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Sometime this year, 50% of Americans will own a web-connected smartphone, yet less than 20% of online retailers have websites optimized and formatted to serve these mobile consumers.

I am calling this the “mobile commerce gap”. The reason for this inequity between demand and supply, in my opinion, is because the internal resources required for online retailers to properly develop a mobile commerce site have been pulled in other directions, even as smartphone adoption rates have exploded. As a result, a majority of online retailers are offering their mobile customers a very poor online shopping experience. This, in turn, results in poor conversion rates and missed sales, not to mention the fact that consumers are left with the general impression that the retail brand is not serving their needs.

Think about it, how many times have you visited a site on your smartphone and immediately left when you saw it was not optimized for mobile? According to Google, this happens 79% of the time!


Why this “gap”? The first distraction came in 2009 when retailers and brands alike were told they must “drop everything and build  an iPhone app”. While apps are great for some things, a vast array of surveys and studies have concluded that consumers much-prefer a mobile site over an app for commerce. The second was the social media craze of last year, as Facebook, Twitter, and the rest dominated headlines and became “must-haves”. Both soaked up internal IT resources and distracted online retailers from building the mobile-optimized sites needed to serve their increasingly-mobile customers.

So, what are the factors online retailers should consider, as they investigate offering their customers the ability to convert sales from their mobile devices via a mobile commerce site? I hope the following 5 points will clear some things up:

1) There is No “Mobile Web”

While it is true that most “standard” websites are capable of being viewed on a web-enabled phone, few consumers are willing to “pinch and zoom” their way into a converted sale on a standard site jammed into a small screen. Ever tried this? It’s not fun.

While the need for mobile-optimized sites might seem obvious, many retailers justify not investing in mobile commerce by citing low mobile-originating traffic to their  current site (usually 2-5%).  Of course, this low-traffic negative feedback loop is caused by the fact that mobile customers seldom return to a site after being greeted with such a poor user experience. The retailer then concludes there is no need to invest in the “mobile web”. Again, there is no “mobile web”.  There is only the web viewed on a mobile device.

2) Mobile Commerce is NOT Mobile Payments

There is a lot of “noise” right now regarding mobile payments at point of sale, when the phone is used as a “mobile wallet” to pay for coffee and the like. While mobile payments might-well emerge as an issue retailers need to address, this  is not the same as mobile commerce. Mobile payments involve banks, credit cards, investments in point of sale infrastructure, coupons, NFC,  loyalty cards, and a whole array of complex issues.

Mobile  commerce is simply the act of ordering something online, from your mobile phone, via a mobile-optimized version of a website. Retailers should not confuse the two, or delay the launch of a mobile commerce site while trying to understand mobile payment options and what uniform technology may or may not emerge victorious.

3) Mobile Commerce “Actualizes” Mobile Marketing

Remember, every time a consumer clicks on a marketing or advertising link to your website on their mobile phone, they should land on a site that is optimized for the device they are accessing that message on.  Whether a tweet, a Facebook post, a banner ad, a QR code, an SMS message, or an email,  the mobile consumer who acts upon the message should be able to convert that action easily into a sale, via a mobile commerce site. If you are a retailer and do not have a mobile commerce site and are spending money on social media marketing or mobile advertising, you are likely paying to promote links to a very poor customer experience.

4) Integrate, Don’t Duplicate

There are several options for creating a mobile commerce site. You could use a transcoder to “screen scrape” your standard website and shrink it to fit a mobile screen. You could “sub-out” your mobile commerce efforts to a third party, by letting them “handle it” with their own separate and duplicative mobile store. OR you could leverage and extend your current, proven and trusted  e-commerce operations into mobile via an integrated solution. This is a superior approach, in my opinion, as it means you are avoiding duplication, while also maintaining full in-house control and fueling mobile commerce from the same infrastructure you trust today for your e-commerce operations.  A software-based integration approach takes a bit more effort on the front-side, but the long-term benefits are significant, as this single effort, if done properly, can serve as the foundation for not only mobile commerce, but also Facebook  commerce and commerce-enabled iPhone and Android apps, as needed.

5) Devote IT Resources, Plan For Growth

The single biggest reason I hear retailers give for not moving on mobile commerce is a lack of IT resources. Simply put, this is a poor excuse. While it may be true that IT is backed up, the measurable, tracked ROI that mobile commerce offers should elevate this to the top of the list. The ROI is extremely rapid, by even the most conservative estimates of the resulting tracked, incremental mobile commerce sales. Retailers and brands that are out ahead of the curve will be the biggest winners, as long as they plan for growth and chose the right approach.


Compelling Numbers

Still not convinced that mobile commerce is a “must have”? In recent weeks Google and other mobile marketing players have begun encouraging retailers to sit up and take notice of this “gap”, since they can’t sell online retailers mobile marketing campaigns if they have no place for the target audience to “land” when they click though a mobile campaign ad/link.

