2015 Predictions

3 February 2015

Payments, commerce, data and mobile is this blog’s focus. I’m very very fortunate to have so many great friends, customers and partners in this area. My thoughts are not my own, as I’m greatly influenced by my “environment”.

I’ve made many new friends because of this blog. The funny story that comes to mind was in August of last year when the CEO of a Fortune 50 company comes into the room and says “ahh.. the INFAMOUS Tom Noyes”…  (never a good way to start off a first date.. but we had a good laugh and thrilled he reads my blog.. ). Honest dialog has a way of creating great friendships. Thanks to all of you for providing such a fantastic environment! You make writing this thing fun.

2014 Prediction Eval

Before you bother reading my 2015 predictions you should probably see if it is worth your time. Best way is to evaluate what I projected last year in my 2014 Predictions

  • Consumer Privacy. Grade – C. Not much happened in 2014 on consumer side. I’m holding with my prediction, just not certain of timing and “tipping point”. How will we know when it happens? Imagine a Sony like incident with consumer data.. Regulated businesses like MNOs and Banks are highly attuned, Apple is the best in class here (consumer champion of privacy see Blog). The Ad industry is dependent upon tracking and data sharing in a very, very grey market approach. There is a better way… 2014 is perhaps the year of “awareness” with Snowden, DEA tracking license plates, State department keeping all of our phone records, to new super cookies on mobile. The next logical phase is ACTION.
  • Retail banking. Grade – A. Huge transformations going on. Prepaid and GPR products are segments growing at over 35% CAGR, US branch footprints are shrinking (see Blog)
  • Debit Volume. Grade – D. Not much going on here, after the DC court of appeals struck down Judge Leon’s ruling on debit interchange (March 2014).  Not much consolidation in PIN debit either. I do believe US debit will evolve to look like Canada’s Interact and Australia’s EFTPOS.
  • Mobile BEACONS. Grade – F. Nothing happening in 2014. Looks like more of a 2016 thing. I’m holding to my projection.. but missed timing completely.. thought Apple would launch beacons at their Sept 9th
  • mCommerce Payments. Grade – B. Summer 2015 is where we will see substantial progress. We see that the networks have turned over the new 3DS CNP scheme to EMVco last month (see link). As Payments move into the OS (see blog), Paypal doesn’t have one. Amazon, Google, Apple, will make SIGNIFICANT dents in Paypal as the platformcontrols authentication and authorization. Amex/Visa/MA’s new rules on tokens, combined with consumer privacy concerns, will accelerate the trend.
  • Specialized HardwareGrade Gives way to Commodity Hardware- Grade A.. makes way for commodity hardware and software. Launch of POYNT and CLOVR are best examples.
  • Host Card Emulation. Grade – B (for 2014), Grade A (by August 2015). Google did indeed push HCE into Android. With the death of ISIS and SEs in US phones.. things will be heating up in 2015 with a new Google launch.
  • EMV. Grade – D?. It appears to be happening.. I bet it would have been pushed back… I have the cards, but don’t yet see the retailer infrastructure. The chip and signature (vs Chip and PIN) is still a very strange one. It would take me 3 days to explain the politics behind it. What really baffles me is Samsung’s planned launch of LoopPay this summer (with Visa support).
  • Banks have given up on payment innovation. Grade – A+. I have a copy of the ApplePay issuer agreement (Sept 2014). Just can’t believe the banks have taken it on the chin like this.. not only ceding mobile to Apple, but Tokens to the Network and 15bps. What do they have left?
  • ISIS WILL DIE.. Grade – A+. Money ran out in Dec 2014, sale will be complete by March.
  • Apple will have NFC. Grade A+ … ApplePay 9/9/2014.. I was wrong on 3 things.. I projected October (it was 9/9) and there would be no SE, and Beacons would be part of launch (to wake up payment app). Big news (below) is that ApplePay will be in browser by summer 2015.. Paypal will be crushed with a double whammy on “value”: usability and a new rate tier (20-40bps off credit) for tokens in CNP.
  • Unlocking the cloud and authentication. Grade – B+ . Apple has done an amazing job here. See my blog on brokering identity.

