Thursday, April 16, 2009

Making Money from Mobile TLAs

Many of you tracking the mobile marketing space are familiar with the 3-letter acronym LBS which stands for "location-based services". For those of you not fully familiar with this term, it basically boils down to the fact that your mobile device inherently knows where you are (or more accurately where it is) because that's all at the heart of the cellular communication system. Marketers and mobile app developers are feverishly capitalizing on this capability. Indeed, my most favorite iPhone widget is developed by UrbanSpoon. At the shake of my iPhone, I can get a nice suggestion of nearby places to eat.

There's a lot of great ideas around LBS and a lot of new companies springing up based on this concept. The only problem is that no one has figured out how to make much money on it. Social networking sites are the ones that have the best traction on LBS but again, none of these sites are profitable. Yes, they have lofty valuations, but unless you were asleep during the dot-com bust or still in grade school, the lesson learned is that valuations mean nothing except to the investment bankers taking their percentage cut and to the founders taking their pot of gold to the bank.


I'd like to mention another TLA (3-letter acronym)for your consideration: NFC which stands for Near Field Communication. I wrote a while back on this topic and why I believe that this technology is definitely the one to watch in the coming years. The only reason why I'm bringing it up again is that earlier this month, Visa launched the world’s first commercial mobile payments service for point-of-sale transactions using Near Field Communications technology. Citibank Singapore and Visa have announced the Citi M1 mobile Visa payWave payment pilot, the first program in Singapore where a mobile phone will double as a credit card.

The Citi Visa pilot, supported by mobile operator M1, will enable cardholders to pay for purchases using a Nokia 6212 Classic handset at more than 750 merchant locations across Singapore. Participating merchants include cafes, restaurants, book stores and retail and music shops.

Not to be outdone, MasterCard Worldwide partnering with Blaze Mobile have introduced the Blaze Mobile MasterCard PayPass, a mobile payment sticker that can be used at any of the 141,000 merchant locations that are currently equipped to accept PayPass contactless transactions. Though this program uses NFC technology, it's still "close-but-no-cigar" since its all about the sticker and not really the mobile device.

As quoted in the Mobile Marketer earlier this week, Pam Zuercher, head of product innovation for Visa, Foster City, CA says, "With 4 billion mobile devices worldwide and 80 percent of the world's population living within range of a cellular network, Visa has a significant opportunity to offer its products and services to geographies where they don't exist today, and enhance the consumer payment experience."

Having financial heavyweights such as Visa and MasterCard rolling out their pilot programs is a huge step in the right direction. What this really translates to is an acceleration of the development of the worldwide infrastructure required to support touchless commerce transactions using the mobile device as the medium of the transaction.

While smart people continue to struggle with how to monetize Location Based Services, monetizing Near Field Communication is an absolute no-brainer. How? By taking a cut off each transaction - a practice that is already happening. And it's not just banks making a bundle off skimming off the top of each transaction. Payment escrow services like Paypal (which made a whopping $2.4 billion in revenue last year) take a cut off each commerce transaction also.

California-based Vivotech is one major force leading the way in many of the NFC payment pilot programs. Their web site says that they are looking to 2010 when full commercial rollout will begin. Certainly a topic and a company to keep your eye on!

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