Mobile Update – April 9, 2012

Here are some of the interesting things that happened this week in the mobile industry with my usual insightful commentary.

(Sorry for the delay in this week’s edition! The holiday weekend was kind of crazy and didn’t leave me much time for blogging. Hope you all had a happy Easter/Passover!)

Google Wallet news

There were two interesting pieces of news around Google’s payment system, Google Wallet, this week.

First, Google bought a payment technology company TxVia to help boost Google Wallet’s security. TxVia is a prepaid card processor whose system allows managing risk through a rules based system.

See American Banker and Phandroid

Secondly, I learned that Google Wallet founding engineer Rob von Behren has left Google for Square. I mentioned his leaving Google before, but I did not know that he went to up and coming mobile payment company Square.

See MG Siegler, TechCrunch, NFC Times, and FinExtra

My Take: These departures certainly hurt Google Wallet’s chances. Key talent seem to be fleeing Google for smaller payment companies. This implies serious doubt from within the Wallet group about its potential for success.

Despite all this, the TxVia purchase indicates that Google is committed to a mobile payments solution. Google certainly has the resources to make it happen. Now it is in the execution.

It still seems to me that Google’s priority for Wallet needs to be carrier support. Google Wallet is only endorced by Sprint and, just as Palm found out, that is not enough to bring the platform to critical mass. Verizon and AT&T support are key but that will be difficult as both already support Isis.

Is NFC necessary for mobile payments?

And speaking of mobile wallets, Isis and Google are pushing NFC based mobile wallet solutions, but is NFC is really necessary for a wallet?

NFC requires a huge amount of infrastructure. Phones need to be NFC equipped and merchants need new terminals. This ecosystem can take years to establish. With cloud computing, can we build a payment system using existing technologies?

This TechCrunch article asks those questions, gets opinions from industry leaders, and presents some of the insider information about the problems between payment companies and merchants which need to come together to make this work.

My Take: Although billions are being invested in NFC based payment systems, their success is far from certain. In the time it takes to build these ecosystems, nimble companies can create other solutions which have a chance to succeed. Also, current payment systems work really well so customers are not in a big hurry to switch.

One really interesting point in the article is that the payment processors can force retailers into buying new terminals by shifting more risk onto them if they do not upgrade. I didn’t realize they could do that and creates an interesting dynamic here.

iPhones use wifi more than Android phones

comScore did a study comparing users that only use cellular data with those that use both cellular and wifi. They found that only 29% of iPhone users only use cellular data whereas 68% of Android users are cellular only.

Source: comScore

My Take:

Why the difference? I’ve heard two plausible theories.

Theory 1: iPhone users use their phones at home instead of other connected devices like their laptops. This would imply iPhone owners choose their phone as the “go to device” when they need to access the net and Android owners use something else (e.g. their laptop, or tablet) when they have a choice.

Theory 2: Android users have less access to wifi networks and have to rely on their cellular connections. According to comScore, only 61% of US households have wifi. It is possible that the 39% are using low cost Android phones.

As usual, the the truth probably lies somewhere in between. Whatever the reason, the lesson is that iPhone and Android users do have different behavior patterns and that is important to remember when targeting the platforms. Not every mobile user is the same.

Nokia Lumia 900 Getting Meh Reviews

The first reviews of the Nokia Lumia 900, Nokia and Microsoft’s “hero” device, are hitting the Internet and, well, they aren’t stellar. The hardware seems to be well received, but Windows Phone 7.5 and its ecosystem are lacking. The software is not as polished as iOS or Android (which are in their 5th and 4th major versions) and quality third party software is still lacking.

See The Verge (review and follow up), Engadget, BGR, Phone Scoop, TechCrunch

Forrester analyst Sarah Rotman Epps notes that “Nokia’s product marketing is targeted at the vast number of consumers who don’t yet have smartphones.” That is about 50% of the market right now but she thinks that may be a difficult strategy as it may be hard to convert someone to a more expensive plan. She proposes that a better strategy may be going after BlackBerry users as they are already used to paying for a data plan.

My Take: Microsoft is behind here and needs to be moving faster to catch up. Depsite the fact that the Lumia 900 is a beautiful looking phone, Nokia is restrained by Microsoft’s technical specifications (e.g. 800×480 screen, single core CPU). They definitely lose a spec war with Android or iOS.

Microsoft is already spending a lot of money trying to get third party developers to support Windows Phone, but they need to be much more aggressive. They need to make it worth it to developers of top tier apps to support their platform.

If Lumia fizzles because Windows Phone is lacking, it will be much harder to get traction with Windows Phone 8. A bad reputation is very difficult to recover from.

Facebook buys Instagram for $1 Billion

Facebook announced on its blog that it will be purchasing the photo sharing application Instagram for $1,000,000,000.

See Instagram and Facebook

My Take: Wow! Just wow! Some quick thoughts:

  • Instagram did not exist 3 years ago
  • Instagram has 12 employees
  • Facebook paid more for Instagram than the New York Times is worth ($937MM)
  • Instagram generates no revenue

Instagram can certainly fill a need with Facebook and that is high quality photo sharing. Photo sharing is very popular (Instagram had 30MM users!) and is something Facebook does only adequately.

Some good insight from GigaOm on why Facebook made this purchase.

The anti-Facebook backlash is also interesting as Instagram users shut down their accounts in protest. (TechCrunch) It seems that many Instagram users liked their private little social network and aren’t happy about it expanding to the size of Facebook. They didn’t like it when Android support was added either!

And that’s the news. Good night and have a pleasant tomorrow.

About Lee J.

Mobile Guy!
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