Will 21st Century Payments be Dominated by Mobile Phones?

The battle for payment method in the 21st century is with mobile devices, some believe. The Apple iPhone and Android phones will one day replace our credit cards and and the winners will be eBay’s Paypal, Google or Apple, some believe.

PayPal revenues are expected in the range of $6 billion to $7 billion in 2013, driven by consumer preferences, market expansion, and innovation in the areas of mobile, digital, social and local, for example.

Visa: Everywhere you want to be, except your Portfolio - 24/7 Wall St.

FTC’s “Do Not Track” Could Hurt Smaller Websites

The effect of Do Not Track on ad-serving websites would be to lower revenues based on behavioral ads. Relatively large websites that publish premium content would likely not be affected significantly by Do Not Track because the vast majority of their ad space is typically sold directly to marketers which may be able to rely successfully on contextual ads.

This would not be true for smaller websites that typically rely more heavily on ad networks to place their ads. For this reason, smaller websites which publish free content supported by behavioral ads could face a significant impact on revenue from Do Not Call.

For consumers, Do Not Track could dramatically affect the quantity and quality of content they see on the Web. This is due to the fact that much of the free content on the Web is supported by ad revenue. Consumers operating in stealth mode would likely see limited or reduced content, plus ads would not be as relevant.

FTC’s “Do Not Track” Initiative Portends Major Impact on Online Advertising

Cloud-Based iPhone?

Apple's possible plans to produce a cheaper, smaller iPhone might also be a test of a "cloud-based" smartphone. The new device might also come with a major revamp of Apple's "MobileMe" online storage service. One way to reduce the price of a new iPhone is to dispense with memory. MobileMe lets users store data in a central location and synchronize their calendars and contacts among computers and other devices.

That same functionality also presumably could be used to support a cloud-based storage replacement for local memory.

If a potential new free MobileMe service is available to store photos, music and videos, the issue will be experience. Will cloud storage be a suitable replacement for on-board storage?

Apple Works on Line of Less-Expensive iPhones - WSJ.com (subscription required)

PayPal is Tail Wagging eBay Dog

PayPal is eBay's future, one might well argue. PayPal serves nine million merchants and over 90 million active accounts, expected to grow to 130 million by 2013.

Despite widely-speculated competitive threats from upcoming payment systems from Facebook as well as from Apple, management believes that PayPal's revenues could double by 2013. That growth will be powered by international growth, increasing eBay penetration to 75 percent from 69 percent today; new initiatives with credit growing revenues in the 40 percent range; and merchant coverage market share increasing to upwards of 24 percent from 18 percent today.

eBay: PayPal Looks Great, Rest of Company Doesn't - Seeking Alpha

Mobile Payments Used by 10% of Japanese Mobile Users

In December 2010, 9.8 million mobile users in Japan used their mobiles for payments, representing about 10 percent of all mobile subscribers in Japan. When looking at the most likely places people used their mobile wallet, retail and convenience stores topped the list with 7.6 million mobile subscribers using
their mobile wallet at these locations in December, followed by vending machines (3.2 million), public transportation (2.7 million), grocery stores (2.6 million) and restaurants (1.5 million).

Since Japan almost universally is seen as the nation most advanced in terms of mobile payments, the usage pattern is illustrative. Only about 10 percent of all mobile users, in that one month, used mobile payment functions of their mobiles.

By way of comparison, 58 percent of Japanese mobile users got news and information on their mobiles. Some 53 percent used at least one mobile app, while 57 percent used email functions on their mobile phones. About 77 percent viewed media on their phones and 63 percent took at least one photo.

That might suggest that deliberate steps, with an assumption of modest adoption, are the best way forward for mobile payment partisans. Even in the relatively well-developed Japanese market, only 10 percent of users avail themselves of the mobile payment functions of their phones, in a given month.

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Google’s Android: A Billion-Dollar Ad Business In 2012?

Google could generate over $1 billion in Android-related advertising revenue in 2012, according to Piper Jaffray analyst Gene Munster.

Munster argues that Android generated $5.90 per use in mobile advertising in 2010; he sees the total increasing to $9.85 in 2012. CEO Eric Schmidt has argued that Android could be a $10 billion business if there were one billion users each generating $10 a year.

By 2012, Munster thinks there could be 133 million Android users generating $9.85 a year, which would mean $1.3 billion in Android-related revenue.

Google’s Android: A Billion-Dollar Ad Business In 2012? - Eric Savitz - The Tech Trade - Forbes

Gartner Identifies 10 Consumer Mobile Applications to Watch in 2012

Mobile apps themselves will not only generate revenue ($15.9 billion in expected end-user spending in 2012) but will also drive hardware sales, advertising spending and technology innovation in the mobile space, says Gartner.

Gartner also expects brand companies to increasingly shift their marketing budget to the mobile channel, and experiment with cutting-edge apps to capture marketing and sales opportunities.

Gartner Identifies 10 Consumer Mobile Applications to Watch in 2012

Mobile Youth Statistics

Mobile Youth Around the World - 2011 Update

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Echostar to buy Hughes Communications

EchoStar Corp. plans to buy broadband satellite network provider Hughes Communications Inc. in a deal worth around $2 billion including the assumption of debt. There are any number of ways to spin the value of the deal. One is a "TV Everywhere" capability for Dish Network customers. EchoStar already owns Sling, so the additional capacity EchoStar is gaining might be coupled with Sling features to create a sort of instant "TV Everywhere" service.