Summary Grade: B+ . Looks like I’m a little aggressive in projecting the new stuff (Beacons, Identity, EMV, HCE). Except for EMV and Debit, I’m still confident in the predictions (philosophically) but my timelines are too aggressive in most cases.

2015 Predictions

These predictions based upon the Structural Changes in Payments which I discussed last month.

Big Picture Predictions

  1. The Year of Partnerships, new Clusters and multi-tenant walled gardens (forced by Apple/Google Dominance).
  2. Mobile moves from Small World organization to Real World Orchestration (my next blog)… starting with merchant friendly value propositions. You must be where customers are, or influence them in the real (offline) world. We have spent the last 10 years enabling a handset that does more than take calls and connecting it to the virtual world. We will spend the next 10 connecting it to the physical world. From POS Payment, Google Shopping Express and Beacons to Door opening and document signing.
  3. Tipping point of Privacy (Apple Defines Best Practice)
  4. Politicization of networks. Government regulation in internet prioritization, payment networks, social networks, advocacy networks and advertising networks. Networks are needed for the efficient life of a firm. Star network resembles dictatorships in social networks, and “channel masters” in business networks. Star networks are optimal for business, however we have grown quite used to the state of `organized criticality’, the scale-free, democratic and highly complex social net. Government involvement in networks usually does not improve efficiency and can lead to significant disruption.  Take a look at what Europe has created in SEPA.. a standard that no one will invest in.
  5. Collapse of “wallets” into Payment in the OSmCom trumps eCom. Tokens take over in eCommerce w/ ApplePay, Visa Checkout and Google Wallet
  6. Marketing… the year of measurement… and beginning of pay for performance
  7. The most trusted consumer brands will remain: Apple, Google and Amazon… with banks suffering most as their products become commodities and mobile rendering physical footprints moot.

Tactical/Deal Predictions

  1. Apple will launch aggressive effort to bring ApplePay into Browser by Summer 2015
  2. We will have a new rate tier from Visa and Mastercard based upon tokens in CNP (see EMVCo 3DS PR)
  3. Google will GO BIG in launch of new wallet in an HCE model akin to ApplePay. It will have dynamic tokenization. Google will excel in getting retailers private label and loyalty cards integrated, and pass Apple in BLE integration (in store).
  4. Alliance Data will be bought by JPM, C, Paypal, Hedgefund+Acquirer or Amex. ADS is my top stock recommendation for 2015, V/MA are my long term.
  5. Samsung will Launch LoopPay with support from Visa by September 2015.
  6. Visa will complete purchase of Visa Europe (hopefully at a 2015 discount) with strong dollar and weak EU growth.
  7. MCX will pivot to a payment instrument within another wallet (think Target Redcard) vs a wallet unto themselves .
  8. Beacon pilots will launch in top 20 retailers. In store navigation, product location, couponing and gamification will be first uses.
  9. Facebook payment will go live and be integrated into a new form of social advertising, where you are paid based upon your ability to influence your network, will see first pilots. Facebook will remain king of CPG advertising
  10. Behind the scenes there is tremendous progress in the collaboration of Banks, Telecos, and Mobile Platforms to Validate Identity. Short term impact is near elimination of mobile payment fraud. 2015 will be year of formalizing an identity verification infrastructure (in the cloud).

2015 the year of Partnerships

Google and Apple against Everyone Else?

I don’t have time to go over all 15 of my projections.. will do so in coming weeks. Over the last 6 months network and system design has consumed my thoughts like nothing else: proprietary networks vs. open networks, integrated vs modular, distributed innovation vs controlled platform, Apple vs. Google, Amex vs Visa, net neutrality vs. prioritization. At what point does OPEN win? My blogs on the subject was Value Creation and Distributed Innovation, Banks non-Banks and Commerce Network and my two favorite books are Platform Leadership and  Weak Links by Peter Csermely (viewable on Google Books here).