Google and others are pointing to studies and reports that contain numbers that are hard to ignore. Here is a sampling:

  • $1.9 Billion: Worldwide online mobile sales in 2009.
  • $23.8 Billion: Expected worldwide online mobile sales in 2015.
  • 61%: The percentage of mobile users unlikely to return to a site not optimized for mobile.
  • 79%: The percentage of Google retailer advertisers who DO NOT have a mobile site.
  • 78%: The percentage of consumers who prefer a mobile site over an app.
  • 62%: The percentage of smartphone owners who have purchased physical goods via their phone in the last 6 months.
  • 2-5%: The typical percentage of mobile traffic coming to a non-optimized retail website.
  • 5X: The typical increase in conversion rates, upon the launch of a mobile commerce site.
(Adobe-Mobile Shopper Insights, Google, eMarketer, Shop.org, Coda Research, Unbound Commerce)

Want even more evidence? I recently attended the Mobile Commerce Summit in NYC and the Keynote speaker was Steve Yankovich, VP of eBay Mobile. eBay has quietly become the largest online retailer in the world and were an early adopter of mobile commerce.

The numbers Steve shared regarding their mobile commerce success at the conference were astounding. Some highlights:

  • $4 Billion: The revenue eBay expects to generate from mobile commerce in 2011, double what they sold on mobile in 2010.
  • 100%: The percentage of eBay’s m-commerce sales they report as being incremental!
  • 38 Seconds: The average time someone spends on eBay for a m-commerce transaction (versus 20+ minutes on their standard site).
  • 100: The number of people eBay reports hiring for their mobile commerce team.
  • 50X: The predicted increase in what eBay will spend on mobile marketing to support the success they have seen in m-commerce.

We are finally at a point where the numbers are so compelling that few can argue against the importance of having a mobile commerce site. The simplest way to put this is, “If you do not have a mobile-optimized commerce site, you are losing money“.

The Time Is Now

Your customers are mobile and they are very likely trying to access your site on their smartphones right now. If they still see your “standard” e-commerce site crammed onto a small screen, you are delivering a poor customer experience and, as such, are missing incremental mobile sales. Try it yourself!

Some experts expect mobile commerce to grow to become as much as 10-15% of online sales. Retailers should weigh the risks of launching a solution that is not integrated with their current operations, since what might not be a problem at first could emerge as a big issue when mobile commerce makes up a significant percentage of online sales. Find the resources, take the time, and consider building/launching a mobile site ASAP that leverages and extends current online sales operations.

You will provide consumers a positive mobile interaction with your brand that also drives significant incremental, tracked revenue. Mobile commerce is here and the time to take advantage via a mobile commerce site is now!

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Wilson Kerr (@WLLK) is a former Tele Atlas exec, LBS consultant, and now leads Sales and Business Development for  Unbound Commerce.

Contact him today to learn more. Mobile: 303-249-2083.

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BREAKING NEWS:

Want to check out the potential impact of location-based Personalized Shopping in real-time? Well, for a while today, you had to wait at least a little while longer to review the role group-buying site Groupon will play.

Their site went down and temporary chaos ruled, due to unprecedented consumer demand for today’s unique deal from national retailer GAP. The (ongoing) deal is a limited time offer for a $50 gift card from GAP, for $25. Free money.

This looks to be the first time a national deal of this sort has been offered and the response shows the true power of offering pre-qualified opt-in consumers a tracked campaign that can be tied to incremental (frontside) retail sales lift.

I have written about this trend previously and the space is red-hot.

Groupon Site Crashes Due To National Gap Deal Interest

By signing up for Groupon, consumers ask to be told about deals near them. Since the GAP is a national retailer, they have locations in every city that Groupon has local coverage in.

My local Groupon Boston discussion board was packed with confused customers, dealing with a site trying to process too much revenue too fast. The good, validating news for Groupon and other Personalized Shopping players like Living Social and RueLaLa is that these confused customers were/are all frantically trying to buy the deal.

This is the online/mobile Personalized Shopping equivalent of a frenzied 6 AM rush through the doors on Black Friday.

Here was the official response from Groupon:

_________________________________

From Moderator “Josh At Groupon” (14 minutes ago):

Everyone experiencing site issues:

Thanks for your patience and sorry for any inconvenience. We’re experiencing an unprecedented level of site traffic today and are monitoring the site all day. If you’re experiencing some technical troubles with the site, I suggest trying to reload the page a few times. If you continue to experience trouble and need to leave the site for a while, just check back before the end of the day and buy your Groupon then! This deal will be available until midnight. Again, very sorry for the trouble.

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In Boston alone (I refreshed a few times and the page loaded without a “Something Broke” error message), at the time of this writing this, 5898 people (and counting, fast) bought the deal (and there is still over 9 hours to go). That’s almost $150,000… at mid-way through the deal, and in one city.

