Month: August 2011

The smartbank in your pocket

Brett King in How Steve Jobs Changed Banking Forever:

In the end when the dust settles, there will still be banks at the backend owning the wires, payments networks and carrying the risk, but they won’t own the customer. The customer will hardly notice banking embedded in their daily life as they go shopping with their phone, as they buy a new car or home, or as they travel overseas or send their kids off to college. It will just be a part of our everyday life…

The italics are mine.

I’ve long thought banking would be an ideal fourth party, for the simple reason that banks are services that tend to work on our side of the demand/supply divide. Each of us also refers to our banks in the first person singular possessive voice: my bank.

Banks are places where we store personal value. They also care about the form of personal data we call money.

I could go on, but I’d rather hear what ya’ll think.

Circling Around Your Wallet

To get our heads all the way around Google+, it helps to remember Microsoft’s Hailstorm initiative from ten years ago. Think of Google+ as Hailstorm done right, or at least better. (That is, for Google.)

googlepluswallet

What Microsoft wanted with Hailstorm was less “social” than personal. (“Social” in 2001 was years away from getting buzzy.)  What Google wants with Google+ is very personal, or Google wouldn’t be so picky about the “real names” thing.

One difference from Hailstorm is that Google isn’t playing all its cards yet. Microsoft laid all theirs on the table with Hailstorm, and its identity service, Passport. What they wanted was to be the iDP, or IDentity Provider, for everybody. Is that what Google has in mind too? In 2005 John Battelle said Google was “angling to become the de facto marketplace for global commerce.” That might be a stretch, but it’s the vector that counts here, and Google+ points in that direction.

Let’s connect the dots.

  • Google’s “real names” policy (they actually say common names) for Google+ is freaking people out, sparking “nym wars“, on the other side of which are my.nameis.me, Kathy Gill, Kevin MarksSkud (who unpacks the whole thing extensively) and many others. (Here’s the latest from Kaliya.)
  • Google+ has just started. The big type on the current index page says “A quick look at the first pieces of the project.” Brad Horowitz, who runs Google+, in an interview with Tim O’Reilly (Google’s main defender at this point) says the project is “unfinished”, in “limited field trial” and not “launch ready”, meaning some people aren’t being served, and getting going for others is still “hard”. Specifically, Google+ cannot serve “tranches” of users who, for example, a) work inside enterprises that “bet their businesses on Google”, b) are minors, c) are brands, and d) wish to use pseudonyms or otherwise uncommon names. (That last group includes many early adopters of Google+ who are now being rejected.)
  • The common names policy wasn’t there for Gmail or any (or many) of Google’s many other services. Why this one? An answer came from Eric Schmidt, who told Andy Carvin that Google+ was being built “primarily as an identity service.”
  • Google has many services, none of which are truly “finished,” and some of which are just getting started. On the finished end of that spectrum is Google Checkout. At just-started end is Google+. Not out yet but announced is Google Wallet. What matters is that they can all both iterate and connect.
  • Google makes most of its money from advertising. That’s different than being an “advertising company.” Google was launched as a search company, and found a way to make money through advertising. They surely wish to diversify their income streams. One way is to support actual commercial activities, at the point of engagement between buyer and seller: to support the Intention Economy that starts with buyer volition, and not just the Attention Economy of which advertising is a part. In other words, to work where the demand chain meets the supply chain.
  • The first source of revenue in markets is customers: ones that have real names on their drivers licenses and credit cards. Pseudonyms, handles and nicknames — such as IdentityWoman, @Skud, FactoryJoe and Doc — might appear on business cards, but not on the bank- or government-issued plastic cards in those folks’ wallets.
  • To Google, Twitter and Facebook, pseudonyms, handles and nicknames are for users. Real names, or common names, are for customers. And real names tend to be what we have on our credit cards and government-issued identification cards and documents, such as drivers licenses and passports. When a seller wishes to authenticate us, that’s what they ask for.
  • Note carefully: Most users don’t pay. All customers pay: that’s what makes them customers.
  • Facebook is already the de facto iDP for perhaps hundreds of millions of people. (Pete Touchner unpacks that nicely in a slide deck, especially starting here.) The ubiquitous Facebook Connect button testifies to that. (As does Marc Zuckerberg calling the name you use in Facebook “your online identity.” But…
  • Facebook Connect lacks infrastructural legs that Google can put under the market’s table — legs like Google Checkout, Android and Google Wallet, as well as Google’s own physical network, back-end processing power and engineering knowhow, spread across many more business and technical disciplines than Facebook can pull together.

