The ABC of M-Commerce
By Niall McKay in Silicon Valley, Mon Dec 18 00:00:00 GMT 2000
Mobile commerce and mobile services may succeed where the Internet failed - by providing users with a quick and convenient way to shop, pay bills, or find places and products that they want or need.
The beat cops in New York, the kids in Tokyo, the hipsters in London - they're all using Mobile data services. In New York, cops use Palm devices and location based services to track the movement of crime on the island of Manhattan. In Tokyo, kids push a button to get the latest train timetable or just play a game. In London, hipsters can dial into an 800 number and listen to a selection of CDs on special offer.
Mobile commerce and mobile services may, indeed, succeed where the Internet failed, by providing users with a quick and convenient way to shop, pay bills, or find places and products that they want or need.
Certainly, the mobile device, be it a cell phone, a personal digital assistant or a brand new $80K Mercedes fitted with an onboard computer, seems to be the axis point in which the last ten years of technological development comes together. The enabling technologies, although not completely cooked, will allow users to carry their data, calendars, phone numbers, music, and photographs etc. with them. It will enable them to know exactly where they are and how to get to the next location. It will enable them to know where their kids are and how to contact them and it will give them access to any piece of data wherever and whenever they need it.
Technologies such as voice recognition, speech to text, Global Positioning Satellite technology, electronic commerce, active badges, biometrics, streaming media and MP3, digital image, microdisplays, memory and microchips and, of course, short range wireless connectivity solutions such as Bluetooth are all conspiring to create a new type of computing infrastructure.
M-commerce is the glue on which the fabric of this new infrastructure will hang. Of course, trying to figure out exactly how big the potential m-commerce market is quite another story. Analyst firm Jupiter Communications pegs the mobile commerce market at $40 million in 2000 rising to as much as $22.1 billion over the next five years. By then, the firm estimates that $10 billion will be spent on shopping, $8 billion for paid content and $3.3 billion for advertising. If you think these figures are hard to believe then you could be right.
"I have seen everything from $200 million to $200 billion per year in 2004," says Ken Hyers, analyst for the research firm Cahner's In-Stat Group. "What I can't understand and nobody seems to be able to explain to me is where that money going to come from. I don't think that your average customer is going to suddenly find an extra fifty or sixty dollars a month to spend on these services."
Hyers may be correct. Why spend extra money on wireless services? For convenience , that's why.
Location, location, location
Like the real-estate business, the golden thread in mobile commerce is location, location, location - according to Jack Pellicci, Oracle's vice-president of global services.
Pellicci, a former US army general, was brought in by Ellison in the early nineties to oversee the implementation of Oracle's spatial database using the knowledge of Geographical Information Systems technology he'd picked up while working for Uncle Sam.
Now the company is working with private industry to build the back-end database for services that will enable service providers to know where their customers are calling from and therefore what services to offer them. The company is also working with the New York Police Department and Interpol to integrate the Oracle 8i spatial database with current police systems so that they can track criminal activities across geographical locations and carry out pattern analysis.
"The industry calls the current revolution mobile commerce. It's just as important to government, but they call it mobile services," he says.
Indeed, location-aware computing is being touted as the killer application for mobile commerce. When the US Government announced its Enhanced 911 initiative, a decree that stated all cell phones must include technology which pinpoints the location of the user to the nearest 300 feet by 2001, privacy concerns were all but swept aside because of the convenience and marketing opportunities it offered. The dream or nightmare, depending on your point of view, is that vendors will be able to target services based on your location. For example, say you are within 300 feet of a Starbucks, the companies computer systems could dial you up and offer you 50 percent off a Grande-Skim-Latte.
"The basic question consumers should ask themselves is, why can't I wait fifteen minutes to shop?" asks Ilkka Raiskinen, Nokia's vice-president of mobile applications and services. "Why do I have to have it now?" "If they can't wait then it's a fair bet that the service will be a success." he added.
Indeed, many service providers are already offering limited location-based services. The Palm Pilot network, for example, retrieves the users' zip or postal code from its Network provider, Mobitext. This enables service providers such as the travel site Travelosity, to automatically know the customer's departure location.