Groupon is in about 75 US markets, so, even if we stopped the deal now, that’s in excess of $11 Million in revenue, sold to about 450,000 people, in a single day.

And, assuming Groupon customers do not melt-down their servers entirely, there is still 9 hours to go. Phew. No wonder they are valued at  over $1 Billion.

Some lessons here are to 1) carefully consider the impact of the fine print on hundreds of thousands of shoppers 2) do not under estimate the enthusiasm of a populace seeking a great deal near them and 3) location-based Personalized Shopping is here to stay and is about to get a whole lot bigger.

Read more about my take on Personalized Shopping here and let me know how I can help your brand take advantage.

-WK

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Wilson Kerr (@WLLK) is a former Tele Atlas exec who started Boston-based Location Based Strategy, LLC in 2007 and is helping his clients harness the power of Personalized Shopping. Contact him today to learn more.


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Wilson Kerr (@WLLK) is a former Tele Atlas exec who started Boston-based Location Based Strategy, LLC in 2007 and is helping his clients harness the power of Mobile Proof Of Presence. Contact him today to learn more.

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The promise of location-based mobile advertising has been painfully slow to materialize. It seems the last five years have all been declared “the year”, with the usual cliché examples flogged. Most brands and their agencies still pace the sidelines, waiting and watching. If they do add mobile to their spend, they tend to replicate the click-though web advertising approach, and miss the full potential.

In this post I will explore the rush of start-ups seeking to perform an end-around on the mobile advertising blockage, by betting that personalized, actionable, tracked, direct to consumer sales promotions that are location-based will finally unlock the true potential of mobile. In past posts I have discussed incremental, tracked sales revenue “lift” and the importance of remembering that brands make money by selling more products through authorized retailers, not by exposing their brand or driving people to a corporate informational website.

 

Driving Boots In The Door Is Key

The difference between an ad and a personalized location-based special offer is subtle, but important to understand, as we consider why “personalized shopping” start-ups are springing up so fast (and attracting so much VC attention). Mobile marketing, when linked to a call to action based on real-time proximity to a retail location (and honed by a personal preference profile) can finally show ROI by linking itself to proven in-the-door foot traffic (and converted sales). Thankfully, the platforms are now there to allow this to happen.

Discounts and special “limited time offers” are not new and have been around since the first baker made a double batch of bread by mistake and needed to sell the excess before it went moldy. By dropping the price, he increased sales volume and attracted new customers to his bakery. By selling more, he discovered he got a better wholesale volume price on the flour. So, even though he grossed less per loaf, his net profit per loaf held up, and he sold more bread and made more money. Simple math.

I have an admission. I check-in on Gowalla,  tweet on Twitter, post Facebook updates based on where I am, scan QR codes, use apps to find business addresses, and see a lot of contextual mobile ads, yet, after almost 3 years as a full-time mobile LBS consultant, I have never actually bought anything as a result of a location-based offer. That streak ended last Tuesday.

$25 For $50 Gift Certificate Prompted My First Location-Based Purchase!

I spent $25 on a location-based offer from Living Social, for a $50 gift certificate at a nearby restaurant called The Fireplace. (My wife is a “foodie” and enjoys dining out the same way I enjoy a day on a trout stream). How could I not? What is really amazing is that, in the 2 days the deal was offered, 925 other people also bought it, generating $23,150 in tracked, incremental revenue, all tied to a single, specific marketing message. Obviously Living Social takes a %, so The Fireplace does not take all this in, but the real value to them is the opportunity to win over repeat customers when they come in the door and sit down for a meal. What traditional ad or coupon or campaign could they possibly run that offers this sort of (tracked) response?

My First Purchase Based On A Location-Based Special Offer!

I checked Living Social competitor Groupon as I was writing this up, and they were offering a nearly identical deal from The Fireplace as well! (Groupon is a volume-“triggered”, limited time, personalized, local discount offer platform). I thought I was misreading the numbers…but over 4,500 people paid $20 for a $50 gift certificate, so far. Wow…that’s over $90,000 generated from a single deal, and counting. When is Groupon going public?! Are they hiring!? Check out the numbers on these deals. Remarkable.

Volume "Triggered" Discounts

Living Social and Groupon are but two such companies harnessing the power of delivering opt-in deals based on location and, I believe, they are on the leading edge of a “personalized shopping” craze that is about to sweep the mobile industry. Groupon, by the way, is not even 2 years old and is valued at least 1.2 Billion (yes, Billion). If they can sell 4,500+ visits to a single restaurant in a few days, what else can they do?

Another standout to watch, besides Living Social and Groupon, is RueLaLa. They serve up invite-only fashion brand discounts (via daily “boutiques”) to 2.4 Million members! There are hundreds more personalized shopping wannabe’s starting up now, to vie for a slice of the personalized shopping pie. Here is a quick sampling; Eversave.com, Woot.com, DailyDeals.com, DailyDeals.net, SaleCamel.com, FuseDeals.com, DailySteals.com, and DailyCheckout.com.

