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Survey Reveals Most Common Reasons Consumers Use Merchant Apps

A new survey about digital wallet usage from Thrive Analytics also contains findings about why consumers download and use merchant apps. While nearly 90% of time with mobile is spent "in apps," most consumers don't have many (or any) retailer apps on their phones.

This is something of a paradox and a major gating factor for indoor location and marketing. Unlike mobile wallet usage, foundational consumer behavior for indoor marketing is already well established: between 70% and nearly 90% of smartphone owners use their devices in stores already. 

However to leverage indoor location and improve the in-store experience, using mobile, apps are required. That's the challenge for retailers. 

The chart below reflects what the Thrive survey (n=2,038 US adults) found about the reasons that smartphone owners use merchant apps:

Source: Thrive Analytics, July 2014 (n=2,038)

To some degree this list reflects what's possible in retail apps today. I believe however that merchants must make their apps much more utilitarian in terms of the in-store experience than they currently are. Using indoor location retailer apps can recognize that consumers are in a store and transform from an e-commerce centric experience to one that focuses on common consumer needs in the store. 

This includes offering more in-store product information, maps and the ability to pay using an app. To the extent that retailers can further develop their apps as in-store assistants and incorporate payments they will give users much more reason to download and retain them.

Preview of Place Conference 2014

When we launched the Place Conference late last year we felt that the time was ripe to hold an event that started to engage discussion around indoor location. But not simply indoor location; we wanted to "connect the dots" between indoor location, broader mobile marketing and online to offline tracking and attribution.

The first Place Conference in San Francisco was a unique event and a big hit. Roughly eight months have elapsed since that time and tomorrow's Place 2014 event reflects the rapid evolution of the market. We're at a moment when mobile marketing is really starting to take off -- expectations are that mobile advertising in the US will be north of $15B in 2014 -- and whe consumers are using their smartphones as shopping assistants in ever larger numbers.

Tomorrow's event at the W Hotel in Union Square will feature a range of speakers and and attendees who don't usually come to the same conferences: agencies, retailers, brands, technology companies, investors, lawyers and representatives of non-profits and government. 

Here's the very packed agenda (and my shorthand): 

  • The Place-Based Moment: Greg Sterling, Senior Analyst, Opus Research (consumer research and market sizing)
  • The Agency Perspective: Conversation with Michael Lieberman (agency perspective on the state of mobile and indoor location)
  • The Indoor Technology All-Stars with Don Dodge (array of providers discussing their capabilities)
  • Ahead of the Curve: Alex and Ani - Ryan Bonifacino, VP of Digital Strategy (why one retailer went all-in with indoor location early)
  • IndoorAtlas and Magnetic Positioning (an indoor technology that doesn't require hardware that you may not have heard of)
  • Connecting the Dots: How Location and Offline Analytics Will Transform Digital Marketing (indoor analytics and how it will impact digital broadly)
  • Case Study: SK Telecom (multiple use cases from South Korea)
  • Featured Speaker: Facebook’s Doug Stotland (how the company is connecting the dots from online to offline)
  • Beacon Location Security & Encryption (best practices for iBeacon and BLE)
  • Indoor Location & Privacy: Steering Clear of the ‘Creepy Line’ (experts discuss how to handle mobile location, indoor location and consumer privacy)
  • Hillshire Brands, inMarket and iBeacon (the first national brand case study using iBeacon)
  • Best Practices for Consumer Push Notifications (Urban Airship shares best practices from its many billions of campaigns)
  • Street, Store or Shelf: Rightsizing the Consumer Experience (what's going to work and how to avoid spamming consumers)
  • Comparing Indoor Location Technologies (an objective comparison of indoor location technologies for brands, retailers and agencies)
  • Whither Geofencing: What Is the Future of Mobile Location? (a forward looking discussion about location and mobile advertising)

If you're going to be in the room you'll be immersed in discussion about the future of mobile, location and offline attribution. These trends are coming together with profound implications for all digital marketers and brands. It's going to be an exhausting yet exhilarating day. 