Any analysis of this area must focus on Apple. Wow! What a machine! The most loved brand, the most profitable, highest in consumer satisfaction, most sales per square foot, creator of new categories, inventors of new consumer experiences, trusted by the most affluent demographic, champion of privacy… on and on. Is Apple an exception?  Can any company ever aspire to replicate their success in any industry? How can anyone else compete in areas they touch? Do the rest of us just pick up the crumbs? Apple’s latest results show that their model is improving, garnering over 86% of the “mobile” industry’s profits (see Forbes).

network evolution nodes to consortium

Open networks are harder to build, and are certainly less profitable than closed. My prediction on “year of partnerships” is due to necessity, NOT the efficacy of collaboration. Few companies can compete with the data advantage of Google, Amazon and Facebook. Apple’s trust and reputation advantage is perhaps even more insurmountable. For large companies it may take 2-5 partnerships in a focused area. Imagine the data challenges small companies face.  This is not a technical challenge as much as a business one. How many successful partnerships have you seen (elephants dancing).  Remember that are injured elephants facing as structural changes in consumer behavior, mobile, information, distribution, trust … impact products and strategies. CommerceSignals is working to help bridge this gap, but that is for another blog.

Where Google, Apple and Amazon are self sustaining Stars (networks), clusters and multi-tenant walled gardens are forming to compete in a quasi open model.  The challenges here are not technical, but organizational and value creation. History reveals few consortiums renowned for their efficiency.  Value is best created where it can be controlled and monetized in “small worlds”.  Networks in business are functional in 2 areas: around a specific function with broad use (Visa/MA, Credit Bureaus, ?Android?) and where market forces can take operate (NASDAQ,  …). This is my big hypothesis… would greatly appreciate input here.

2015 must be the year of merchant friendly value propositions. Logically, the majority of commerce happens in a retailer.. and hence the “solutions” must as well. The inability to partner will give way to platforms that enable partnership… optimally platforms that would allow millions of “lightly structured” interactions to test 1000s of value propositions until something sticks (this is Commerce Signals). Take beacons for example.. we know that Apple can maintain security and confidentiality.. but the retailer must install beacons that work for everyone and have a business case (consumer insight). Consumers want to know how insights will be used. How do you manage the agreement between Manufacturer, Beacon Provider, Apple, Retailer and Consumer?

iPhone 6 – Tipping Point for Platforms

As I outlined in iPhone 6 – Apple’s Strategic Opportunity, I believe the iPhone 6 represents the dawning of a new age of mobile “platform”. What was a music manager with a phone has turned into the most secure, easy to use device ever created. The factors of competition have changed, it is no longer about camera resolution, storage, and screen size. The visible (obvious) attributes of competition have become a commodity; as are the “problems” that your phone solves (telephone, music, calendar, pictures).  Where previous phones helped you manage items in your “small world”, the iPhone 6 has become both the secure key to the cloud with the ability to broker interaction in the physical world (NFC, BLE, identity, tokens). The “convergence device”. See my blogs Brokering Identity and Authentication in Value Nets.

Unfortunately, Apple is so focused on the consumer it has no ability to partner. While there is no company better in creating devices that thrill a consumer, there is perhaps no company worse at building partnerships and business models where value is shared. Given Apple’s cash hoard, my top recommendation.. create a new division focused on network.. helping connect consumers to the physical environment they live in (thermostats, health, retail, cars, advertising, …). This is NOT a handset function.

Abrupt end here.. this blog has been in partial completion mode for 6 weeks. I had to get it out. Will articulate my views on the other “Top 5” predictions this month.

Apple… Payment via BLE/Beacons will still happen (but when is issue)

2 May 2014

Many great blog comments. Let me go through some generic questions/answers.