The ones that will win will use algorithms to learn from real purchases and deliver increasingly personalized and location-based offers that drive (tracked) foot traffic into physical locations.

Platforms/apps that track in-store metrics showing both foot traffic (MPOP) and sales conversion (redemptions) that are fueled by personalized location-based special offers (delivered by smartphone), will bridge the gap between the virtual world and the physical world. These platforms (with Mobile Proof Of Presence as a foundation) are about to become the hottest thing going.

Gowalla, Foursquare and their kind and doing some great things, but should consider that advertisers will want accurate metrics regarding brand interaction, within a retail environment where hundreds of brands might be present. For coffee shops and restaurants, their model works pretty well, but inaccurate and “fake” checkins are going to prove an achilles heel as/when the brands with the real money to spend get a taste of “tighter” MPOP accuracy via other options.

In April of this year, I wrote a post about the significance of validated MPOP (Mobile Proof Of Presence) and maintain that hyper-accurate MPOP validation linked to special offers, not mobile ads for brands, will be the key to finally unlocking the full potential of mobile. And it’s happening.

The LBS world was recently rocked by news that a pre-launch application called Shopkick had attracted $20 Million in VC funding. That’s right, the application has not even launched in beta, and the company has attracted what Mashable calls “an obscene amount of investor attention”.

 

Why, you ask? Because Shopkick intends to validate MPOP in a whole new way (they call it the Shopkick Signal), via installed in-store equipment that eliminates fake checkins and delivers marketing messages based on very tight proximity, within a store and without GPS. This means brand-specific checkins are possible, and they are accurate. According to a recent Techcrunch article, Shopkick co-founder Cyriac Roeding is quoted as saying, “This is all about foot-traffic. So far, no one has nailed a way to entice people to actually come to the store that makes sense to the retailer“, Roeding says. He goes on to say,“This is the physical world equivalent of an online click,”. Hmm.

Attracting "Obscene Investor Attention"

I assume the platform also will learn actual shopping and buying behavior and personalize the offers it serves up based on a powerful cocktail of mobile delivery+retail locations+brands carried+loyalty rewards+MPOP+special offers+redemption/ conversion tracking.

The platforms (like Shopkick) that capture accurate metrics generated by opt-in consumer interaction with retail locations (and sales conversion of branded products carried within those locations) are going to become very attractive to retailers, brands, and agencies sick of being screaming at by their clients to provide just such a solution. Remember, this is information that consumers ask for, and they are rewarded with savings on products they buy, in stores they visit.

Brands and retailers alike might finally step off the sidelines and onto the field, if they can track ROI and link incremental sales to campaigns, while providing a positive consumer interaction with both the brand and the retail stores authorized to carry it. The era of personalized shopping is upon us and mobile, at long last, might finally starting living up to its potential.

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Wilson Kerr is a LBS Consultant focused on helping companies understand and harness the power of  Mobile Proof Of Presence. He is also wondering  how he will slip the waitress his 50% off Living Social coupon at The Fireplace without his wife noticing.

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Wilson Kerr (@WLLK) is the Founder of Boston-based LBS consulting firm Location Based Strategy, LLC and helps brands understand location-based forces that drive changes in human interaction and communication. He can be reached at Wilson@LBStrategy.com.

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As a LBS consultant seeking to fortify my position as a thought leader in the area of checkins and Mobile Proof Of Presence (MPOP), I scan daily blog posts, articles, tweets, newsletters, and emails for real, live examples of companies harnessing the potential of MPOP to drive sales lift.

Many experts (myself included) have opinions about how impactful the phenomenon of “brands delivering personalized marketing messages to opt-in consumers at the exact time and place they are most-able to act upon these messages” will be. My use of the word “phenomenon” here tips my hand, but specific examples that can be seen as validating use cases are generally still hard to find.

Checkin

Checkin Platforms Have Paved The Way

While the potential has been in-place for some time, it has only been in the last 6 months that the stage has finally been set for cases of  lift to be demonstrated. By “lift”, I mean proven, incremental sales tied to opt-in location-based marketing campaigns delivered via mobile platforms that leverage the fact that a consumer willingly notified the offer-serving platform they were in physical proximity to the point of sale. We have Fourquare, Gowalla and other “checkin” platforms to thank for this shift, as their success has accelerated consumer and brand awareness (and calmed the hand-wringing “privacy alarm” naysayers).

The Meat Of The Matter

The Meat Of The Matter

While checkins are hip and fun, the real meat of the matter here is in mobile payment systems, offer redemption tracking, and algorithmic “learnings” by the platforms that deliver real, actionable value to consumers.

This is what will get us over the hump, as the offers are not only unintrusive, they are personalized, actionable, and tied to a system that gets smarter over time, based on real consumer redemption/purchase behavior. Pie in the sky? Amazon nailed this years ago and new “customized daily deal” companies like RueLaLa, Living Social and Groupon are out of the gate and growing fast.