 

Lines and Cash Are Two Big Payment Pain Points for Consumers

PayPal recently released survey data on e-commerce and mobile payments. There were more than 15,000 respondents from a range of countries: Australia, Brazil, Canada, China, France, Germany, Israel, Italy, Japan, Russia, Singapore, Spain, Turkey, UK and the US.

The survey identifies arguably the two major offline payments "pain points" for consumers: 1) waiting for their payments to be processed (or waiting in line) and 2) having enough cash on hand (less true in Western markets).

Payments pain points paypal

PayPal found that the hierarchy of "can't leave home without" items was as follows:

  • Keys -- 34%
  • Phone -- 24%
  • Credit cards -- 21%
  • Cash -- 20%

The survey also asked about friction or frustrations with to e-commerce: "Which of the following, if anything, annoys you about online payments?"

 E-commerce pain points

The responses vary by country but this is the list: 

  • payment security
  • registration requirements
  • hidden charges/taxes
  • entering credit card numbers
  • malfunctions in the middle of transaction
  • passwords and pin numbers

The survey also inquired about time spent shopping -- this is self reported data but with a roughly 1K per country sample. The question asked how many hours per week were spent shopping offline vs. online.

In China more time was spent online and in Brazil the time spent was identical (very hard to believe). The UK is nearly 1:1 but the US favors offline by about 2.5X. I would take these numbers not as actual but as directional indications of time spent. For example, is grocery shopping included here? It's not clear.

 Time spent shopping online vs. offline

In my view the most interesting findings are reflected in the top chart about the challenges and frustrations of traditional offline payments. There's great opportunity in minimizing payment wait times and enabling people to avoid lines. This is starting to happen as in-app/mobile payments are currently being deployed in fast-food and "fast-casual" restaurants and in a few fine dining establishments with the OpenTable app.  

Retailers also have a major opportunity with mobile payments. Loyalty and payments are two features that would help them generate app downloads and repeat usage. It would also provide them with additional tracking tools, not to mention "closed-loop" ways to market to their customers. 

Currently most retail apps are sort of mini e-commerce sites. By contrast, they need to create apps that either contemplate the majority of usage being nearby and in-store, and make changes to the user experience accordingly, or have context-sensitive apps that can change when a user comes into a store. 

Report: M-Commerce on Track to Hit $50B This Year

Custora released some new data on mobile e-commerce drawn from “over 100 online retailers, 70 million consumers and $10 billion in transaction revenue.” Based on transaction volume to date in 2014, the company predicts that mobile e-commerce will hit $50 billion by the end of the year.

Based on US Census Bureau data, total US e-commerce is likely to be in the range of $280 to $290 billion this year. 

Custora says that roughly 37% of visits to e-commerce sites in the US are now coming from smartphones and tablets. Apple devices currently drive the highest transaction volume but Android is gaining, chiefly in the form of Samsung devices and “forked” Android Kindle Fires from Amazon.

The Kindle Fire phone is poised to be a mobile commerce powerhouse if it sells. However it lacks mainstream appeal in my view. 

us-e-commerce-revenue 

Apple’s over share of m-commerce declined from 75% in 2012 to 51% in Q1 2014 according to Custora data. Among tablets the iPad still dominates, driving roughly 80% of all e-commerce from tablets. Samsung tablets were responsible for 15% of tablet based e-commerce and Kindle tablets drove about 4.5% says Custora.

Perhaps the most interesting finding from Custora is that email generated 27% of m-commerce transaction volume in the quarter. These were users “responding to email marketing and shoppers going directly to e-commerce sites (including app traffic).” By comparison, email marketing drove 21% of PC based transactions and 23% of tablet-based e-commerce. This strongly argues for immediate optimization of email for smartphones.

Custora says that social media basically didn’t drive mobile transactions. The company said “social media accounted for only 0.6% of sales on phones and 0.2% on tablets.”

Over 57% of US Homes Have No Landline or Don't Use the Landline

New data from the National Health Interview Survey (NHIS) from the National Center for Health Statistics, now reflect that 41% of US homes have no landlines -- only mobile phones. These data are from the period July 2013 through December 2013.

