Why Groupon is in the Mobile Payments Business

At first blush, it is puzzling that Groupon, a mobile and online advertising company, now is in the mobile payments business. 

But there are logical reasons, both tactical and strategic, for doing so, one might argue. For starters, the particular part of the mobile advertising business Groupon is in is facing dramatic reductions in average revenue per ad, and some concern about consumer disengagement. 

That isn't to say the business has no legs. Local advertising and media research firm BIA/Kelsey projects that U.S. consumer spending on online deals will reach $3.6 billion in 2012, doubling last year's figure of $1.8 billion. By 2016, spending is forecast to hit $5.5 billion, though year-on-year growth rates will slow to single digits.

BIA/Kelsey forecasts that, going forward, online deals will become an anchor for a platform of non-advertising small-business services. These services include instant mobile deals, loyalty products, promotions, reputation management, transaction processing and e-commerce.

But neither is the business growing so fast it can support all the new competitors in the field.

So Groupon is betting that a significant share of retail transactions will be made using mobile payments. So as its original business grows, Groupon can diversify and grow its own revenue streams by becoming a transaction processor.

That helps Groupon grow its revenue much faster, right now, while its mobile and online advertising business segment grows. 

OS Strategy Changes In The Post-PC World

In the older PC business, it made good sense for operating system providers such as Microsoft to avoid competing with its customers. 

So Microsoft did not build its own branded devices. That began to change with the first non-PC computing devices, such as MP3 players and game consoles. 

Some were therefore surprised when Google built its own Nexus smart phone, and then acquired Motorola, thereby becoming a device supplier in its own right. Some were surprised when both Microsoft and Google decided to build and sell their own tablets. 

So what ever happened to the "avoid channel conflict" model? Some would argue that Microsoft and Google want to encourage innovation, and avoid the hardware commoditization process seen in the PC business, where suppliers mostly tried to compete by driving prices lower, rather than by adding value. 

So one way of looking at the changed strategy is that both Microsoft and Google want their respective ecosystem partners to focus more on innovation than price cutting. 

"The message to their device manufacturers is abundantly clear: If you’re not building devices that surpass what we can do ourselves, you’re not adding value," says Tony Costa, Gartner analyst. 

That appears to be another difference between the ways OS suppliers conducted business during the PC era, compared to what they are doing in the post-PC era. 

"Pay Music" Analogy to "Pay TV" Wrong?

The natural analogy for streaming music services, or Sirius XM, for that matter, is that streaming music or Sirius XM is to radio as cable TV is to TV. By that analogy, consumers will prefer the new programming choices the new services offer, in comparison to broadcast radio. But some question whether the analogy is apt. 

“There is a natural ceiling of adoption of the people who are willing to pay $9.99 a month for music they don’t own," says industry analyst Mark Mulligan. 

And that might be a key difference. People never experienced TV as something they owned. TV always was "streamed" or "broadcast." Radio, on the other hand, was a one way people consumed music, the other key mode being packaged prerecorded media (records, then tapes, then CDs, then MP3s). 

Though there was a period in the 1980s and 1990s when it seemed people had significant desire to "own" copies of favorite movies as they were used to owning copies of their favorite songs, that habit has not proven to be a sustained major trend, as sales of DVDs are declining, while sales of Blu-ray discs are not growing fast enough to replace lost DVD sales. 

To be sure, the DVD rental business, and the newer streaming delivery of movie or TV content, is succeeding in a way that the earlier "pay per view" business did not achieve. 

In other words, for historical reasons, people might view the logical consumption modes for TV and music in different ways. To be sure, many skeptics once believed that people would not pay for TV, either. Those skeptics were proved wrong. 

Perhaps the same consumer reluctance will be overcome, and streaming music services will indeed become the "equivalent to cable TV for the radio business." 

"It’s a niche proposition," says Mulligan. "The majority of mass-market consumers are still not interested in that pricepoint.”