On July 14, Mobile Commerce Daily Associate Editor Dan Butcher posted an article that stopped me cold. Titled,“McDonald’s Goes With Near Field Communications For Sales Lift”, it succinctly describes a program that utilizes nearly every ingredient of (what I believe to be) the recipe for a new form of location-based marketing. Dan’s post was covering a July 5 post by Senior Analyst Red Gillen of financial consultancy Celent titled, “A Merchant’s Argument For Mobile Contactless Technology“. Note that the (bold) emphasis is mine, throughout.

Red Gillen

Red Gillen Of Celent

Mr. Gillen researches payment initiatives and visited with McDonald’s in Japan, to discuss mobile technology. He starts off by saying, “..The focus of our discussion was McDonald’s use of mobile technology for sales lift purposes — i.e., as a channel to distribute coupons and special offers, to entice customers into McDonald’s restaurants.”

He is already speaking my language. “Sales lift” is another way of saying incremental purchases and his immediate shift to the importance of using mobile to drive more customers through the retail door struck me. Too many view the “mobile web” as a smaller version of the web and miss the obvious real world implications of being able to walk around, while online, with a device that knows where you are. Coupons are old news but linking Near Field Communication (NFC) as the “mobile technology” behind redemption by a specific customer and, thus, proving that customer was in a specific store at a specific time is not.

He goes on to describe the program in detail by saying, “Customers (now about 18 million of them) register as members of McDonald’s “Toku” promotional program.  On a weekly basis (in time for the weekend), McDonald’s sends program members a mobile e-mail, with a list of coupons and promotions available that week.  Customers then have two choices.  One is to use their mobile browser to open mobile coupons, which are shown to McDonald’s cashiers (a promotional code is clearly visible).  The other, if customers have already downloaded the McDonald’s app (which 8 million have already done), is to download the coupons to their contactless mobile wallet.”

Wow. An opt-in program. Time sensitive offers delivered to a mobile device. Two ways to redeem the coupons. One of them involves mobile NFC payment tied to a downloadable opt-in branded app that serves as a “contactless mobile wallet”. Hmmm.

McDonald's Mobile Coupons

McDonald's Mobile Coupons

Red is just getting warmed up. Remember this is not a pilot or a concept, this is  happening. He goes on to say, “Either way, the customer gains the benefit of the coupon.  However, with the contactless version, there is a special advantage.  Namely, McDonald’s is able to close the loop between coupon distribution and redemption.  By associating redemption patterns with a customer’s “Toku” membership ID number, McDonald’s begins to develop intelligence about that customer’s preferences.  Based on this, McDonald’s is able to configure and send out highly personalized promotions (by menu item, specific restaurant, time of day/week, etc.) to the customer’s mobile phone, which the customer is more likely to redeem. This increasingly tightening marketing loop cannot be achieved with plastic membership cards, nor with mobile browser-based coupons.”

So, the NFC redemption system learns as it goes and is able to generate increasingly personalized time/place/item offers based on real behavior within the application. This is the “walk-by-and-get-an-offer Starbucks Cliche” so often flogged in LBS circles, but it’s real and it’s live now and, apparently, used by 8 million opt-in consumers in Japan, in conjunction with a distinctly American brand that is hardly a fringe player in the quickserve landscape.

The finale is contained in the last paragraph, “Once customers tap their contactless coupons, the data is leveraged to immediately send orders back to the kitchen..This just goes to show that contactless is not just about payments.  In fact, it often isn’t about payments at all..”

 

NFC Contactless Payment and Redemption

Red’s point is that, even though NFC is most-often associated with cash-free payment (for example in mass transit ticketing), the real power of this model is that the system is using the personalized, tracked coupon redemption patterns to learn from the consumer’s behavior in order to both prove increased store visits and sales (lift) and increase efficiency via the speed of the resulting transaction.

I have covered why this is so important for brands to understand in previous posts, but suffice it to say I am excited to finally see the first real examples of companies leveraging the power of tracked, cutting edge mobile LBS technology, while also respecting and harnessing the power of consumer preference.

________________________________

Wilson Kerr (@WLLK) is the Founder of Boston-based LBS consulting firm Location Based Strategy, LLC.

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Wilson Kerr is the founder of LBS consulting firm Location Based Strategy, LLC.

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On December 21st, as we all got ready for the 2009 Holiday “unplug”, it was reported that local business rating and review information aggregator  Yelp rejected a hefty $500+Million takeover offer from Google. Bold move, but why did they walk away? No one seems to be certain.

Yelp’s window stickers tell a tale of building local merchant trust and a lot of grunt work by “boots on the ground”. By this I mean the literal and figurative wearing out of shoe leather for the purpose of winning over single-door business owners one by one. Explaining the power of Location-Based advertising and the impact of having real people maintain a fresh and vibrant listing infused with reviews, offers, specials, and the “inside scoop” is something best done live and in-person. This crucial element of Local Search is hard to scale and an expensive proposition, even for Google.

