The media rumor mill is positively frothing over regarding Google’s potential move to become the next Visa or MasterCard. Did you know they’ve brought out a phone that has Nearly Far Combustion? And this phone can magically read bread in a supermarket and then you wave it and some stuff happens and then you get coupons from space, or Elvis, or something.
I will attempt to recalibrate expectations here a little.
Google has brought out a handset, the Nexus S, that has Near Field Communication (NFC) technology set to READ only mode. It can read reciprocal NFC RFID tags in the same way that a phone with the appropriate software and camera can read barcodes. For mobile payments to happen and for the phone to emulate a wallet, the NFC chip and associated software needs to be enabled for CARD EMULATION mode. This is a software upgrade requirement and Google could do this, but it is somewhat telling that their initial rollout of the devices is not about the phone becoming a wallet, but about the phone being enabled to “grab” information from tags at specific locations.
In parallel to bringing out the NFC enabled Nexus S, Google has been working on a project in Portland, Oregon called “Hotpot“. As a component of this, local businesses can place NFC decals in storefronts so that folks with NFC enabled devices can “grab” information about the location such as peer reviews and promotions. Think of Yelp or Foursquare at a precise location level. Now, not only does ‘grabbing’ information provide the consumer with information about the retailer that they at, but they are also providing Google with a “check-in”, determined by that specific phone being tapped against that specific location at that specific time. Google has a record of a “hit”, as telling and accurate as a click-through on a web advertisement. This overcomes the conundrum of how Google would quantify response rates for advertising spend at physical world merchant locations – the “grab” IS the click through.
So why would Google care about mobile payments? In short, they don’t. A quick glance at their financial filings for 2010 illustrates how they make their money. Let me show you this graphically…
So, there you have it. Google’s reason for NFC deployment in handsets will be in expanding on what they do best – generating revenues from advertising. And, if a third party wants to develop apps for their mobile phones that can perform mobile payments, then that’s just gravy for them. But, the likelihood of Google developing mobile payments themselves is, IMHO, about as likely as Apple introducing the iShake-Weight.
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