The report goes on to say that almost 34% of households with both landline and wireless phones "received all or almost all calls on wireless telephones." These mostly wireless homes represent 16.1% of all US households according to the NHIS. 

Together the two categories of wireless only or mostly wireless homes constitute 57.1 percent of all US households. Either the landline doesn't exist or it's mostly a spam catcher for telemarketing and other unwanted calls.

There are regional and demographic differences in the data. The poor were much more likely to be mobile only and so were younger adults. The Midwest was the region that (barely) had the most mobile only households with 43.7%. The Northeast had the least at 24.9%. 

According to NHIS, growth of mobile-only homes has slowed vs. previous years. Thus growth of mobile-only homes may be near a plateau. 

Tiny Collection of Apps Dominating the Mobile Universe

Yesterday Nielsen released data (which has strangely now been pulled from the site) showing that smartphone users were spending about 30 hours per month in Q4 2013 on mobile apps. That was up from just over 23 hours in the previous . . . quarter? year?. The chart below isn't clear on the comparison time frame. 

What's most interesting is that while time went up the average number of installed apps did not. Users on average had just under 27 apps on their handsets. That number was basically flat.

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Interestingly, in May 2012, Nielsen reported that the average US smartphone owner had 41 apps on his/her phone vs. 32 apps in 2011. So either the calculation above is incorrect or the number of retained/active apps has declined. 

The following is comScore's top 15 US apps list for April 2014 (the most recent data available):

The internet -- as represented by apps, which now take up 51% of digital media time -- is shrinking. The list of top mobile ad revenue recipients is even shorter than the top apps list.

Forget the percentage specifics in the chart below; the point is the list itself. Google, Facebook, Twitter and Pandora are all "publishers," though in all but Pandora's case they're ad networks too. YP is a publisher but on the list as an ad network. Millennial Media is also a network. 

If we look at all these data together what we see is a mobile app universe dominated by a tiny collection of apps vs. the total universe of 1.2 million iPhone apps. An even smaller number of publishers/networks collect the majority of mobile ad revenue.

Google Project Tango and aisle411 Team Up for Augmented Reality Shopping

Project Tango is Google's new 3D mapping technology. It uses the smartphone's camera, gyroscope and accelerometer to do indoor mapping (based on SLAM -- simultaneous localization and mapping).

This approach doesn't require additional hardware installation (even Beacons). It just requires smartphones to do the initial mapping. It's one of three or perhaps four such approaches now emerging. Others include Indoor Atlas and FlyBy Media (a Tango partner). 

At Google's developer conference I/O last week the company was showcasing various uses of Tango, one of which was in a retail environment through a partnership with aisle411. The latter implemented Tango in Walgreens to generate in-store augmented reality (AR) shopping experiences (see video below). 

Product locations are married to a store map, created using the Tango technology. Using a smartphone or, in the video, a tablet fixed to a shopping cart, the end user can see product locations, map shopping lists to a floor plan and see enhanced product information or coupons "pop up" on the screen. 

Aisle411 says the technology allows for accuracy "within centimeters." This is a pretty interesting variation on some of the indoor location scenarios we've been discussing and exploring. However one question is whether stores will equip shopping carts with tablets, which could be expensive and risk theft. On the other hand this AR experience is potentially less satisfying and effective on a smaller screen smartphone -- users are unlikely to hold them out as they walk down store aisles. 

Regardless it's a pretty interesting marriage of digital and real-world experiences in a shopping environment. Aisle411 will be speaking on the indoor location technology panel at next month's Place Conference on July 22 in New York. 

The Outlook for (Monetizing) Wearables

Before we can truly discuss the outlook for wearables we need to see Apple's iWatch and how much it costs. There are already a dozen or so smartwatches in the market, chief among them the Pebble and Samsung devices. Most of them have already failed.

The Pebble is a qualified success. However, there is really only one truly desirable smartwatch coming to market so far -- and we don't yet know the pricing. That's the Moto 360. 