Google is the powerhouse leader in the race for infusing local business information into maps and they seem to be rolling out new programs on a weekly basis. Google’s Favorite Places Program attempts to add a powerful subjective element to their local search listings.

By the way, I recently blogged about Google’s Favorite Places as a new program, but was in San Francisco last week and spotted a real, life-sized Google “map blob” on the sidewalk!  A pic I took last week is below.  It was dusty and looked to have been there for some time, so I asked the business owner and it seems the true launch of Google Favorite Places was back in July! Was I the only one to miss this? Google tapped minor local celebrities and had them name their favorite places. Google then delivered giant “map blobs” to the selected businesses, with window stickers! Watch hotshot SF Mayor Gavin Newsom help Google kick-off this new program in this short video clip. Watch a video of the entire Google Favorite Places July SF love fest here.

Photo I took of a lifesize Google "map blob" on the sidewalk in SF last week.

Google is a giant looming ever-larger and their complete dominance might seem inevitable. Their stock was up 85% in 2009. Many local businesses do sign up with the Google Local Business Center and Google is pushing their 2-D QR code door sticker “scan for offers and info” angle aggressively.

That said, it seems Yelp has created a following with enough momentum that Google would rather buy vs build this hyper-local connection. Surely a big factor is the time and cost of collecting this information and scaling it on a national/global level. But why has Google failed to connect with local businesses the same way Yelp has? While tens of thousands of nationally-branded restaurants, for example, could be added with single ad deal, both Google and Yelp know that the real proof in the pudding for Local Search power is the subjective, variable, time-sensitive attribution that comes from trusted like-minded consumers promoting small joints that “only the locals know”. A Taco Bell is a Taco Bell the world over.

The Google “Don’t Be Evil” mantra is harder to maintain when they seem on the verge of dominating nearly every aspect of our mobile/LBS lives and positioning themselves as a “must-do” solution for local businesses. Could Google be growing so big and so powerful that simply Being Google Is Evil?

So, why did Yelp walk away from a cool half billion? It could be that they are in secret negotiations with another player. It could be because they think Google will come back with more money. It could be because of many reasons. But perhaps it is because they realize they are riding the first wave of an anti-Google movement and want to see where this wave is headed. There might be a lot of upside for those offering an effective alternative.

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Wilson Kerr is a former Tele Atlas Business Development Exec and founded Boston-based LBS consulting firm Location Based Strategy, LLC in 2007.

Wilson@LBStrategy.com    iPhone: 303-249-2083 (BOSTON)

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By Wilson Kerr of Location Based Strategy, LLC

The speed that wild Google wireless rumors transform into fact is astounding. After just a few days of frenzy caused by leaked information about Google employees all getting FREE Google phones to test, a front page Wall Street Journal article (yesterday) announced the “confirmed” impending arrival of the Google Phone. Not a phone powered by Google’s Android operating system sold by a carrier for a subsidized price, but an actual Google device sold by Google directly to consumers, subsidized by Google, that could be used with any carrier network.

Remember that carriers create the profits that allow the real cost of a phone to be masked. While most new smart phones on the market today costs a few hundred bucks, it only takes a few months to surpass this one-time cost in subscriber fees to the Carriers. They apply some of this profit backwards and use it to subsidize the real cost of the device.

By linking the phone to the carrier, the carrier essentially works with the device manufacturer to lure the consumer via artificially low phone prices. The carriers battle with multi-million dollar advertising campaigns over coverage and partner with manufacturers to offer slick new phones to obtain that crucial new subscriber win. Of course, there is little pressure to drop the rate plan fees, since a few giants dominate and most cool phones offer no choice in carrier. If you have an iPhone, note how much you paid for it and what you have paid AT&T since that day..

Google has been watching from the wings while preparing methods for extracting more value from the actual use of the phone via the infusion of alternate value-add than can be collected in fees for traditional voice or data plans. I have written about the many programs Google has in-place for changing wireless advertising and generally targeting the point of sale in the real world, after a consumer has (literally) navigated to a store location where an advertised product or service can be purchased. Since the Google phone is not linked to any carrier, how will they be able to subsidize the price of the device and avoid coming into the US market with a $600 phone?

Google is setting the stage for a radical move that will change how the wireless world thinks about charging for phone usage. It will happen sooner than expected and I am not sure how many will see the significance when it does. On this day I will call “G Day, 2010”, a Google phone will be used to buy something. Not order something online, but to make a real purchase.

The location of the store will be displayed via Google Maps and the buyer will only have to deviate slightly from their daily routine of travel. The consumer will scan the 2-D Google Favorite code on the door and a special offer will be displayed. The point of discovery will be known to be a personalized, time-sensitive Google coupon unique to that specific store, and displayed at that exact moment. The duration of the visit to the store and any other products searched-for while in the store will be captured. A litany of other facts will be melded together in the Google cloud to make the phone that made the purchase more-intuitive, so the owner of the phone appreciates it even more and saves money in the process.