The other angle is revenue diversification and growth. Ask a cable executive where the strongest growth now is coming from, and you will be told it is business services (voice and data) sold to business customers. Hughes will bring a multinational enterprise services business, as well as a smaller play for small and mid-sized business customers. Hughes recently has introduced a business-grade voice service for enterprise customers, for example, allowing it to sell a voice and data package.

EchoStar agreed to acquire Hughes for a price of $60.70 per share, representing a two percent discount to Friday’s closing price, but a premium of 31 percent over the January 19, 2011, price of $46.43 when news first broke that Hughes was up for sale.

The transaction values Hughes at about 6.8x times 2011 adjusted EBITDA forecast of $292 million,

which represents a fair multiple for the company, based on the company's historic multiple range of 3 times to four times adjusted EBITDA, but well below the eight times to 10 times multiple some had assumed Hughes might fetch.

Echostar to buy Hughes Communications for $2 billion | Washington Business Journal

Online Video Usage Up 45%

Online video for the most part remains a supplemental activity, complementing multichannel video subscription services. But online usage continues to grow, raising obvious questions about when a tipping point might be reached. But no tipping point can be reached unless content owners can create a viable and substantial new revenue model from online video, and advertising already is seen as merely supplemental. That likely means subscriptions, one way or the other. Up to this point Netflix and Hulu have been the leaders in that regard, despite efforts by iTunes and others.

Online views, or online viewers, are important. But ultimately those metrics alone will not drive a shift to major online availability of professionally-produced content. Some combination of subscriptions and on-demand payments will have to emerge, large enough in volume to create a viable expectation that revenues from such alternative streams can rival the revenues now earned from cable and other video distributors. Views and viewers are important, but not as important as the emergence of paid models of some size.

Among the ten most heavily used brands in January, YouTube continues to hold the top position among online video sites with nearly 8.5 billion video streams – 10 times the number of streams than its closest rival, Hulu. YouTube and Hulu are followed by VEVO in total streams, with MTV Networks Music (+79.1%), Netflix (+37.5%) and MSN/Windows Live/Bing (+36.3%) showing the strongest month-over-month growth in streams.

When looking at the most engaging video brands – as measured by time spent – Netflix was the top destination as the average U.S. video viewer spent over 11 hours watching video on the site from home and work locations, which isn’t surprising considering Netflix subscribers can now watch full-length movies and television shows from their PC/Mac/laptops.

Online video usage in the United States grew 45 percent over the last year, according to Nielsen. Although the number of unique online video viewers only increased by 3.1 percent from last January, level of activity was up as viewers streamed 28 percent more video and spent 45 percent more time watching. Total video streams also saw significant year-over-year growth, up 31.5 percent to 14.5 billion streams.

January 2011: Online Video Usage Up 45% | Nielsen Wire

Cord Swapping, More than Cord Cutting

It might not matter much, in the near term, that end user preferences about consuming video are changing. But it might be quite a dangerous assumption to ignore those changes for the long term.

Many younger users simply have acquired the habit of using online methods for video consumption, as a primary behavior, with linear viewing being supplementary.

CRTC Rethinks Wholesale Broadband Access Policy

Wholesale policies historically have had huge implications for smaller contestants in the telecommunications business. One might rightly point to wholesale policies as the single most-important determinant of competitive local exchange carrier success in the U.S. market, for example.

Something similar seems to have been happening in Canada, where the Canadian Radio-television and Telecommunications Commission (CRTC) has moved to change wholesale access pricing policies relating to wholesale Internet access.

After concluding that wholesalers could charge their ISP customers on a metered basis, it now is taking another look at the policy.

CRTC to review billing practices for wholesale Internet services

Apple to "iPod" the iPhone?

Apple is working on the first of a new line of less-expensive iPhones and an overhaul of software services for the devices, people familiar with the matter said, moving to accelerate sales of its smartphones amid growing competition. In a sense, those moves would mean Apple is pursuing an "iPod" strategy, to a certain extent, creating a line of iPhones with various capabilities.

One of the people, who saw a prototype of the phone late last year, said it is intended for sale alongside Apple's existing line. The new device would be about half the size of the iPhone 4, which is the current model.

The new phone—one of its code names is N97—would be available to carriers at about half the price of the main iPhones. That would allow carriers to subsidize most or all of the retail price, putting the iPhone in the same mass-market price range as rival smartphones, the person said. Apple currently sells iPhones to carriers for $625 each on average. With carrier subsidies, consumers can buy iPhones for as little as $199 with a two-year contract.

Apple Works on Line of Less-Expensive iPhones - WSJ.com (subscription required)

Ericsson and Akamai Team for Mobile CDN

Ericsson and Akamai Technologies have announced an "exclusive strategic alliance" focused on bringing to market mobile cloud acceleration solutions aimed at improving end-user Internet experiences such as mobile ecommerce, enterprise applications and internet content.

The companies will jointly develop solutions for the fast-growing market of content and applications delivered to mobile devices. Working with Ericsson, the content and applications already being accelerated over the Internet by Akamai will now also be accelerated over mobile broadband.

Ericsson and Akamai establish exclusive strategic alliance to create mobile cloud acceleration solutions - Ericsson

Real Issues with Broadband

The thing about "problems" is that you have to know when a problem has been largely solved, substantially solved or is so close to being solved that one has to move on to tackle the next set of problems. Internet access and broadband are, in many ways, those sorts of problems. Availability is less and less a problem. Redesigning life and business to take advantage of the changes is where the real work awaits.