Lucent's Bell Labs is also working to develop applications for providers that will make these location-based services more compelling. The company is currently beta testing a movie-phone application that triangulates the users location using the cell phone infrastructure, retrieves a list of cinemas in the area and the movies they are showing, and then downloads the selected movie trailer to the user's cell-phone. The customer can choose the movie, and even view the cinema seating arrangement, push a button and retrieve an electronic ticket.
Bell Labs believes that its I-post card technology could also be used for a number of applications. It could, for example, send you hourly snippets from the web-cam in your children's nursery or show you what the traffic is like up ahead.
A different approach.
That is, of course, provided that you're in an area where the network will support full multimedia over the wireless network. In Europe and Japan so called third-generation (3G) networks that offer 384 kilobits per second will be rolled out in the next 12-24 months. In the US, the 3G spectrum is not even going up for auction until the latter part of 2002.
However, the poor wireless data infrastructure in the US has brought about an interesting result - very advanced voice enabled applications, according to Jim O'Malley, manager of Motorola's e-commerce global solutions.
"PC penetration and high-speed Internet connectivity is much higher in the US than in other parts of the world," he says. "So US customers are much more likely to go to their PC to shop and when they use a cell phone they are less fond of pushing button and much more fond of talking."
This has led to the creation of numerous voice-integrated applications. MIT's Oxygen project, for example, enables users to dial an 800 number ask the computer a question. The system will then go out to the web and retrieve the data. Commercial versions such as Tell-me are also available. The Silicon Valley-based voice portal company enables users to dial-up and say "Tell me the weather in Oslo, Norway" and it will retrieve the answer from the Internet.
Motorola's O'Malley believes that it will take several years before voice technology becomes widely used in applications. At that point reading and writing emails, for example, will become a thing of the past.
"The most successful applications are likely to integrate, voice, data text to speech, speech to text technologies," he says. "So you may push a button to access your bank, speak your commands, and enter you pin via the keyboard."
Indeed, there are a number of significant differences between the approaches to the US and European markets. While Europe has a more advanced wireless infrastructure some believe that many European providers approach to the m-commerce market is doomed to failure.
"Many of the European service providers are approaching the wireless market with the same monopolistic attitude that they have always had," says Seamus McAteer, director of Web Technology for Jupiter Communications. "The problem in Europe is that everybody wants to own the customer and own everything that the customer is doing."
McAteer believes that this strategy is doomed to fail because banks are scrambling to become service providers, telecommunications companies are trying to become banks and all are trying to sell the customer everything from books to travel services over the mobile phone.
In contrast, the US providers encouraging the market leaders in each business segment to provide the service through their wireless infrastructure.
"If mobile services are to be a success then the providers are going to need compelling content." he says. "They need to get that compelling content from content and service providers. If they try to do it all themselves they will probably mess it up."
Furthermore, McAteer believes that the European tariffs are unrealistic. "These guys are charging by the minute." he says.
This will discourage users, especially the youth market, from using cell phones to do things like download music and play games.
However, m-commerce is as fraught with difficulties as it is potential. For example, everybody is agreed that the future of mobile commerce and services is a small box. The cell phone vendors believe that the box is a phone with perhaps an MP3 player and a Personal Digital Assistant (PDA). The PDA vendors believe that the box is a PDA with a phone and perhaps an MP3 player and the MP3 manufactures believe that it's an MP3 player with wireless download capabilities.
Despite vendor assurances that the device market will be fragmented - that we'll have one device for business and another for personal use - if the PC industry is anything to go by, it's likely that the Swiss Army knife approach will be the most successful.
Another major difficulty is that many of the Wireless providers have over stretched their resources. 3G licenses were selling in the UK for $35 billion and in Germany for $45 billion. Together with the scramble to own the customer, is the scramble to own the customer's preferences, and the customer's micro-payments and electronic wallet.
Indeed, after years and years of wrangling over electronic payment schemes the industry has only managed to disagree. So will M-commerce succeed where electronic commerce has floundered? Probably, but not any time soon. Indeed, it may take years before these problems are worked out and by then who knows where we will be.
Perhaps b-commerce (biological commerce) where our electronic wallets implanted into our DNA?
Niall McKay is a San Francisco-based writer and journalist who covers science and technology. He is a contributing editor to the Red Herring Magazine, a columnist for the Irish Times and writes for the Financial Times, Wired Magazine, Salon, and the New York Times.