The Samsung and LG watches ($199 and $229 respectively) shown off at the Google developer conference this week seem like decent but not great devices. As fashion items they leave much to be desired. I haven't yet used them so I can't comment on the experience. I have the Samsung Galaxy Gear Live (Android Wear). 

Nielsen reported yesterday that it tracked a "surge" in wearables adoption (fitness trackers and smartwatches) and usage between September 2013 and February 2014. The company added that "these wearable owners used their devices an average of 14 times during the month." The measurement firm also observed that smartwatch owners log a lot of time monthly accessing the internet and content on those wrist devices: 

file

There's a question about whether the time is additive to existing mobile device usage or whether it cannibalizes some of that time. Regardless, the data above are very interesting, suggesting that with the right devices (mix of fashion + function + price) wearables could become a mainstream reality with fairly high engagement and diverse use cases.

The next obvious question about wearables surrounds marketing and monetization. Ad exchange TapSense announced earlier this week that it would be supporting delivery of ads to smartwatches. Those ads will likely follow the same pattern as early mobile display advertising: lackluster or perfunctory ad creative and weak or awkward overall experiences.

Most companies won't build anything like landing pages optimized for wearables. And most of these early ads will probably be for other app downloads. 

More likely to be effective are app-based notifications. For a long time SMS marketing held promise as a loyalty and location-based notifications tool. Today that promise has largely faded. However wearables may offer another go at that opportunity.

Consumers could, for example, opt-in to receive location-based notifications -- including indoor alerts -- that might contain marketing content (awareness or DR calls to action). This approach is probably going to be more effective and less awkward than ads within tiny apps on your wrist.

Paradoxically apps with ads that are too small to be noticed won't be effective and ads that are too large are likely to annoy. As "personal" as the smartphone is a watch is going to be even more personal in some respects -- and thus people may be less tolerant of conventional advertising on these devices.

Search content/ads may be an exception. Still you can't show many ads on a 2.5 inch screen. 

If Ad Spend Matched Time Spent Mobile Ads Would Be Worth $29B This Year

Earlier this week comScore reported that mobile devices (smartphones + PCs) were responsible for 60 percent of total digital media time in the US (chart at right). Traditional TV is still the king in the US in terms of overall consumer time spent. 

More specifically, comScore said that US users spend 51% of all their digital media time in mobile apps. The firm reports roughly 83% of mobile media time is app-based (vs. the mobile web). Nielsen puts the number at 89%. 

I spoke to comScore at some length about these numbers. We agreed that ad dollars would eventually follow the consumer traffic migration. The question is how long it might take. For the past few years mobile ad spending in the US has roughly doubled YoY (per the IAB):

  • 2011: $1.6 billion
  • 2012: $3.4 billion 
  • 2013: $7.1 billion 
  • 2014 (projection): $14 to $15 billion 

Total digital ad revenue in the US for 2014 will probably be around $49 billion. If time spent and ad spend were aligned mobile would capture more than half of that number (and in-app advertising the bulk of that). Accordingly mobile ad revenue would be $29.4 billion and PC ad revenue would be $19.6 billion. 

That would be radical.  

Price Matters: Amazon Fire Blew It, Will the iWatch Learn from That Mistake?

There were early, hopeful rumors that Amazon's smartphone would be free. What a radical move that would have been.

That free rumor was quickly quashed by Amazon. Indeed, when it showed up last week the Fire phone was priced like an iPhone: $199 with a two year contract or $650 unlocked. I was very surprised by this "premium" pricing. 

Amazon CEO Jeff Bezos feels he's developed a premium phone and that consumers will also see it that way. True, Fire does have a number of stand-out or innovative features:  

  • 13MP rear camera
  • Firefly: Shazam for the real world.  
  • Unlimited, free cloud photo storage
  • Deep integration of the Amazon content and services ecosystem 
  • Free “MayDay” video customer service
  • Dynamic perspective: a kind of 3D experience on the home screen and for games
  • Free year of Amazon Prime for new customers

Yet one can't escape the feeling that this device has been designed almost entirely to promote Amazon, its content and e-commerce. The user is somehow secondary or merely a vechicle for the realization of Amazon's broader mobile ambitions.