Enterprise Videoconferencing Falls for 2nd Consecutive Quarter

For the second consecutive quarter, the global enterprise video conferencing and telepresence market was down, according to Infonetics Research.  Revenue fell six percent to $644 million in the second quarter of 2012, Infonetics reports.

“Economic woes in Europe, declines in public sector spending, and a shift toward lower-priced video conferencing products drove sales of video conferencing and telepresence equipment lower from the year-ago quarter” says Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics Research.

DirecTV Weighs Brazil Telco Buy

DirecTV is one of several companies seeking information to evaluate a bid for Vivendi SA ’s Brazilian phone unit GVT, Bloomberg reports.

DirecTV, the largest U.S. satellite-television provider, is counting on surging demand for video entertainment and Internet service in Latin America as growth subsides in its original U.S. market.

The move would be one more step by DirecTV towards more active involvement in the "triple play" business, which traditionally has favored cable and telco firms able to provide such services. Up to this point, DirecTV has been a provider of TV and broadband access, but the firm has not had an elegant way to provide voice services. 

AT&T "Welcomes" Idea of Spectrum Caps?

You wouldn’t normally expect any market leader to support possible new regulatory action that might actually limit the amount of spectrum, or the types of spectrum, any mobile service provider can own.

But the unexpected AT&T view of the Federal Communications Commission’s intention to review both spectrum holding limits and spectrum quality considerations--essentially “welcoming” such a review could point to an AT&T belief that uncertainty is a bigger problem than spectrum limits.

Also, AT&T could be betting that other competitors will suffer more than it will if new limits on spectrum ownership were to emerge.

Or, some might argue, AT&T simply has decided that confrontation with the FCC has limited utility, at least in this case, the reason being that AT&T itself has a number of important spectrum purchases lined up for FCC approval.

AT&T is attempting to buy about $2.6 billion worth of spectrum to catch up with Verizon Wireless. AT&T has proposed at least 24 deals in the past four months for the rights to spectrum.

Verizon already has won U.S. approval to buy airwave rights from Comcast Corp. and three other cable companies for $3.9 billion.
Many AT&T users might agree that AT&T needs more spectrum, just as Sprint customers using that firm’s 4G network (WiMAX) might complain that performance is slower than it used to be.

AT&T’s plans would boost its most important spectrum holdings by 62 percent in the biggest 100 U.S. markets, according to John Hodulik, a UBS AG analyst.

There’s no question bandwidth demand is growing. The issue is really “how fast?” and “what can be done” to better use existing spectrum resources.

Still, under normal circumstances, one would expect a market leader to oppose the notion that there should be caps on the amount of spectrum any single provider can own. What therefore needs “explanation” is why AT&T would essentially say it welcomes the possibility of such caps.

Many, after all, would argue that control of spectrum is essential for market control. If new competitors cannot get spectrum, they can’t be in the business. On the other hand, such limits are commonplace. U.S. cable operators work under the assumption that no single provider will ever be allowed to gain control of more than 30 percent of U.S. video entertainment customers.

So how does Comcast grow? Comcast sells many other services to a finite number of customers, and then gets into another business, namely programming.

Whether AT&T’s thinking is “merely” tactical (do nothing to impair approval of its immediate spectrum buys) or more long term (sooner or later we will face spectrum caps, but those caps also will affect its major competitors, and there are other sources of business advantage), the apparent lack of resistance to the notion of spectrum caps is unusual.

John Legere Named as CEO of T-Mobile USA

Deutsche Telekom has named John Legere, a 32-year veteran of the U.S. and global telecommunications and technology industries, Chief Executive Officer of its T-Mobile USA business unit, effective September 22, 2012, 

Some might find the T-Mobile choice a bit puzzling, given Legere's prior stewardship of Global Crossing. Some might have expected an executive with deeper experience in mobility, for example. 

Others might note that Legere has experience with enterprise and computing device aspects of the business. Some might point to experience with mergers and acquisitions, in a business rife with competition, as well. 

If you share the opinion that the top end of the U.S. mobile business simply has too many competitors, then both T-Mobile USA and Sprint must be counted as among firms that "must" merge or sell, ultimately. 

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