Apple wants BLE/Beacons/Tokens… but will not release wallet with this capability for following reasons (my best guess):

  • Issuers must approve Token/Beacon model: creation/provisioning of token (TSP), use of tokens (not eCommerce), and assurance information.  This was the reason behind my Assurance Blog this week.
  • Apple is keeping the Banks in the dark to protect information on the launch (probably a good idea).
  • Similarly merchants are being kept in the dark, no coordinated acceptance infrastructure. Thus iBeacons will likely be a phase 2 (or limited phase 1).
  • Politics/negotiations/existing agreements. My guess is that Apple does want revenue from this new product, but will be disappointed. There is no economic model for a wallet provider in a card present transaction. This has been one of the reasons why NFC/Provisioning has failed, and the credit card only model.
  • Payment is NOT the focus of Apple’s new services and Hardware..  (see blog Apple Greatest Asset – Ability to Change Consumer Behavior)

What makes most obvious sense for Apple in Payments?

In a perfect world Apple would convert all 600M cards to tokens and leverage this both for iBeacon/POS presentment AND for eCommerce. I believe this was their initial plan.. and still their plan. My view is that all eCommerce merchants and wallet providers would be glad to let the networks exchange COF for tokens.. a few of the big ones are my clients. Lets just say the network’s message “you have to work with EACH issuer on card present pricing, value proposition and data”.  Yep it is that bad.

As you can imagine Issuers want revenue, credit card usage is incremental revenue.. Everything else in the iBeacon/token model above is a LOSS, thus Issuers are not exactly running to support. Thus token business issues abound for: debit, eCommerce, wallets, data, control, acceptance, …etc.

For example, Banks hate the idea of losing card not present (CNP) rates for eCommerce and having the networks locked into the TSP role. So Apple must keep a token in the phone, and also keep the 600M cards on file until the payment networks can get the cojones to define standards around assurance, tokens in eCommerce, and force issuer acceptance of risk and card present rates. Issuers have a strong case for caution, as Networks did this before (eCommerce/CNP liability shift) and failed miserably (see my blog vbv/msc Failure, and Bruce Schnieier’s similar post).

Data, data, data. My belief is that Apple is taking on the role of consumer champion (see blog Apple’s Platform Strategy: Consumer Champion). Apple may not realize that the this new architecture meaningfully impacts both bank and merchant data services.  Merchants and processors will no longer have insight into the consumer card number, which in many cases is used for analytics and loyalty.

Issues/Unknowns

  • Durbin/Hybrid Card. Per rule you can NOT wrap a debit card with a credit card. The card type must also be know to the merchant. If the Apple wallet has only one card per network, and consumer can store a debit card.. then that card must be a debit card.  Perhaps Apple doesn’t know this, or the implications. Someone is pulling a fast one.. the networks certainly know this rule, and undoubtedly will feign ignorance when consumers try to register their debit cards… only to find out later that they can’t be used.
  • Acceptance. If Apple launches with credit card only they will have failed to deliver any merchant benefit, or act as consumer champion. Similarly merchants (ex MCX consortium)  will have little case for adding contactless acceptance if they don’t know the card/cost or everything is a credit.
  • Process for taking the 600M cards on file and auto registering them with the networks. This could be going on now, with the networks building an issuer interface for approval.
  • Tokens. Apple really wants to make this happen, but only Amex and Paypal are in a position to support. My recommendation to Apple would be to get moving with tokens and Amex… as a lever to make V/MA networks get moving.
  • Pilot Merchants. Beyond the Apple store, I would pick Macy’s, Nordstrom, American Eagle, Gap, and a few others out as the most innovative in payments.. and the most likely pilot customers for a iBeacon shopping and checkout experience. Keep your eyes peeled.
  • Will Apple move forward with an iBeacon breakout without network/issuer support? This would make sense in the US, where contactless adoption is terrible. Apple certainly has the expertise (and cash) to go strong on iBeacons, go around the networks and treat as CNP transaction (owning the fraud/risk) and manage the fraud internally. The could do this in select retailers (in US), and focus EMV Contactless capability outside the US.

I believe Apple didn’t put NFC in the 5s because they thought that they could launch Beacons without the Network’s support.  When launched all iPhones will be able to take advantage (only BLE H/W dependency).

