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Paul gelb-nfc-pov-the-razorfish5-report-2011

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  • 1. 5 Near Field Communications Paul Gelb, VP of Mobile Heiko Schweickhardt, Technology Lead In June 2007, a slide for everyone to learn the ins and outs in a Razorfish client of the technology and what it means for presentation painted a commerce, marketing and privacy. In the bleak picture for near field hands of those companies, NFC yields communications. “Today, a much broader opportunity than what the NFC contactless mobile payment arises from the contact-free nature of solution that is prevalent in Japan and mobile payments and a slice of merchants’ many emerging countries is not a viable transaction fees. Payments aside, NFC solution in the U.S.” We found that the has the potential to ignite billions of growth and impact of NFC had been stifled dollars of incremental revenue from by the competitive situation already in mobile marketing services. This windfall place, not by a lack of infrastructure to would finance countless transformative support it. Because the market for credit applications of NFC technology. It is in this and debit cards in the U.S. is saturated, context that the emergence of NFC in 2011 a new payments system would have to will be a watershed moment for mobile, provide significantly more value to users and impacting every industry. solution providers. NFC technology has been available for years, but it has only attained This new data and integrated service significant adoption in a few markets as a offering could generate billions if contactless payment solution. So, given all not hundreds of billions of dollars in that, near field communication (NFC) may incremental ad revenue. The increase in seem to be an odd selection for this report. inventory would come from the number of mobile users and the amount of time What’s changed in four years? that they spend with their mobile phones. There are over 5 billion mobile phones, Apple, Google and Facebook. NFC figures which is over 4 times the number of TVs. in the immediate plans of these uber- In fact there are more mobile phones disruptors and that means it’s important than people with access to fresh drinking07
  • 2. 5water. The penetration of smartphones, the system in which they match ad requestsdevices marketers will predominantly be from advertisers with consumer profilesable to target, is growing exponentially. The that reside in a database that they control.device is always with the consumer, creating According to the patent request description,the possibility for it to trigger a targeted an advertiser, using the dynamically-pricedad on nearby digital signage or any other system, may pay a unique price for andigital consumer touch point. Last, and advertisement based on an assessment ofmost importantly, the additional data would characteristics unique to the target recipient.increase ad effectiveness and efficiencyby allowing marketers to target the most A great deal of NFC’s value is in its abilityvaluable consumers with the most effective to replicate ancillary value streams fromad content at the time they would be most credit and debit cards. For example, thereceptive to the message. aggregated data from each user’s purchase behavior creates purchase histories that areNFC’s advertising potential is what is of the integrated into data from various sourcesmost interest to new NFC market entrants by credit report firms to create robustsuch as Google, Microsoft, Apple and consumer profiles. These profiles are usedFacebook. In fact, Apple has submitted a to create highly targeted lists of consumerpatent for a dynamically priced advertising sales leads that can be sold at high prices toApple´s Dynamically - Priced Advertising Systemwww.patentlyapple.comPatently Apple 110 112 112 112 Advertisement Advertisement Advertisement 110 114 Infrastructure Owner/Manager 116 116 116 Advertisement Advertisement Advertisement 124 126 Target Advertisement(s) Marketing Factors 118 118 118 Bill Bill Bill Target User 122 Infrastructure Owner/Manager 114 08
  • 3. direct marketers. The list of consumers can pattern will allow marketers to reach a wholebe targeted by geography, demographics, new level of analysis and optimization ofbehavior (lifestyle activities like golf or marketing programs.gardening), methods (preference for onlinepurchasing vs. mail order) and life stageevents (new parents or new home owners). PrivacySome banks and credit card companieshave even sold highly targeted ad space on Most readers by now have likely startedaccount statements directly to marketers. to think, if not scream out loud, about privacy issues. A comparison to other similarThis value stream provides an opportunity products and user behavior patterns showsfor NFC to generate exponentially more that privacy concerns will not impedevalue than credit or debit cards. NFC can mass market adoption rates. As previouslyconnect a consumer with the physical world discussed, credit and debit cards providein ways that generate an infinite number of numerous institutions with consumer data,interactions or valuable profile data points. which includes more personal informationConsumer profiles could now include a user’s than any digital property currently collects.current location, where they have been, who Adoption and usage of these cardsthey have been in contact with, who is in their skyrocketed when loyalty point programssocial network, what media content (across emerged. Consumers clearly demonstratedmultiple channels) they have consumed and their willingness to relinquish the anonymityeven how much influence they have on other of cash as long as they were compensated.consumers’ purchase decisions. When Amazon provided productNFC providers can also close the loop recommendations, based upon items thebetween mobile marketing programs and user had viewed but not purchased, manyconversions. Evidence from NFC Pilots, posted were apprehensive. Consumers’ fears werejob descriptions and registered patents has assuaged when Amazon communicatedrevealed the imminent release of several the value of those recommendations.integrated mobile marketing and commerce Netflix and Pandora provide more extremesolutions. These solutions would enable examples. Both companies are able toone service provider to deliver targeted provide and communicate enough productads and promotions (coupons), integration value from information submitted by usersof consumer profiles with product/store that the average user is now submitting alldatabases, promotion redemption, retailer kinds of data in the form of content ratingssupport for enabling m-commerce at the POS and movie account queues. These examplesand consumer NFC contactless payment. The clearly prove that privacy issues areability to see a consumer’s full behavioral removed when a company communicates09
