actually had a little insider info about his coming down the Google pike. Now that I have had the time to process all the info, following are my thoughts:

1. This device could be

  • A customer-facing  tablet kind of device running android with build-in integration of Google places for reviews and checkins
  • A device to verify your location (ala ShopKick) so that users running a Google app on their phone or other devices can easily receive notifications (key), do checkins, validate coupons and write reviews. Something like this would be pretty cool but might require some standards work to get it working across different devices
  • A device that not only enables user interaction but also allows businesses to run business apps like POS apps etc. on Google infrastructure

2. At the end of the day, this move by Google is about getting more data. Google is really worried about Facebook getting all the user/local data because of FB apps and they want to distribute these devices (they will be expensive to send and maintain) to get some of this data.

3. The important point here is what is in it for local businesses? I think they will be able to see much richer data on their own customers and Google will share the data they collect with each of the merchants.

4. The Apps delivered via such a device could be really powerful as these apps will enable Google to get their hands on the all important sales/market basket data. Businesses won’t mind as the traditional business apps are old and expensive to buy and maintain. If Google can deliver these apps cheaply and easily, it would be powerful.

All in all this looks like a huge gamble on part of Google (could be over several billion dollars worth), but might be justified given the size of the market we are talking about. Still though not having a social graph will likely handicap Google in making sense of this data because  most of the local business customers are driven by word-of-mouth.

Posted in checkins, coupons, Google, Loyalty | 34 Comments

Loyalty links of the day

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Monetization and spam

Great piece for Eric Eldon on VentureBeat about spammy ad networks and practises on facebook.

This week I spoke to another big facebook app develop…Overall I think we need to look really closely at facebook claim of app developers generating over $500M this year.

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Allah fun bucks

Just saw this funny cartoon… from Stripcreator

cartoonWith the preponderance of virtual currencies … :-)

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In defense of distraction

Fascinating feature in New York Magazine about how we are dealing with all these technologies that require constant attention and apparently we are not very good at multi-tasking

Over the last twenty years, Meyer and a host of other researchers have proved again and again that multitasking, at least as our culture has come to know and love and institutionalize it, is a myth. When you think you’re doing two things at once, you’re almost always just switching rapidly between them, leaking a little mental efficiency with every switch. Meyer says that this is because, to put it simply, the brain processes different kinds of information on a variety of separate “channels”—a language channel, a visual channel, an auditory channel, and so on—each of which can process only one stream of information at a time. If you overburden a channel, the brain becomes inefficient and mistake-prone. The classic example is driving while talking on a cell phone, two tasks that conflict across a range of obvious channels: Steering and dialing are both manual tasks, looking out the windshield and reading a phone screen are both visual, etc. Even talking on a hands-free phone can be dangerous, Meyer says. If the person on the other end of the phone is describing a visual scene—say, the layout of a room full of furniture—that conversation can actually occupy your visual channel enough to impair your ability to see what’s around you on the road.

The only time multitasking does work efficiently, Meyer says, is when multiple simple tasks operate on entirely separate channels—for example, folding laundry (a visual-manual task) while listening to a stock report (a verbal task). But real-world scenarios that fit those specifications are very rare.

But why do we have this urge to do multiple things?

I’m not ready to blame my restless attention entirely on a faulty willpower. Some of it is pure impersonal behaviorism. The Internet is basically a Skinner box engineered to tap right into our deepest mechanisms of addiction. As B. F. Skinner’s army of lever-pressing rats and pigeons taught us, the most irresistible reward schedule is not, counterintuitively, the one in which we’re rewarded constantly but something called “variable ratio schedule,” in which the rewards arrive at random. And that randomness is practically the Internet’s defining feature: It dispenses its never-ending little shots of positivity—a life-changing e-mail here, a funny YouTube video there—in gloriously unpredictable cycles. It seems unrealistic to expect people to spend all day clicking reward bars—searching the web, scanning the relevant blogs, checking e-mail to see if a co-worker has updated a project—and then just leave those distractions behind, as soon as they’re not strictly required, to engage in “healthy” things like books and ab crunches and undistracted deep conversations with neighbors. It would be like requiring employees to take a few hits of opium throughout the day, then being surprised when it becomes a problem. Last year, an editorial in the American Journal of Psychiatry raised the prospect of adding “Internet addiction” to the DSM, which would make it a disorder to be taken as seriously as schizophrenia.

The most promising solution seems to be meditation to get your executive attention control in shape

The most promising solution to our attention problem, in Gallagher’s mind, is also the most ancient: meditation. Neuroscientists have become obsessed, in recent years, with Buddhists, whose attentional discipline can apparently confer all kinds of benefits even on non-Buddhists. (Some psychologists predict that, in the same way we go out for a jog now, in the future we’ll all do daily 20-to-30-minute “secular attentional workouts.”) Meditation can make your attention less “sticky,” able to notice images flashing by in such quick succession that regular brains would miss them. It has also been shown to elevate your mood, which can then recursively stoke your attention: Research shows that positive emotions cause your visual field to expand. The brains of Buddhist monks asked to meditate on “unconditional loving-kindness and compassion” show instant and remarkable changes: Their left prefrontal cortices (responsible for positive emotions) go into overdrive, they produce gamma waves 30 times more powerful than novice meditators, and their wave activity is coordinated in a way often seen in patients under anesthesia.

Gallagher stresses that because attention is a limited resource—one psychologist has calculated that we can attend to only 110 bits of information per second, or 173 billion bits in an average lifetime—our moment-by-moment choice of attentional targets determines, in a very real sense, the shape of our lives. Rapt’s epigraph comes from the psychologist and philosopher William James: “My experience is what I agree to attend to.” For Gallagher, everything comes down to that one big choice: investing your attention wisely or not. The jackhammers are everywhere—iPhones, e-mail, cancer—and Western culture’s attentional crisis is mainly a widespread failure to ignore them.

Author suggests that some of the predictions associated with the attention problem might be overblown and may be our brains will just adapt to the new stimulus environment…I am not sure but I hope certainly that we can cope.

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Tons of data, but does it help?

Some interesting data via mediapost sourced from Andreas Weigend, over at the Harvard Business Blog.

In 2009, more data will be generated by individuals than in the entire history of mankind through 2008. Information overload is more serious than ever.

Andreas is the former Chief Scientist at and an expert in data mining and computational marketing. He currently teaches the graduate course Data Mining and Electronic Commerce at Stanford University.

The second data revolution brought about a new dimension to data creation: users started to actively contribute explicit data such as information about themselves, their friends, or about the items they purchased. These data went far beyond the click-and-search data that characterized the first decade of the web.

There is no doubt that this data is going to help researchers better understand the human network and interactions. But will all this data help companies make money by enabling better targeting?

Well so far, opposite seems to be happening. The places where there is most amount of data – like Facebook etc. – are really struggling with their monetization efforts. In fact not only are these companies not profitable, they are also lagging well behind other traditional media properties in terms of CPM rates they can generate. Could it be that these companies really don’t know how to process this data and once they figure out the right ways to process the data, they will be rich?

I suspect the monetization woes of Facebook et al are not really related to inadequate processing of the data but rather motivation of the users. Its almost like the users of most social media platforms are equipped with a Tivo that ignores all ads no matter how relevant. As such I suspect that even though the ads on social media platforms are more relevant because of all the data, but they get far less traction because of the motivation issues.

So while this huge amount of  data will help us better understand our behaviors, it is unlikely to help resolve the monetization issues plaguing so many social applications.

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Monetizing social media

Pretty amazing…

How to monetize social media – Tencent example

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