Monday, 06 June 2011 10:25

Google Wallet's Mobile Inspiration

On May26 Google launched its mobile-payment platform "Wallet" which is likely to turn smartphones into mobile wallets. According to Bloomberg, the Wallet system, which is supposed to use near-field communications (NFC), will work on selected Android smartphones that are sold on Sprint Nextel's network. The system will be tested initially in New York, San Francisco, Los Angeles, Chicago, and Washington D.C.

Additionally Google doesn't plan to charge transaction fees for Wallet purchases. The goal of this new offering is "bring together all pieces of ecosystem to create a new shopping experience" (sic), according to Stephanie Tilenius, Google's VP of Commerce. "We are not making money in commerce, we are making money from our core business, which is advertising", she said. But, we at FiG think that Google will benefit from more than just partnerships and advertising income.

Here is how Wallet works: Consumers either can input their Citi Mastercard info or use a pre-paid Google card to set up accounts on their phones. They can then load the account with coupons and other loyalty programs. When they shop they simply need to wave their phone in front of a receiving device to process a transaction with any discount or reward points going in immediately.

So what Google gets from this is not just a single transaction, but also consumers' data that will be analyzed and interpreted as consumers' buying preferences, purchasing patterns, and decision-making process. This is valuable information for any retailer or business and  it will be a way to enable Google to attract vendors and companies to partner with and implement the device.

Furthermore, if you recall a conversation that we had in April when discussing Google's business strategy, we talked about the potential of Google's next moves and how these moves will secure Google's current position as a dominant searching engine without too much dependence on advertising. Now the answer appears to be much clearer--the mobile focus. And the Android system and Wallet can be a very good start:

  • First, the mobile platform will be the largest media channel for most people to consume the internet in the near future. Google has noticed this, and has undertaken tremendous studies including mobile search and the development of the Android operating system powering phones.

  • Second, mobile will create the ability to individually target more people than any other channel. Although Google still has to make money from advertising on Wallet, it changes the game. On its search engine Google attracts advertisers primarily by the amount of daily users and the frequency of daily usage. However, if the Wallet is proven to succeed, Google can not only provide a platform to cover the audience but also can target a specific segment and provide the advertiser direct feedback for future improvement.

  • Finally, it is the computing, the connectivity, and the cloud technology that drives the mobile adoption. Google has already been leveraging all the connectivity and the power of cloud computing starting with location via Google map. By further developing its mobile technology, the Wallet for example, Google can target mobile ads by location, service carriers, individual devices, and specific transactions.

But, of course, either the mobile battle or the mobile payment war won't be easy for Google. Apple, with its iPhone which currently ranks number two in smartphone data usage, has claimed that they are working on a similar device.  Square has been improving their mobile payment process, and ISIS plans to roll out its service in early 2012. In order to have a strong presence in mobile channels Google still has a long way to go.