Category Archives: Identity

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.

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!!!!

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 Amazon.com 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.