The early reviews have been very mixed. Consequently few iPhone buyers will switch and the same is probably true for those loyal to Samsung Android devices. Amazon's loyal customers are the likely buyers of this handset. While that's millions of people it's not enough to make the phone a true hit. 

Had the phone been more aggressively priced, as the Kindle Fire tablet was when it launched, the story would be very different. In all but a very few cases price matters. An unlocked $199 Fire or, ideally, unlocked $149 Fire would generate significant sales. Then, I believe, Amazon would have had a massive potential hit on its hands. 

Consider that Motorola sells the 4G Moto G Android phone for $179 -- unlocked. Between the Amazon phone and the less flashy but still well-equipped (and much cheaper) Moto G, the choice is obvious: Moto G. 

As with the Fire, now destined for disappointing sales absent a price cut, the price of Apple's forthcoming iWatch matters. The device (or devices) will be released, according to reports in October.

Financial firm Piper Jaffray surveyed 100 people (too small a sample) and asked about interest in a $350 iWatch. Apparently only 14% (or 14 people) said they were willing to buy a $350 iWatch. The survey extrapolates limited demand from those findings. 

The conclusion of that there's only limited interest in smartwatches is wrong. There's considerable interest in the market. Surveys by Opus Research, Nielsen and others suggest a potential market in the US of more than 100 million people. There are two key variables however: design and price.

The Samsung Galaxy Gear watches failed not because of price ($299) but because they were ugly and poorly designed. We can expect Apple's iWatch(es) to be well designed but the price is an issue.

If Apple can price these devices below $300, and preferably below $250, they're likely to see considerable sales volume. But above $300 the market will be more limited, as the Piper Jaffray data suggests.  

Apple needs another hit product so it would do well to take a lower margin on the iWatch in favor of boosting sales and making it more accessible and affordable for a larger population.  

Beacons Found to Increase App Usage and In-Store Engagement by Nearly 20X

Beacon marketing provider inMarket released some data drawn from its shopper/store base that show Beacons and associated content/offers can increase app usage, retention and brand engagement.

The company looked at a sample of 25,000 in-store shoppers across its app network during April-May of this year and found the following averages:

  • Interactions with advertised products increased by 19x for users who received a beacon message.
  • In-store app usage was 16.5x greater for users who received a beacon message.
  • Shoppers who received a beacon message were 6.4x more likely to keep an app on their phone, versus those who do not.

These findings reinforce others that already exist and highlight the potential to improve the in-store experience and boost sales both for retailers and brands.

We'll get a drill down and more in-depth look at in-store Beacon usage/engagement data from inMarket partner Hillshire Brands and its agency BPN Worldwide at the Place Conference coming up July 22 in New York.

This kind of data is a counterweight or argument against the notion that consumers are hostile to indoor location, which several surveys and media reports seek to portray.

Mobile Ad Revs Over $2B in Q1, Could Hit 30% of Total for 2014

This morning the IAB put out a press release that reported $11.6 billion in digital ad revenue for the first quarter of 2014. However the trade association did not indicate how the numbers were broken down by channel and category. 

In 2012 mobile advertising represented 9% of total US digital ad spending. In real dollar terms that was roughly $3.3 billion. In 2013 mobile advertising grew to be 17% of total digital ad revenue or nearly $7.1 billion. 

Mobile advertising could double again in 2014 and reach between $14 billion and $15 billion. If so, by my calculation, it would represent nearly 30% of total US digital ad revenue -- assuming a full year 2014 projection of roughly $49 billion.

In Q1 mobile ad revenues were probably in excess of 20% of the total. In Q4 2013 they were 19% (though 17% for the full year). At 20% mobile ad revenue would represent $2.3 billion of the Q1 2014 $11.6 billion.  

Report: Weather Apps Have Highest Retention, Games the Lowest

App retention is getting better, according to Localytics. The company said that only "20% of apps are used only once, an improvement of 6% over four years." The data in the report were collected from 1.5 billion devices and 25,000 apps using the Localytics platform. 