Apple’s iPhone 6: GSMA’s NFC thrown “Under the Bus”

28 April 2014

I must get 10 calls a week on Apple/NFC.  I’m quite concerned that Apple’s new capability will be completely mis-understood by the press, so i thought I would preempt all the NFC zealots out there with my own tag line.. So far I have a 100% success rate in predicting Apple and NFC (blog). Don’t know if I can keep it up as I read the tea leaves. Let me start with facts, then give you my informed opinion

Facts

  • There are 2 aspects to NFC: 1) the communication protocol as defined by the NFC Forum (this stays as is), #2) The GSMA’s construct and standards for how NFC can be deployed in a handset (things like TSM, SE, SWP, …). See http://en.wikipedia.org/wiki/Near_field_communication
  • Neither Google, Apple, Merchants nor Bank Issuers are in favor of the GSMA’s NFC platform. This is a fact in my mind… particularly in the US.
  • Host card emulation has created a way for all Android 4.4 and above phones, with and NFC compliant radio, to provide application access to the NFC radio. Phones cannot be certified for 4.4 unless they demonstrate support for HCE. See blog HCE – Now the Preferred Contactless Approach
  • The new card present scheme “Tokenization” was announced Oct 2013 at Money 2020, with the specification out last month (see EMVCO details). See my blog Payment Tokenization.
  • HCE and tokenization play together well. Tokens must be coupled with something else (Device ID, Bometrics, PIN, …). For those that have been MIS informed by Gemalto… there is NO NETWORK connectivity requirement for HCE/Tokens. A token representing a card is in software on the phone. It can be stolen.. but it is a worthless piece of information without the other identity/device information. HCE gets around the EMVCo Contactless encryption requirements.. and operates under the TOKEN specification. But there is much grey area here.. as “acceptance” of token is not clearly defined (including pricing). Thus the only “covered” presentment method from a phone to a POS is through a card emulation application. Token acceptance will be coming later, but “assurance levels” are making this a cracy space (tomorrow’s blog).
  • Update – I see that the smart card alliance has already responded to my blog here. The need for a trusted execution environment.. blah blah blah. Did you know that in an EMV contactless transaction that the PAN is sent in the clear? Yep… the need for the TEE is around signing a cryptogram (to verify where the card came from). Obviously I would much rather hide the PAN in a token, and enhance with phone information than give the PAN in the clear and sign something. There is no need for a TEE in payments, just as I access my bank through my browser on my PC without a TEE.. I can also do so with a phone. arghhh…
  • Tokens align well to banks and payment network dynamics and investment. US Banks had been working on a tokenization initiative for the last 3-4 years in the Clearing House (blog).
  • In both HCE and Tokenization scheme, the ISSUER IS IN COMPLETE CONTROL of their card. Issuers generate the token, and authorize the transaction.  US issuers have their own token infrastructure in place from the TCH initiative (above). I wish I could emphasize this more. With HCE, issuers control which application(s) can present a card..  just as they did with within the TSM provisioning model.
  • There are HCE pilots that are live and functional. So much for not being “viable”. The issues are not around technology, but rather validating fraud controls and device ID. Issuers can be up and running with either Mastercard or SimplyTapp in weeks.
  • Perfect authentication and security is a nightmare to Banks.. Banks make money on ability to manage risk. There is no risk in a world of perfect authentication. Or as Ross Anderson says “if you solve for authentication in payments… everything else is just accounting”. See Blog – Perfect Authentication is a Nightmare for Banks.
  • MNO led payment schemes (the GSMA’s platform) are failing in OECD 20 (mature markets, but are leading the way in Emerging Markets). I have seen the transaction numbers… Reasons are multifaceted (see blog for reasons).  The technology works.. it is beautiful.. problem is business/consumer value proposition and consumer behavior.
  • Historically, new POS payment instruments and POS payment behaviors are established through frequency of use. There are 3 categories: Grocery, Gas, Transit. Transit is the global success story (Docomo, Suica, Octopus, …)
  • 4 Party Networks have a limited ability to change rules, Issuers dominate in influence. Amex is 3-5 years ahead of every US issuer in terms of capability, strategy and execution.

