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Over one hundred billion dollars is spent annually on “traditional” online advertising, and each of the last three years have been prematurely declared the year of mobile advertising. For too long, the promise of mobile advertising has been based on technical, location-awareness-related advances the industry has heralded as beneficial, while these same advances scared consumers away.
This is finally changing and consumers are discovering simple, easy iterations of mobile technology that provide simple, easy solutions for problems they want solved. Saving money via special offers/coupons at known, nearby business locations is the best example and Groupon and their kind have driven socially-promoted savings on purchases that can be measured in increments of $Billions.
The Bridge To Mobile Commerce: Deals and Group Buying
Groupon is the fastest growing technology company in history and Founder/CEO Andrew Mason links their success to providing a “hybrid of local advertising and local commerce”.
Groupon’s unprecedented success should serve as a lesson to the various elements involved that melding established consumer behavior and technology in a simple, easy way that also leverages consumer acceptance of social media is a key factor for success.
The real power of this model lies in the fact that incremental, tracked purchases are made at the beginning of the consumer interaction, generating pay-for-perfomance, frontside ROI metrics that blow other “wait and see” methods of marketing out of the water. When you add in a “social media award” component (share the deal and get the deal for free), this model becomes even more powerful, as the campaigns quickly become viral and market themselves.
While Groupon, Living Social and the rest have been written about extensively, I am not sure the full potential impact of this model is understood. These companies solve an existing problem for local businesses by converting the traditional coupons, sales, and special offers they have used for decades into tracked offers that can measure in both financial upside and foot traffic. They also tap exisiting marketing budgets by stealing pre-allocated dollars away from traditional media via no-risk performance-based value propositions (that work).
This is in contrast to much-touted hyperlocal mobile push advertising campaigns that require a problem to be explained, before a retail business or brand will considering paying to try to solve it (assuming they agree the opportunity for ROI is there). More importantly, most retail businesses still do not have a way for mobile banner click-throughs to land a consumer in a place where a purchase can be converted. This is where mobile commerce comes in.
The quote above is from Dan Gilmartin of Where.com and I agree. While redemption of printed or digitally displayed group buying vouchers brought into a restaurant, hail salon, or spa (for example) works well-enough, retailers that sell lower-margin goods want converted sales that “move the merch”, as they say. Giving 50% of your margin away to Groupon and their kind, is a fine solution for high-margin, service-oriented businesses, but retailers need to link campaigns for specials to actual sales.
Converted sales transactions, rather than impressions rendered or click-throughs to a standard website, are what attracts small to medium-sized retailers that gain little from traditional brand marketing. Since non-standardized point of sale systems for redemption are still the Achilles Heel of the mobile coupon model, tracked, mobile commerce conversions will emerge as the new, essential “redemption metric” in 2011.
With $1.5 billion in mobile sales logged in 2010 (a 3X increase over 2009), Ebay’s mobile commerce success shows that consumers are willing to transact on a mobile device. In just the 30 days before Christmas 2010, eBay transactions were valued at over $100 million in gross merchandise value, a 135% increase over last year (Mobile Commerce Daily).
“Today’s consumers are transforming the shopping experience with their mobile phones, and retailers who have not broken down their siloed channels will not be able to keep up,” says Jim Bengier, global retail industry executive for Sterling Commerce.
2011: The Year Of Mobile Commerce
In the rush to check off the branded app and social media platform “must-have yes boxes” , mobile commerce sites were passed over by retail brands, and consumers have been left to “pinch and zoom” and fumble with large format websites not optimized mobile devices.
How big is the mobile commerce opportunity? In July of 2010, a scant 12% of online retailers had a mobile commerce site and an even smaller 2% had an app with checkout capability (Acquity Group). Even with these dismal brand/retailer adoption numbers, US mobile-commerce (sans travel bookings) grew from $400 million in 2008 to $3.4 billion in 2010, and growth is predicted to be “explosive” in 2011 (Mobile Commerce Daily). Show me the money, indeed.
In 2011, linking a smooth-running mobile commerce engine to special offer and redemption platforms/efforts will emerge as essential, as this is the simplest way to track success in a way most retailers understand. Retailers who sell online should build robust mobile commerce sites linked to their etail “technology stack” in order to capture converted sales, driven by mobile (or social) marketing. Simply “scraping” an etail website and shrinking it to fit for mobile ignores key differences in mobile vs at-home consumer purchasing-related behavior.
Social Commerce: Sharing The Wealth
Of the 620 million consumers using Facebook, the most active 200 million access the social network through their mobile device.
Why do large retailers and brands spend money building up millions of Facebook Page fans and then drive them away from Facebook to convert a sale? It’s even worse if they send a mobile consumer to a standard website.
Increasingly in 2011, retail brands will use Facebook to promote special deals for fans, and give them the option to buy what they are promoting by linking to a mobile commerce page where that product is cued up. Facebook might-well offer these tools for businesses as a part of Facebook Deals, as they look to emulate Groupon’s incredible success.
Social commerce will take a while to catch on, but is on the horizon. It is an extension of mobile commerce, because technical integration with the “etail technology stack” is needed to create Facebook Commerce tabs, so secure transactions can take place within Facebook pages.
The power of social commerce really shines when, for example, mobile (or Facebook commerce tab) purchases driven by special deals offered to Facebook fans can be shared within (and extended to) the buyer’s social graph, after the purchase is made.
Tap, Tappity, Tap: NFC Taps Established Consumer Behavior
I’d be remiss if I did not mention NFC (Near Field Communication) in this post. While mobile and social commerce are next up for online purchases on a smartphone, mobile payments at point of sale for smaller transactions will also be a hot topic in 2011. The path to a “mobile wallet” will be rocky, but NFC will emerge as the best way to both validate mobile proof of presence, and conduct small “tap to buy” transactions using value deduction from a secure, preloaded digital account contained within the device. Consumers know NFC and it is easy to use. The fact that three big US carriers have buried the hatchet long enough to line up behind NFC via the formation of Isis, is a powerful signal.
These inherently mobile “real life hot links” need to go somewhere, so NFC will support the rapid growth of mobile commerce as well. Watch for NFC tags to start appearing in pilots/tests on out of home advertising, packaging, and even wine bottle labels.
Mobile commerce drives revenue and location-specific redemption of special offers that can be promoted via social media marketing. Redemption takes the form of real mobile commerce transactions linked to promotions that mimic the powerful Groupon model, without giving up the margins. Mobile commerce will grow rapidly in 2011, as branded apps fade in importance, in direct proportion to increased data speeds, accelerated location-enabled smart phone adoption/usage by consumers, and the creation of mobile commerce sites by retailers.
Facebook will increasingly play a role in every brand or retailer’s marketing plan. With 200 million accessing it via their mobile device, Facebook will become a place where discounts, sales, and special offers are not only shared and compared, but increasingly parlayed into converted mobile commerce sales. Facebook commerce transactions that leverage this same technical backside integration and occur within Facebook will not be far behind.
Wilson Kerr (@WLLK) is a former Tele Atlas exec and started Location Based Strategy, LLC in 2007 to help clients harness the power of mobile . He is also running sales for for mobile commerce solution provider Unbound Commerce. Contact him today to learn more.