Back in May, I posted Google’s Wallet and VRM here. In it I posed eleven reasons why Google Wallet is potentially a development of profound importance. Here’s one:

Reason #9: Now you can actually relate. When a customer has the ability to shop as well as to buy, right in his or her wallet — and to put shopping in the context of the rest of his or her life, which includes far more than shopping alone — retailers can discover advantages other than discounts, coupons and other gimmicks. Maybe you’ll buy from Store B because you like the people there better, because they’re more helpful in general, because they took your advice about something, or because they help your kid’s school. Many more factors can come into play.

Such as when your circles intersect.

The earliest thrust for Google Wallet has been NFC (Near Field Communication), for doing mobile payments. From a Google post back in May:

Because Google Wallet is a mobile app, it will do more than a regular wallet ever could. You’ll be able to store your credit cards, offers, loyalty cards and gift cards, but without the bulk. When you tap to pay, your phone will also automatically redeem offers and earn loyalty points for you. Someday, even things like boarding passes, tickets, ID and keys could be stored in Google Wallet.

At first, Google Wallet will support both Citi MasterCard and a Google Prepaid Card, which you’ll be able to fund with almost any payment card. From the outset, you’ll be able to tap your phone to pay wherever MasterCard PayPass is accepted. Google Wallet will also sync your Google Offers, which you’ll be able to redeem via NFC at participating SingleTap™ merchants, or by showing the barcode as you check out. Many merchants are working to integrate their offers and loyalty programs with Google Wallet.

With Google Wallet, we’re building an open commerce ecosystem, and we’re planning to develop APIs that will enable integration with numerous partners. In the beginning, Google Wallet will be compatible with Nexus S 4G by Google, available on Sprint. Over time, we plan on expanding support to more phones.

Two months after that, in July, Google acquired punchd, “a better solution for loyalty cards”. (More here.) And now it seems that one of the first retailers with the NFC devices required at checkout is going to be Radio Shack. (Google’s list of signed-up “single tap™” partners is quite long.)

Pause now to think about supply and demand.

Most of Google’s commercial work so far has been on the market’s supply side, especially with advertising. (Nearly all their customers are sellers, not buyers.) Google Wallet, however, works on the demand side, because it goes on your phone, which lives in your pocket or your purse.

Your electronic wallet is the point of contact between your demand chain and the sellers’ supply chain. With electronic wallets, we get many new ways for these two to dance. And, therefore, many more commercial opportunities.

Wallets are also instruments of independence. (As are, say, cars.) As the Intention Economy grows (and electronic wallets will help with that), so must the things we as individual customers can do with them — and behind them, back up our demand chain, in our personal data stores. This is where we need to be the point of integration for our own data, which should include data collected by and about us.

Don’t think about how and why we should sell our data, especially to marketing’s guesswork mills (of which Google is the largest). Think about what services we might buy, to help us apply intelligence to the use of our data.

Think about new and different ways in which we might save and spend our money — ways that have nothing to do with today’s defaulted vendor-run gimmicks (loyalty cards, “sales,” coupons, “rewards”…) meant to trap us, herd us and shake us down for more money. Think about having more control over how, why, and where we spend (or actually save — as in a bank) our money. That’s what we start to see when we think about electronic Wallets beyond the near horizons of point-of-sale connections and better come-ons from sellers. That’s what Google will start to see when they start talking with us, and not just with big companies looking for more and better ways to sell.

If our electronic wallets are to become instruments of independence, we need a choice of interchangeable ones that work the same with every seller — much as we have a choice of cars that work the same way with every driveway, highway, gas station and parking lot. This means Google’s can’t be the only wallet. (I’m sure they know and welcome that.)

Presumably, Google Wallet will be open source. In fact, that would be a good way to fight Isisa new competitor to Google Wallet, funded by AT&T, Verizon and T-Mobile — and whatever Apple comes up with if it wishes to fight Google Wallet and/or Isis. Says Mashable (at that last link), “Isis was born last year, and aside from allowing mobile payments, it’ll also give you the ability to redeem coupons via their mobile payment service. It’s planned to debut in several unnamed major cities next year and will monetize by charging marketers a fee for sending offers to consumers’ phones.”

Earth to Big Boys: We’ll pay for value, including services that make our wallets serve us, and not just the marketing mills of the world.