 

Opinion

  • Apple’s biggest asset is their ability to change consumer behavior (blog).
  • Apple’s iPhone 6 will be coming out in October (my best guess) with payment capability. It will have the capability to communicate in the NFC protocol.. but nothing about the new iPhone will be compliant with the GSMA’s architecture
  • Apple’s new capability is NOT ABOUT PAYMENT, but about Commerce (see blog) as they act as a CONSUMER CHAMPION (see blog).
  • Tokens play very, very well into an iBeacon model. Given that tokens are worthless “keys” that refer to a card.. these keys can be exchanged in the open with BLE. There is no need for near field if the information is worthless.
  • -Update- From my perspective I would not refer to Apple’s efforts as HCE. Where Google’s HCE repurposed an existing chipset to create a new software model. Apple has designed a new hardware model. Apple will be using bank issued tokens. Banks will look at using these delivered tokens in combination with: 1) Apple derived authentication score, or 2) MNO device ID from Payfone, 3) Bank mobile application information, 4) combination of above.
  • Authentication is key to Apple’s role in consumer trust and commerce. Per my blog Authentication in Value Nets, Apple is 3 years ahead of Google and everyone else in integrating software and hardware level security (ex Secure Enclave). Google has a path for a secure execution environment through Arm’s Trustzone, but this is more challenging as Google does not mandate hardware architecture (yet).
  • Apple’s new POS payment method will involve finger print on phone, and token presentment to retailer. It can be transmitted via NFC, BLE, QR Code.. or whatever the merchant and consumer can agree on.
  • How does Apple make money on this? I don’t think they will make money on payment, but rather on #1 Authentication (charging the card issuers for an authentication score), or #2 Marketing (charging merchants for consumer insight/ability to reach consumer).
  • Gemalto continues to cast stones, and miss revenue targets. Mobile Communications revenue of €225mn (-5.7% YoY growth, -1.0% constant currency) came in below consensus of €245mn (2.7% YoY). This is the second consecutive disappointing quarter for Mobile Communications, with revenue down 4% YoY in 4Q13. Why would any MNO invest in a secure vault on a Android handset when any application can go around it. That’s right.. there is no lock on the capability. This tremendously impacts the willingness of MNOs to “invest” in incremental features.. when their “investment” can be used without their permission.
  • What will REALLY impact Gemalto is a VIRTUALIZED SIM. Don’t think this is coming in iPhone 6.. but is it coming (see Viritualized SIM).
  • The next 2 years will see mobile payments as a “1000 flowers blooming”. Top card issuers will extend their mobile banking applications to enable card emulation (BLE, NFC, QR, … whatever).
  • Payment Networks will be working to expand the 16 digit PAN to something much larger to support dynamic tokens. They will be working to transition Cards on File to tokens.. with perhaps a card present value proposition.
  • MNOs will realize that they have a unique ability to create a device ID that competes with Apple’s biometrics. Payfone is the leader in the US, Weve in the UK. Beyond this, they may also begin to realize the $5B KYC opportunity I outlined 5 years ago.

Rewiring Commerce: Four Phases

18 Feb 2014

One my most often repeated lines is mobile payments are not about payments.. but about everything else. We have no payment problems today. When was the last time you left a store without your goods because the merchant doesn’t take your form of payment? Payments are the easy part, and experience has shown that it takes a VERY VERY long time to change consumer payment behavior (20 yr plus, see my blog on Behavior Change).  My personal bets are all around mobile’s future role in commerce….  I call it Rewiring Commerce (previous Blog).

