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Show Me The Money: Mobile And Social Commerce Set To Converge In 2011

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.  Contact him today to learn more.

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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 to 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.

group-buying-sites

The Bridge: Special 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 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 they can measure in both financial upside and foot traffic. They also tap exisiting SMB marketing budgets by hijacking a portion of pre-allocated marketing dollars away from traditional media via no-risk performance-only 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). 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.

ebayMoving The Merch: “Redemption Is Mobile Commerce”

The quote above is from Dan Gilmartin of Where.com and I agree. While redemption of printed or digitally displayed group buying coupons 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 like spas or tours, but retailers need to link campaigns to actual sales and mobile commerce is the best way to capture this value.

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, especially for retailers.

Ebay’s mobile commerce success is evidence that consumers are willing to transact on a mobile device, with $1.5 Billion in mobile sales logged in 2010, a 3X increase over 2009. In just the 30 days before Christmas 2010, eBay transactions were valued at over $  in gross merchandise, 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.

Coda-research

2011: The Year Of Mobile Commerce

In the frenzy to check the social media Facebook-Twitter-Blog “yes box” or build an app, mobile commerce sites were passed over, and consumers have been left to “pinch and zoom” and fumble with large format websites not optimized mobile devices.

How big is this mobile commerce opportunity? In July of 2010, only 12% of online retailers had a mobile site that allows a purchase to be converted and only 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 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 cloning it for mobile ignores key differences in mobile vs at-home consumer behavior.

Rise of Social Commerce

Social Commerce: Waiting In The Wings

Of the 620 million consumers using Facebook, the most active 200 Million access it 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? Increasingly in 2011,  retail brands will use Facebook to promote special deals for fans, but also give them the option to buy what they are promoting, by linking to a mobile commerce page. Facebook might-well offer these tools, 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 mobile commerce solution providers need to leverage the technical integration with the “etail technology stack” to create Facebook Commerce tabs, so secure transactions can take place within the branded Facebook consumer experience. The social element comes in when, for example, purchases driven by special deals offered to Facebook fans can be shared within (and extended to) a buyer’s social graph, after they are made.

Mobile-Payments-M-Commerce-Transactions

Tap, Tappity, Tap: NFC  Taps Into Established Consumer Behavior

Mobile/social commerce is the next step for purchases of any size, but mobile payments at point of sale for smaller transactions is will also emerge as a hot topic in 2011. It has taken a decade for this to catch on in Japan, and this will not be easy, but NFC will emerge in the next few years as the best way to both validate mobile proof of presence, and conduct small transactions using value deduction from a secure, preloaded digital account contained within the device. 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 that only NFC meets this criteria.  Watch for NFC tags to start appearing in pilots/tests on out of home advertising, packaging, and even wine bottle labels. These links need to go somewhere, so NFC will support the rapid growth of mobile commerce, as “buy it now” takes on a while new meaning.

 

Conclusions

Mobile commerce drive revenues and proves location-specific redemption of special offers that can be promoted via traditional and social media marketing. Redemption takes the form of transactions linked to brand-controlled 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 growth of mobile commerce sites.

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 discounted mobile commerce purchases are  not only shared and compared, but increasingly parlayed into additional converted mobile commerce sales. Transactions that leverage this same technical backside etail integration and occur within Facebook will not be far behind.

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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 currently working on a project for mobile commerce solution provider Unbound Commerce. Contact him today to learn more.


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More Stories By Wilson Kerr

Wilson has 11+ years experience in the Mobile and Location Based Services (LBS) space. Recently, he became Director Of Business Development and Sales for Unbound Commerce, a Boston-based mobile commerce solution provider. He has deep expertise in the areas of mobile commerce, social media, branded location integration, branded content licensing, and is knowledgeable in a broad range of navigation technologies. Wilson has worked with top tier brands, content providers, device manufacturers, and application developers, including Nokia, Unbound Commerce, Tele Atlas/TomTom, The Travel Channel, Langenscheidt Publishing, Intellistry, Parking In Motion, GPS-POI-US, and others. Wilson is a blogger on all things location-based, edits the LBS topic page on Ulitzer, teaches a Social Media 101 class, and has served as a panelist and speaker at Mobile LBS conferences and networking events. Wilson has held positions in Business Development, Sales/Marketing, and Digital Licensing at The North Face, Outdoor Intelligence, Fishing Hot Spots Maps, Tele Atlas North America/TomTom and, most-recently, Unbound Commerce. Wilson left Tele Atlas to start Location Based Strategy, LLC in 2007. Company Website: http://www.LBStrategy.com. Twitter: @WLLK

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