Localytics attributes increased retention to better developer-publisher "understanding of and focus on user engagement that has enabled developers to create more useful and personalized apps." Here are the aggregated topline data: 

  • 20% of Apps are only opened once, improving from 26% four years ago
  • During the same period, the percentage of apps used 11 or more times increased 13% and now comprises nearly 40% of all apps.
  • Sports and Games apps have the highest app abandonment rate, whereas Weather and Social Networking apps have the lowest

overall chart

In a worrying development for iOS developers, Localytics says that iOS showed weaker app retention than Android:

In 2013, both Android and iOS had the same percentage of apps (34%) with 11 or more sessions. Now, Android has surpassed iOS in app engagement by increasing to 45%; nearly half of Android apps are opened 11 or more times, whereas only a third (34%) of iOS apps are.

The company speculates that "iOS users may be suffering from app overload. With the relatively larger number of apps installed on iOS devices, competition for an iOs user’s time increases and can weaken retention." 

platform chart

As indicated, weather and social apps showed the highest retention while sports and games had the highest percentage of one-time usage. Localytics observes that social networks are filled with personalized and highly dynamic content.

Yet sports apps have dynamic, changing content (e.g., scores) too. Perhaps personalization is a missing element or, alternatively, sports content may be highly "generic" and widely available, making any individual app less compelling. 

category chart

Report: "Magnetic Positioning: The Arrival of Indoor GPS"

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Precis

IndoorReport_cover

Technologies for indoor location and offline analytics differ substantially in their costs, capabilities, accuracy and longevity. But these technologies remain largely undifferentiated in the minds of many brands, retailers and venue owners who’ve had limited exposure to them in the real-world. In this report, Opus Research delves deeply into one such technology, magnetic positioning, to understand how it differs from its competitors in offering precision accuracy without any hardware requirements and a relatively low total cost of ownership.

To see a preview of “Magnetic Positioning: The Arrival of Indoor GPS,” an Opus Research report written by Senior Analyst Greg Sterling, click here

Featured Research is available to registered users only.

For more information on becoming an I2G client, please contact Pete Headrick (pheadrick@opusresearch.net).


Forecast Shows Google Losing Mobile Search Share While Yelp Gains

A new report from eMarketer argues that Google is leaking mobile search revenue to apps. The forecast in the document says that US mobile advertising in total will reach $17.73 billion this year and search revenue will constitute just over $9 billion of that total. 

Last year the IAB reported $7.1 billion in US mobile ad revenue, roughly double the year before. If mobile ad spending were to double again it would reach between $14 and $15 billion. Getting to nearly $18 billion is a stretch. However eMarketer casts a very broad net around mobile advertising, including email and services like "site optimization" that don't involve any media spending. 

Mobile search share

Regardless of definitions, the consumer tendency to use apps rather than the mobile web is apparently taking a toll on Google’s mobile ad dominance. According to the forecast, Google's mobile search ad share was 83% in 2012, dropping to 68.5% last year. These numbers are somewhat deceptive because Google's mobile revenues are still growing and the company continues to have the largest individual share of global mobile ad spending. 

What's happened, however, is that more money is flowing into mobile generally (and mobile search advertising) and some of that money is being spread around to places other than Google. Among them, YP and Yelp are called out in the report.  

YP has been one of the (surprise) top five mobile ad companies in the US. However eMarketer projects that YP will lose share (though potentially grow overall revenue), going from 7.6% of total US mobile search revenues in 2013 to 4.1% in 2016. By comparison Yelp will grow from 1% in 2013 to 1.9% of search ad revenue in 2016. 

Report: More Apple-iBeacon Announcements Coming Today

Among other, anticipated product announcements at Apple's WWDC conference today (iPhone, smart home, iOS 8) the company may make some new iBeacon announcements. According to the Wall Street Journal, Apple has placed iBeacons around the conference hall where WWDC is taking place to demonstrate the BLE technology to developers.