As an engineer I like to take a control volume approach to systems. To some extent, marketing is a measure of inefficiency… heat or friction in a mechanical sense. Marketing spend makes up almost 19% ($750B) of total US Retail sales (around $4T), with most of that spend untargeted and non digital. Even these astounding numbers do not begin to touch the total opportunity in Commerce Efficiency (ie  transportation costs, spoilage, mark downs, discounts, and inventory write offs). Rewiring Commerce is much more than Apple’s beacons talking to you when you shop, it’s about how local suppliers/producers could meet needs locally, providing manufactures with tools to better estimate demand (eliminating waste and transportation), mass customization,  resource optimization, value orchestration..  yada yada yada.

Who is impacted by rewiring commerce? Everyone that buys or sells. What is key? Data, trust, identity, platform.

rewire impact

I see disruption of Commerce (ie rewiring) occurring in 4 phases.

rewire commerce phases

The First phase of mobile commerce disruption was focused on improving information flow (ie Showrooming).  Second phase is underway, experimental and highly fragmented with one my favorite companies being Blue Kangaroo. In this phase there is context to the mobile interaction without the consumer’s direct input. This is where Apple’s beacons will play (see blog Apple and Physical Commerce earlier this month).  Perhaps the best categorization of Phase 2 is in shopper marketing from Booz & Company.

shopper marketing

Third Phase: Intent

Theme here is consistent with a physical world version of Google’s search word marketing advantage. In this phase retailers and manufacturers work to influence your behavior before you are in the store (as opposed to in store beacons in phase 2). One of the start ups I’m incubating is focused on helping any company purchase intent information.  For example, when someone turns their car off in a mall parking lot they may be intent on shopping. Or when you buy suntan lotion you may be intent on a beach trip. Google is light years ahead of everyone in physical intent… why do you think they want to put up all those free wi-fi hot spots. But their information is extremely limited.. much more location based than behavioral.  In this phase retailers use their consumer insight in combination with others to provide relevant information to specific consumers.

 

In order for consumer adoption to take place there must be real value. Value requires:

  • knowing the customer (historically),
  • knowing the customer now (intent),
  • having the ability to touch the customer before they shop (publishing),
  • trust (consumer permission),
  • ability to run an advertising campaign,
  • ability to target consumers based upon insight,
  • ability to track consumer behavior after the campaign (redemption/purchase)
  • tracking requires ability to work with retailers

Yep.. that is a long, long list. What companies can do this today? Google, Apple, Amazon and Facebook.. with Google and Amazon 3-5 years ahead.

There are several strategies at play here today, but the biggest challenge is in obtaining real world intent. Several “Omni Channel” plays leverage online intent to create off line behavior to get around the real world data challenge (only if the consumer starts online).

  • Platform: Amazon, Apple, Google, Facebook
  • Retailer Focused: Square, Amex/Loyalty Partners PayBack Card, OminChannel, Paypal
  • Big Data: IBM, …
  • Big Government: NSA (meant for a laugh, please don’t add me to Echelon/PRISM)

Third Phase Summary

In this phase the Retail environment is not changing substantially, we are better using mobile to interact with consumers within the current retail and advertising constructs. Junk mail and random push messages are gone. Consumers are choosing to “trust” entities that consistently deliver RELEVANT VALUE. Services will be focus toward affluent consumers, as the focus of value will be around discretionary purchases. As efficiencies improve, we will begin to see a massive shift in advertising spend toward digital channels and specifically mobile.  The key for mobile monetization will be in Consumer Identity Arbitrage.. with Apple’s framework the clear leader.

Fourth Phase – Value Orchestration

I discussed this in Value Creation and Distributed Innovation, Static Strategies and the Rewiring of Commerce and in Future of Retail.

In this phase we will see real world changes to how Commerce is conducted, including: store formats (footprint, layouts, inventories), advertising, online/omni channel, customized products (by region and individual), local sourcing of goods, new intermediaries, brokering of: trust, identity, anonymity,…..etc.

Retailers and Mobile Network operators will begin to translate their distribution and data advantages into new platforms. Big data will be used to project your behavior, and recommendations will be targeted to you. I’m not going to go into much detail here, as this is where most of my big bets are…..

This is not a good wrap up.. but I have work to do.

Next Blog: Targeting and Attribution