When we have full independence, we will also have the ability to engage as equals in agreements and contracts. The legal dance online will need to resemble the legal dance offline, which is in the background. In the same way that we don’t need to “accept” a written “agreement” to enter and shop at most stores in the physical world, we shouldn’t need to do the same online. We should be able to bring agreeable terms with us, match them with those of sellers, electronically, without the intervention of lawyers or forms to sign, and do business. In other words, freedom of contract needs to obsolete contracts of adhesion, and the calf-cow system of asymmetrical non-relationships we’ve had online since the dawn of the cookie.

Listening to Brad Horowitz talk with Tim O’Reilly, I sense that Google is also tired of the old cookie-based paradigm of e-commerce. Helping make the customer independent, starting with his or her own wallet, is a great way to start breaking that paradigm.

The problem, as Google is discovering though the “nym wars”, is identity. People take that one personally.

To get a better angle on the issue, let’s look more closely at Microsoft’s Hailstorm. Here’s what I wrote about it at the time. Here’s a much longer piece by Clay Shirky, also from back then.

Microsoft saw Hailstorm as (among other things) a way to compete with AOL, which was the Facebook of its time. Hailstorm’s main feature was Passport: a then-new single-sign-on authentication service. The idea was to have Passport login buttons appear everywhere, like Facebook buttons do now (though far less securely than Passport, which didn’t spill your social guts by default). Such buttons provided Single Sign-On, or SSO.

Joe Wilcox’ unpacked Hailstorm and Passport in March 2001 for CNET. An excerpt:

HailStorm is a group of services, using Microsoft’s Passport authentication technology, meant to provide secure access to e-mail, address lists and other personal data from virtually anywhere via PCs, cell phones and PDAs (personal digital assistants). The catch? Users of the services will be required to pay a fee to use them. Analysts said that if the HailStorm model is widely adopted–and if people will pay a premium for security–the days of ad-subsidized Internet services, such as free e-mail and messaging, may be over.

“HailStorm is absolutely the test of can you make money on the Web,” saidGartner analyst Chris LeTocq. “But to get there, you have to offer people something they are willing to pay for. That will be the test for Microsoft.”

Microsoft executives are confident that the time is right for HailStorm. “There’s been a lot of stuff (on the Internet) in the last couple of years that was free and interesting, but people weren’t actually willing to pay for it,” said Charles Fitzgerald, director of business development in Microsoft’s platform strategy group. “We want to pursue a model that lets us deliver a lot more value in an economic fashion so that we all can get paid every two weeks like we’re used to.”

One big difference: Google isn’t looking to make money with fees here. In fact they say clearly that they are not. But Google is looking to make money their old-fashioned way, which is with “second and third order effects” that will manifest in due time.

Here’s what’s the same: Passport was an identity service. Which Eric Schmidt says Google+ is now.

Microsoft failed because they thought their platform (Window plus .Net) was bigger than the Net and the Web. (In the now-gone Hailstorm white paper, they talked about “moving the Web” in a new direction.) Google knows better.

Still, the game is the same. That game is turning users into customers.

In competitive terms, Facebook and Google will both have users. But Google will have the customers — even if they’re not customers of Google’s services directly. Google will be helping customers use their wallets, while Facebook will be stuck at SSO.

But Google vs. Facebook, or anybody vs. anybody, is the wrong way to look at the market opportunities opening up in the Intention Economy. Because the Intention Economy isn’t a supply-side game. It’s a demand-side game. The slate is fresh, but not blank. Two groups are already there:

  1. VRM developers, working to equip customers with tools of both independence and engagement. (Automobiles, rather than seats on railroad cars.)
  2. Fourth parties, working on behalf of customers, helping them build out their personal demand chains. These can include any service company an individual employs — that is, pays, to help work with the third and second parties of the world (numbered from the customer perspective). We’re talking here about banks, insurance companies and anything called an agency, plus all the new companies coming into the personal services and personal data store businesses. These might include parties the individual doesn’t pay, but that clearly are in business mainly to help individuals (first parties) rather than second and third parties. That qualifies Google, should they wish to join.

There is a lot happening with VRM here that we’re not ready to talk about yet. (No, none of it involves Google Wallet, at least not yet.) But demand chain (Craig Burton‘s term) hints strongly at where we’re going.

Investors take note.

A loyalty card survey

I’m on record saying (at least some) surveys suck. I’ve softened a bit on that, in part because I now have two relatives working at . So today, when I found myself wondering how many loyalty cards people carry around, I thought, Hey, why not run a little survey on that? So I put one together, through SurveyMonkey. And, while I was at it, I added a couple of VRM questions.

You can take the survey here.

Thoughts, of course, are welcome.

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