Inside PayPal's Mobile Payments Initiative

Paypal_text2buy_1 PayPal now lets people pay -- and everyday restaurants and merchants accept payment -- using plain vanilla SMS text messaging.

A PayPal user with an active mobile phone account can send a payment to another PayPal account belong to either an individual or a merchant. PayPal Mobile payments are sent by sending a text message to 729725 ("PAYPAL"), and then keying in the amount and destination of the payment.

In an interview, PayPal spokesperson Amanda Pires said, "Imagine the ability to split a lunch bill. I could just text you 20 dollars." She added, "Our customers told us this is something they want. Everyone's sending everyone else a dollar to try it out. It's addictive."

Retailers should note that this lets a bricks-and-mortar merchant associate their land-line number with their PayPal account. If you're a yoga studio in Denver, and a visitor wants to take a class from you and says "Do you take PayPal?"

"Sure," you say, "Just send the payment to 303-296-1234". While she's standing in front of you, your customer uses her cell phone to text PayPal to have the payment sent to your number. She receives a quick call to authorize the payment, and then, bingo! A minute later you receive an automated call informing you of the payment. (Just to make sure, you go online to check your bank account to see if the funds have been transferred. They have.)

No word yet on payment processing fees. PayPal recently announced a micropayment initiative which processes payments at a rate of 5 percent plus 5 cents per transaction for transactions less than $2. This initiative could save merchants 40 to 60 percent when compared to the industry's current payment processing rates of approximately 2 percent plus 20 to 30 cents per transaction. But, with the cost of handling one mobile-originated SMS, two mobile-terminated SMS, and one automated phone call requesting a PIN, methinks that adds up to more than 5 cents for the transaction. 

For the future of this initiative, look to PayPal's owner, eBay, which recently acquired IP phone service provider Skype. eBay CEO Meg Whitman recently indicated one way Skype might be integrated into its core business might be to add the ability of buyers and sellers to communicate in real time rather than via e-mail, helping to close complex deals in categories such as new cars and real estate. Further, the Text2Buy initiative may help address eBay’s “gray market” issues, in which a buyer and seller take their transaction offline in order to close the deal without incurring a fee to eBay.

The Next Big Thing: The Mobile Phone as a Video Set Top Box

PortablewifiDavid Pogue reviews portable WiFi boxes from Kyocera, Junxion and Top Global -- devices that use the PC laptop card provided by a cellular carrier like  VerizonSprint or Cingular to provide wireless service to PCs anywhere there is cellular service, at DSL speeds (400 to 700 kilobits a second).

The Kyocera box will even let you connect with an EVDO cellphone, such as the Samsung A890 or  Audiovox 8940, with a USB cable. The phone becomes a sort of Internet antenna for the router.

Executives of the new News Corporation "startup" Mobizzo, or the mobile initiatives for Viacom or Time Warner might want to make note of this development. Right now, all of the assumptions are based on mobile video only being displayed on the mobile phone itself. What happens when the phone becomes like a set-top box, and is able to "sling" video (and other multimedia content) from the cell networks to any video screen in a two hundred foot radius?

The carriers, especially Verizon, don't like this development: "Broadband access is designed for individual customers. When customers use unauthorized devices to share the service, they are in violation of their service agreements," according to Brenda Raney, a Verizon Wireless spokeswoman. Verizon had only recently changed their policy, now allowing their subscribers using the LG VX9800, Motorola RAZR V3c,  Motorola E815,  and LG VX8100 mobile phones as high-speed modems for their laptops.

History is repeating itself: When I was with @Home, our financial projections were largely based on charging $40 to $60 per computer, much as we would charge subscribers for extra set-top boxes. While MSOs lost some revenue from the shared connections in the short term, the opportunities from WiFi enabled services like VOIP, combined with superior economics (no truck rolls for adding the new services), have more than made up for the difference.

Link: David Pogue review in New York Times (registration required)

Mobile Telephony + iPod

MotopodApple has sent out invitations for a special event to be held September 7th at their favorite venue, San Francisco's Moscone Center.

"1000 songs in your pocket changed everything." notes the invitation. "Here we go again."

The Wall Street Journal reports that Apple has reached an agreement with Cingular, the nation's largest wireless carrier, to carry the Motorola-made product. The image shown here is a creative imagining of what the phone might look like and is in no way authorized by either Apple Computer Inc. or Motorola.

As Apple faces its own battles with the recording industry over song price - and as significant new players like HMV and Virgin provide more distribution options - Apple might find its hands full.