The WSJ article gets a number of things wrong about the technology however. For example Bluetooth beacons/iBeacon cannot currently enable precise indoor location indoors so it's definitely not "indoor GPS." Indeed, this is a potential advantage because users cannot be accurately "tracked" by merchants, allieviating some privacy concerns.

It's really only one-way opt-in communication from a retailer to a consumer. However beacons require the download of an app to work. Provided the case is made (i.e., offers, better in-store experience) consumers will be receptive. 

Among a range of indoor location technologies, iBeacon has the most visibility right now. Apple has deployed iBeacons in all of its 250+ retail stores globally.

In addition several NBA teams and Major League Baseball are using iBeacons to enhance the fan experience. For example, the Golden State Warriors basketball team sold better seats and offered welcome messages and discounts on team merchandise to fans in the arena using the Bluetooth Beacons. The team says the experience was very positive and intends a broader range of use cases next season. 

In addition, retailer Alex and Ani is rolling out iBeacons in all 40 of its retail locations. American Eagle Outfitters, in partnership with retail loyalty app Shopkick, said it would install iBeacons in its more than 100 U.S. retail stores this year. And British retail giant Tesco is testing how beacons can be used to improve the in-store experience. 

For those who want more information, we provide a broad overview and discussion of iBeacons and Bluetooth based in-store marketing in our report "A Marketer's Guide to iBeacons." You can also listen to our recent webinar on BLE Beacons: Everything You Always Wanted to Know about Beacons (but were afraid to ask) featuring Steve Hegenderfer, director of developer programs at Bluetooth SIG.

But for the most comprehensive look at indoor location, offline analytics and proximity marketing register for Place 2014 in New York on July 22. Be sure to take a look at the session and speaker lineup.

GE to Partner with ByteLight for In-Store Shopper Engagement

GE Lighting is partnering with ByteLight in effort to help retailers communicate with customers in-store through networked LED fixtures. The joint solution is intended to determine the precise location of shoppers who “opt-in” through a retailer’s app.

ByteLight and GE will showcase a networked LED fixture next week at LIGHTFAIR 2014 that combines Visible Light Communication (VLC), Bluetooth Low Energy (BLE) and inertial device sensors. The combined approach will be able to communicate with any shopper who has a mobile device with a camera and/or Bluetooth Smart technology.

The partnership is significant with GE, an iconic lighting manufacturer, entering the market for indoor location services. Not to be outdone, another lighting hardware stalwart, Philips, recently announced an indoor location opportunity of its own.

Also telling is the announced "comprehensive approach" with visible light and BLE technology. With many retailers still trying to understand the myriad indoor location technologies in the market (e.g. WiFi, proximity beacons, magnetic positioning, video cameras, as well as ByteLight’s LED offering), integrating different solutions is a likely approach for retailers as they navigate how to deploy indoor location technologies.

IndoorAtlas Delivers Indoor Location Entirely without Hardware

Finnish company IndoorAtlas offers something that sounds almost too good to be true: accurate indoor mapping without the installation of hardware. In addition, its approach can be accomplished very quickly -- even crowdsourced.

The company, founded in Finland with offices in Mountain View, has been around for several years but has had some difficulty convincing people that its approach to indoor location and mapping actually works. One reason is that, unlike Bluetooth Beacons, nobody else is promoting this approach to indoor location.

People are thus largely unfamiliar with it and how it works. Some people who learn of IndoorAtlas' "magnetic positioning" argue that all the building materials (i.e., steel, concrete) must distort magnetic fields inside structures. However this is precisely what IndoorAtlas says it relies upon: structural elements that give each building or indoor area a unique "magnetic fingerprint."  

This weekend the NY Times offered a brief overview of the company and its approach. We've been writing a report on the company's technology, which will be out shortly. IndoorAtlas will also be attending and presenting at our upcoming Place Conference in New York on July 22

We are among a small handful of individuals who've actually seen the technology working live in a store environment. About a month ago we got an in-store demonstration in a major retail store. Throughout the demo and our tour of the store the IndoorAtlas app accurately maintained our real-time location (exactly or within a couple of feet) as we moved throughout the store. 