  • 4. the value the user will get from data NFC touchpoints for consumers. Potentialcollection, there is transparency around the interactions with touch points include virtualdata collection and/or the user is given a check-ins to participate in loyalty programs,choice to opt in. special offerings and related product recommendations or virtual conciergeNFC providers could follow these tactics by services like indoor augmented realityhaving a personal information and loyalty and floor plans. All these services can beprogram management application for mobile consumed with an intuitive wave gesture.devices. Users would be able to opt in to a Touch points like these will likely drive morecollection of their personal information and consumers back into retail stores, providingselect what bits could be used for ad targeting. them a richer, hands-on experience throughtIn exchange for opting in, users would be the integration of services.compensated by mobile wallet dollars.These rewards dollars would be based onevents in which their information was shared Securitywith advertisers and could be redeemedduring any m-commerce / NFC transaction. Security will likely be a greater challengeThese virtual dollars could be financed by than privacy for NFC. The high value ofa nominal percentage of the incremental access to a person’s financial assets andrevenue generated from ads that leverage the personal data will increase the risk ofconsumer’s information for targeting. potential threats. Several NFC providers are planning to offer remote deactivation of the NFC functionality and deletion of profileUser Experience information. Another security protection will be a biometric sensor that can readConsumers would benefit from a highly fingerprints or other anatomical features.improved user experience with NFC as Once again the revenue potential of thiswell. While contactless payments can be opportunity will allow market leaders in thetechnically achieved in different ways, the space to invest in and constantly improveease and swiftness of waving a mobile security protections. While NFC may neverphone in front of a retail register is far more be completely secure , there should belikely to be understood and embraced than the same level of protection as personalis a process where you have to scan visual information data bases and financial servicescodes with an embedded camera app. companies offer on other digital channels. Ultimately, we have witnessed significantHowever, again extending our focus database breaches over the last few years,beyond payment reveals a value that can but there has been a negligible effect onbe significantly increased by providing consumer adoption. 10
  • 5. The last hurdle for mass implementation of NFC chips, is currently offering businesses NFC is the cost of producing and distributing in pilot cities free NFC receiver hardware hardware to stores that are capable of when they participate in ongoing tests. Even receiving payments from consumers’ governments have begun to invest in the mobile devices. NFC providers and public technology. The French government has institutions have already demonstrated spearheaded the purchase and distribution their willingness to absorb all or at least a of thousands of receivers for businesses in portion of this cost. This is especially true 13 cities that are participating in one of the when mobile devices are leveraged as largest NFC pilot testing programs ever. As the receiver hardware. Google is said to well, public transportation authorities in be poised to distribute as many as eight several U.S. cities have begun to invest in million “custom mobile devices” to small testing and implantation of NFC payment businesses around the U.S. Apple has pilots receivers for rider mobile payments. with several retailers, that includes IOS devices with preloaded m-payment receiver The large number of players investing in accessories, dedicated customer support NFC is evidence that the costs of addressing agents, expedited dispute resolution, challenges presented by privacy concerns, invitations to VIP events and merchant security threats and receiver hardware costs rewards. Bling Nation, an NFC start up are not prohibitive to the NFC business that leverages stickers with embedded model. However, to maximize ROI and Communication Between Controlling & Controllable Devices www.patentlyapple.com Patently Apple 90 94 Controllable Device 32 24 25 WAN Wired 1/0 IR Interface 34 24 30 NFC Interface PAN LAN 106 110 102 104 96 98 100 114 116 Internet Web Service 34 28 108 112 30 NFC Interface PAN LAN 32 24 25 WAN Wired 1/0 IR Interface 92 Controlling Device11
  • 6. profit margins, potential NFC providers for companies that have looked beyondare investing in the development of non- mobile payments to uncover its untappedpayment NFC applications for users. These potential. What will make NFC’s emergenceutility and entertainment applications in 2011 even more exciting are the potentialwill provide non-monetary benefits to revelations from innovative companies thatconsumers and generate additional value are able to take the next step. Applicationsin creating consumer profile data. These and device accessories have explodedinnovative NFC products could be offered alongside the recent rapid growth of smartas part of the compensation for opting into phones and tablets. When we look beyonddata collection. NFC entirely, what new opportunistic industries will be revealed?For example, Apple has already patentedan NFC application that could align withthis strategy. The patent describes mobiledevices that leverage NFC as becominguniversal remotes capable of controlling anyother NFC device, including TVs, DVRs, DVDplayers, gaming consoles and even garage/doors. Data generated from this applicationof NFC technology would include whatcontent and commercials a user had seenacross multiple media channels.NFC powered remotes are just the tip of theiceberg. Numerous executions have beenpatented, prototyped and/or piloted. Socialapplications will enable users to share music,videos, contact information, a social networkconnection request or even an app. Travelapplications will create virtual room keys, IDand ticket submissions and baggage checkin. The list of potential functions is onlylimited by the creativity of the developers.NFC, a technology that is not new orparticularly sexy, will open up nearlyunprecedented opportunities for ad revenueand ground-breaking consumer experiences 12