Apple will need to change its song price strategy. I've been a strong advocate of simple price models - as I've noted before, Sprint's Dime-A-Minute strategy years back was brilliant in cutting through complex multi-state tarriffs to provide a simple, understandable value proposition. The problem is the need for legal music is far greater than the typical iPod target market. Not all songs on a disc are equal, and there are millions of businesses who should be iPod users but at ninety-nine cents a song, the economics - and the appropriate licensing - might as well be on Mars.

We are just seeing the beginning of how touch-tone phones are intersecting with music - not just ringtones, but services like Shazam and others that let you know what song is playing right now (call 703/286-6454 for a slightly different take on this same concept). I think Apple needs to rethink the MVNO (mobile virtual network operator) model that ESPN, Boost, Amp'd and so many others have begun to popularize. I think Apple is still too proprietary ... and this market, like before, may just slip through their fingers if they don't find a way to accommodate the major labels.

Sprint Nextel in NFL Exclusive

NflFresh from announcing the creation of the third-largest wireless company on Friday, Sprint Nextel Corp. announced Monday it has signed a five-year deal with the National Football League to become the league's official wireless sponsor. The company said it will use the estimated $600 million arrangement to provide exclusive game highlights, updated scores, live game video and Fantasy Football statistics to its wireless customers. It said it is working with the NFL to develop much of the original programming, which will feature content from the NFL Network and NFL Films.

Expect this to affect the fortunes of two major initiatives: ESPN's MVNO deal with Sprint whereby ESPN wants to become its own mobile carrier in the same mold as Virgin Wireless and Boost; and efforts by SBC and other carriers to deliver television over Internet protocol (IPTV).

Taking pro football - the best performing sports franchise by most any calculation - out of ESPN's platform is like imagining ABC without Monday Night Football. It's not an absolute deal-killer, but it potentially robs the nascent platform of what should have been its number one draw. I say "potentially" because Sprint Wireless, with its heritage and ongoing commitment to cable operators (Adobe Acrobat required), understand TV programing trends better than the other carriers.

And as for IPTV, which I've blogged here and here - I think a critical aspect of tomorrow's IPTV platforms isn't going to be "how" the programming is delivered to the home, rather "how" and "where" and "when" the consumer is going to choose to watch the video. The early successes of TiVo demonstrate both the consumer appetite for being able to choose when to watch, and also the ease with which the market may be lost. Sprint's less-heralded efforts in IPTV may have a leg up, as they learn how consumers prefer to consume mobile video.

Paid Parking Via Cellphone in Coral Gables

Parking_metersThe Miami Herald reports an innovative system that lets people pay for parking using cell phone text messaging.

The automated system allows drivers who subscribe to simply dial in from their cell phone, punch in the number assigned to their parking spot, and the required costs -- plus a 25-cent usage fee -- will be billed to their credit card. When leaving, subscribers call back and end the billing cycle.

It reportedly takes just six-and-a-half minutes to complete the signup process, which involves entering a credit card, e-mail, license plate and telephone number. A competing service is reportedly operating at the University of California Santa Barbara.

Now that Coral Gables has found a way to increase parking revenues via SMS, how long until they start accepting other types of city fees - such as tolls or public transportation fees - using the same method? To see what may lie in the future, one need look no further than London, which has combined real-time monitoring with SMS-based payments so as to be able to tax literally anything that moves.

Envisioning The Future of Cell Phones

CellphonesastrainticketsAs someone who used to be about 10 years ahead of his time, I've learned that just about every idea, however outlandish, is fair game. For example, a recent notion of  mine putting cell phones on dogs and cats - so guilt-ridden owners can talk to their pets from the road - has been done in Korea, according to CNN. The Textually blog reports on a step even further where the collar detects the dog's emotional state before sending a warning to the owner either via email or SMS. Woof.

So, when thinking of tomorrow's smart phones, we're literally talking about the horsepower of today's most powerful computers - like IBM's BlueGene/L, which can predict weather just a couple of hours in the future for a region as small as a football field.

So it was with great interest I read a speech by Tomi Ahonen, author of Communities Dominate Brands. The Canadian industry association, CWTA, invited him to deliver the keynote to its celebratory event celebrating 20 years cellular telecoms in Canada, and asked him to look 20 years into their future.