It was consistently accurate. While this was an isolated situation -- though it wasn't controlled; it was a real "big box" retailer -- we have no reason to believe that it wouldn't perform the same way in other indoor environments.  

As we've argued in the past no single indoor location technology is perfect or complete. Multiple technologies will need to be combined to do the different types of things that retailers and venue owners seek to accomplish with indoor location (analytics, marketing). For example, RetailNext combines video, Wi-Fi and increasingly beacons in its analytics solution.

But the impressive and relatively amazing thing (hence the skepticism) that IndoorAltlas does is deliver indoor-location accuracy without the installation of any hardware whatsoever. 

Roughly $500 Billion in Consumer Spending Waiting to Be Influenced by Indoor Marketing

When we published our recent "Mapping the indoor marketing opportunity" report, we estimated that roughly $10 billion in spending would be impacted directly or indirectly indoor location technology and marketing. However the market is so young that it's difficult to make a forecast with any sort of precision. 

Given that analysts routinely inflate and overestimate the value of markets and the speed of their development I was somewhat nervous about this figure. However it turns out that $10 billion number may be quite conservative.

In that number we included software licensing revenue from indoor analytics. The consumer marketing side of the equation is much more vague given that indoor marketing is still mostly speculative. The models and behavior haven't yet shown up -- though they will. 

 

Source: Nielsen (advertising and audiences report) May 2014 

However, one clue to the fact that we may have grossly underestimated the value of "indoor marketing" comes from a Nielsen chart (above) estimating how much consumers spend on grocery, personal care and various sundries annually. The numbers are almost unbelievably large.

The total spent in the US on these categories comes to roughly $500 billion annually. If even a fraction of the value of these purchases can be influenced at/near the point of sale through indoor marketing we've got a massive market on our hands.

The total value of all digital media advertising in the US last year was approximately $43 billion, according to the IAB. If even 10% of the consumer spending mentioned by Nielsen above can be influenced by indoor marketing (in one form or another) we're talking about $50 billion worth of goods annually.  

'Webrooming': the Opposite of Showrooming

Traditional retailers express anxiety and concern about so-called "showrooming," whereby smartphone owners shop for products in physical stores and then buy online for lower prices. We've shown multiple times that this is a real phenomenon; however it's generally a minority use case. 

In a sort of contrarian finding, Consumer Intelligence Research Partners said a few months ago that the large majority of Amazon shoppers are loyal to that site and not opportunistically buying online based on price. The financial research firm used consumer survey data to argue, "rather than looking for items at a physical store, then buying them online, most Amazon.com customers [80%] started shopping at the Amazon.com website." 

In our own survey data we have documented that roughly half (52%) of mobile users have (at some point) decided not to buy something based on information discovered on a smartphone while in the store. It's safe to say is that consumer in-store behavior is now more complex and smartphones are arming them with more information to help make purchase decisions -- online and off. 

Multiple surveys, including ours, have shown a range (66% to 90%) of in-store smartphone usage.

But what about the opposite of showrooming -- "webrooming" (a very awkward term I hope doesn't stick). According to an article in AdWeek, Merchant Warehouse found that "69% of people with smartphones in the 18-36 demo have webroomed, while only 50 percent have showroomed. Among 37-48 year olds, 71 percent have webroomed versus 53 percent who have showroomed." 

This is being presented as some new behavior or novel phenomenon. But it's just traditional retail buying. 

Well over 90% of all retail buying happens locally. But most internet users now do some form of online research before buying offline (depends on category/consideration). The bigger the ticket the more online "pre-shopping." 

I've previously estimated that when retail spending and local services are combined you've got a $9 to $10 trillion annual market in the US. Roughly $2 trillion or approximately 20% (or so) of that is being influenced by "online research." That figure will only grow as more people use smartphones as shopping assistants.

The bottom line, literally and figuratively, is that consumer shopping behavior is now multi-platform and more complex. But whether you call it "local shopping" or "webrooming," the overwhelming majority of buying (90%+) continues to happen offline.