I suspect this first landmark purchase on G Day, 2010 will occur through the use of a pilot program Google Checkout system that leverages NFC (Near Field Communication) technology built onto the phone and a connected Google reader provided to the participating business at no charge. No cash will change hands, the merchandise sold will be automatically removed from the store’s inventory and the consumer’s pre-loaded Google account charged. The final stage of the transaction will be that the Google advertising account of the store will be charged not for the display of the ad that caused the consumer to discover the special, but for a % of the purchase made when the consumer acted upon the offer.

Why is this important regarding carriers and Google’s push to launch a Google phone while the industry shakes its head and wonders just what they are thinking? Because the carriers will have to compete to be the one selected by consumers to allow the phone to function. Usage plan prices should (thankfully) plunge and Google will be in a very good position to rewrite the book regarding how average revenue per user (ARPU) is arrived at. If they can generate enough in advertising fees as a % of tracked incremental transactions, perhaps they can even pay the carrier for the service, and give the already-subsidized and activated phones away. The first carrier to do this will be in a very good position to join forces with Google, the others might perish, since they will not be able to compete with the power of alternate value add machine that Google has built, while watching from the wings. Watch for this sale that will mark G Day to happen sometime this year.

Then again, perhaps, in some small shop owned by a Google employee near Mountain View, CA, it has already happened..

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Wilson Kerr is the founder and principal at Location Based Strategy, LLC, a consulting company dedicated to helping brands, content owners, and retailers understand the LBS opportunity and create strategic initiatives to tap its potential.

www.LBStrategy.com

Boston iPhone: 303-249-2083

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Google’s Location Based Advertising Storm

Google’s recent moves in Location Based Services (LBS) advertising are like dark clouds on the horizon, all moving toward each other, while they suck in energy and gain speed. The collective LBS world is becoming jittery, and for good reason. Google is redefining location based advertising and is setting the stage for a takeover of traditional advertising, using free location-based consumer functionality as effective and unobtrusive cover.

On October 12, 2009, well in-advance of predictions on this subject, Google ditched map provider Tele Atlas and rolled their own proprietary base map as fuel for the massive Google Maps engine. On October 28, they dropped the “free navigation bombshell” by announcing that the Android platform (running on approx 35 mobile phones, including the much-touted Droid) will feature no charge turn-by-turn.

Ads In Disguise

While the “Free Nav” story captured headlines and the stand alone navigation world is still reeling, few seemed to notice that Google added clickable, tracked POIs (Points Of Interest) on their newly copyrighted maps. With no search needed, business listings populate the map, based solely on one’s propensity to be in physical proximity to these listings. A consumer can redeem Google Coupons fed into Google by the merchants and make a (web) purchase through Google Checkout. The listings are packed with tracked functionality such as photos, reviews, click to call, website links, brands carried, average prices, etc. Google collects all the information from the actual business owners, through the Google Local Business Center (video link).

These on-the-map business locations are ads in disguise. They function like ads but look and function like free increased functionality. Google is proving, as it did with their turbo charged cash printing behemoths Adwords and AdSense, that location-based advertising carefully masked as contextually/location relevant functionality that improves the mobile user experience will be not only used by millions, but welcomed.

Recently, Ulocate Communications (the people behind the Where platform) dropped banner ads for their Where app via their new Spotlight program. Their users rejoiced! What they really did was change the format of the ad to look like a business location and the effectiveness of these “non-ads” soared by 3X!

“(Our strategy is to) provide a successful monetization tool that doesn’t compromise the user experience, but rather serves to enhance it,” said Lacy Garcia, director of marketing and communications at uLocate, Boston. “We have received positive feedback from users thanking us for removing ads, when in actuality we have not removed them but rather replaced them with Spotlight.”

The Secret Sauce

While brand agencies of record try to catch up, scramble to build mobile sites, or dive headlong into branded apps, a powerful, easy way to compete with Google is for LBS companies to provide platforms that allow national brands to leverage their secret sauce. Only the brand owns the right to use their mark and only the brand really knows where its locations are. Stores open and close and phone book databases for sale can be months or years out of date. While Google is smartly tackling the hardest part first (local businesses), there is an opportunity for platforms to target national brands with simple, tracked, branded POI programs.

Navigation device  manufacturers have been selling powerful drivers of incremental store visits, without taking advantage. Connected PNDs should all be, at least, tracking POI search display and counting the consumers directed to these business locations. Every off or on-board navigation application should be doing the same. Even if they are not used to hit up brands for ad money, these metrics are powerful proof to the power of infusing maps with Alternate Value-Add and these metrics will be important when new programs are rolled out to brands that do not want to park their entire LBS marketing budget in one Google parking place.