I pretty much agree with much of what he says: credit card functionality on phones by 2010, retail acceptance of mobile payments by 2015 to the point where more payments take place over phones than traditional credit cards, and built-in video projectors in phones by 2020. Remember the scene in Star Wars where Luke sees the image of Leia for the first time, floating as if by magic? We're going to go away from watching video on postage stamp-sized screens, to heads up displays similar to those currently pioneered by Seattle firm Virtual i-O. Lay your phone on a table, and voila - a talking head appears, probably a bit smaller than mine.

Given the audience, he is wise to be silent on issues like tax and what happens in a global economy. The explosion of mobile telephony and cable television across the world in the 1990s, partially made possible by governments who saw opportunities to modernize, was a sign that countries recognized the importance of a modern communications infrastructure. Increasingly complex mobile integration issues, and the question of how taxes are calculated, signals a coming world politic that makes the current European Union fracas look like a child's playground. 

Link: Full text of 20 Year Future of Mobile Telecom

Apple v TigerDirect, Pt II

AppleFLORIDA, USA - TigerDirect has lost yet another round to Apple Computer, now that Apple is free to use "Tiger" for its Mac OS X 10.4. Previously, TigerDirect's Perception Digital MP3 player has been lost in the market, when compared to the Apple iPod.

What's next - naming Mac OS X 10.5 "Amazon"?

While sources like AppleInsider and pooh-pooh Tiger's claims, those writing the articles have probably never felt the business end of Apple's famed legal team, who have laid claim to a remarkably broad number of uses for the term "Apple", including Applecorps - you know, the recording arm for that obscure band named The Beatles.

The Beatles released most of their later albums on the Apple Records label, with its unique labeling--a green-skinned Apple on the A-side and the halved apple for the B-side. A deal was struck in 1981 to avoid conflict ... but who could have guessed Apple's subsequent foray into digital music?

McDonald's Pick 'n Roll Wireless Promotion

Mcd_pnr_phone_1McDonald's launched their NBA Playoffs wireless promotion in connection with their Internet-based promotion by the same name. If you pick the series winner and the number of games played, you score points. The top winner gets to see their team in action at some future point, and there will be 10 other winners that will receive a US$100 gift certificate from the online store.

I think games like this are exactly what marketplaces need to do to increase what I call circulation, i.e., the number of stores shopped during a typical visit. Shopping center giant Westfield has made it a priority to bring in the retailers that enable shoppers to satisfy more recurring shopping occasions. For example, by replacing a department store component with a grocer, the mall gets much healthier traffic.

Google and others have recently released SMS tools that allow consumers to research movie showtimes, product pricing and driving directions. These are the kinds of tools shoppers will increasingly use to better manage their lives and determine where they are going to go to shop. Marketers like McDonald's and Westfield know that contests stimulate healthy sales traffic without training consumers to expect continuous price discounts.

Barriers to Mobile Shopping

Lucky_goldstar_gamephone_2Where there is traffic, there will be commerce. For example, reports on a teen that sends 8,000 text messages a month. Abberation? How about Spain, Germany, Korea, or the UK?

I believe one reason that e-commerce has been slow to take off is the difficulty of reaching the local store. For example, consumers know they can pick up their phone and use directory assistance to locate and be connected with any reputable retailer. There has never been the confidence that you could always do the same with the web or email. The medium's lack of accountability has held up web eCommerce, in my opinion.

This is changing, somewhat. Yahoo! is giving free web hosting to small businesses. AOL is the latest to jump on the Ingenio pay-per-call bandwagon: you see an ad, click the link, and a call is established between the retailer and you. Yet for as many companies that have invested in phone systems, a mere 18% gave their own phone systems a passing grade in a recent survey (registration required). As rabid as teens are about mobile, it's going to take some real thinking about retailer coordination to make local shopping work.

OMA, MPEG Usher In New Era of Mobile Subscriptions

Mpegla_1The Open Mobile Alliance has finally arrived at a deal with MPEG-LA for the rights to use the MPEG patents to secure content on mobile phones, according to Reuters. The license fee is now $0.65 per handset (down from $1/handset) and $0.25 per subscriber per year (down from $0.01 per song).

This change enables services to support a wider variety of music plans, especially "all you can eat" plans. Subscribers will flock to the hitmakers like Coldplay and Gwen Stefani, but labels needed this concession in order to build their artist development business.

This change is also an important belwether for IPTV and other content providers. It enables them to be more creative in how they bill the customer. I continue to believe that companies that can simplify the complex business of television programing have a shot at nascent businesses such as helping business customers create new experiences.

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