Metrics Now For Money Later

Google is collecting metrics regarding the effectiveness of these branded locations, for the future. Google controls what businesses are displayed, and to whom. Imagine the value proposition of a program with a proven track record of driving real consumers into real businesses, versus to their websites? Imagine the impact of removing a business from a Google LBS advertising program, once it is established and Google can prove the impact of ending participation?

While Google has populated the map with generic icons for now and is not charging the business owners for being on the map (literally), it will not be long before we will see their Ad Extensions program kick in, allowing advertisers to upload entire store location lists, with brand icons, and link them into tracked performance-based campaigns.  These icons-as-ads will infuse powerful cooperative name brand recognition into Google Maps and will be a potent new weapon in the Google ad arsenal.

Like a bullet shot in the vacuum of space, most navigation devices and platforms are fired once (at the point of sale) and then speed off forever, loaded with untracked POI searches and untold millions in incremental revenue generation, with very little of it currently tracked or measured. These platforms can and should take advantage of their user base and the fact that millions of business locations are being delivered today. Smart agencies will seek out these opportunities to partner with the platforms now, so their brands can learn and actively participate in shaping how the programs evolve and the agencies can offer their clients more than just an integrated Google campaign, going forward.

A Google Future Based On Percentage Of Incremental Sales

The real end-game could be for Google to collect a percentage of actual, tracked sales via Google Checkout in real stores. Forget pay per click or run rates on text ads (or Google/AdMob’s banner ads) that drive traffic to websites, the Google “non-ad” model fueled by the “secret sauce” of brand plus location could-well lead them to a future where the business only pays for incremental actual converted sales. It’s not a stretch to imagine Google actually giving their much-anticipated Google phones away for free, with subsidized carrier plans, to enable the armies of millions to go about their daily lives while their phones get smarter and deliver opt-in services and offers and what they want when they want it. If they can make more off the phone in advertising based on a percentage revshare of actual proven incremental sales than the device sale or the Carrier use fees, why not lower the barrier to entry completely? I doubt the Carriers care if Google or the consumer pays them. Then there is the 700 MHz spectrum Google won at auction…

A Google Future That Is Already Here: Google Favorite Places

A missing link in the “tracked incremental sales based on location” future is already here. It was announced yesterday Dec 6 and it’s called Google Favorite Places. It is hard to overstate the potential power of this new Google program and I hope the LBS world sees the potential impact it has. While I thought sneaking in branded POIs on their new maps was big, this is far-bigger.

As I type this, Google QR (Quick Response) code store front stickers are being shipped to nearly 200,000 Google Local Businesses. These are those funny rectangular 2D barcodes you see on packaging and they will allow a consumer to stop in front of a business, scan the barcode with a smart phone and access time-sensitive specials, brands sold, coupons, reviews, photos, etc. Imagine the power of knowing that a specific consumer was standing in front of your store and when and if they came in and took advantage of the information on the Google listing in the form of a redemption! If Google Checkout was used, they could obviously track sales volume and whether or not the promotions on the Google listing correlated to what was bought. Imagine the impact of this to local businesses, let alone national brands?

Cost to the business? Free. Cost to download the $1.99 barcode reader for the first 400,000 that access it on the non-Google iPhone App Store? Free (courtesy of -you guessed it-Google). Cost to download the barcode reader on the Google Android App Store? Free.

Speaking of national brands, Google announced today (Dec 7th) that inventory control systems will be fed into Google search for a “Near Me Now” functionality element that will allow a consumer to locate a specific item and find the nearest location that has it in-stock. Once found, a user can use the new Google Goggles to obtain more information about a product.

By giving away all this functionality, Google takes the wind out of the sails of those who might complain about seeing advertising within a paid-for service. Google can then hook consumers on the fact that the advertising is not only non-intrusive and contextually relevant but is linked to location and behavior in a way that actually enhances the user experience, allows the platform delivering the location based “non-ads” to seem smarter and more intuitive, and drive a gold mine of metrics up the rainbow into the Google cloud.

What Can Be Done

What does this all mean? The navigation platforms should seek ways to track metrics using the POIs they deliver today and be working with brands to populate their platforms with ads that do not look like ads. Agencies need to provide innovative solutions and teach their clients about the larger LBS environment, versus simply plugging them into banner ad networks for mobile or building iPhone apps.  It means the collective Western LBS industry should look East to see the future, if they cannot see the Google storm front yet. Companies like NTT DoCoMo have been pioneering tracking incremental sales for years and most people in Japan now use their phones to make purchases.

Advertisers and brands and agencies and platforms all need to watch the LBS horizon to learn from what they see coming and use this impending front as incentive to create and offer local and national brands innovative solutions that can be shown to be effective, as the Google clouds gather and build.

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Wilson Kerr is the founder of LBS consultancy Location Based Strategy, LLC. www.LBStrategy.com

Wilson@LBStrategy.com    iPhone: 303-249-2083 (BOSTON)


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