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Posts Tagged ‘value’

Ban on Certain Samsung Products Appears Likely ITC Ruling

December 30th, 2012 12:24 admin View Comments

The Courts

Ars Technica reports that “On Friday the ITC filed a redacted version of a remedy suggested by ITC Administrative Law Judge Thomas Pender, in which he recommended a ban be enforced against Samsung products that were found to infringe upon four Apple patents. The judge also recommended that Samsung post a bond for 88 percent of the value of its infringing mobile phones, as well as 32.5 percent of the value of infringing media players, and 37.6 percent of the value of infringing tablets.” That sounds like a clear loss for Samsung, but the judge “also approved several workarounds suggested by Samsung that might permit the company to continue selling the implicated products (which include the Transform, Acclaim, Indulge and Intercept smartphones, according to Computerworld). These workarounds would sidestep infringing on Apple’s four patents—which include one design patent and three technology patents.” Ruling and remedy have yet to be approved by the panel whose word would make them final.

Source: Ban on Certain Samsung Products Appears Likely ITC Ruling

Software Engineering Has Its Own Political Axis From Conservative To Liberal

August 10th, 2012 08:30 admin View Comments

Programming

An anonymous reader writes “Steve Yegge is back at it again. This essay is on the notion that software engineers range from conservative to liberal in their notion of software and how it should be built. He says, ‘Just as in real-world politics, software conservatism and liberalism are radically different world views. Make no mistake: they are at odds. They have opposing value systems, priorities, core beliefs and motivations. These value systems clash at design time, at implementation time, at diagnostic time, at recovery time. They get along like green eggs and ham. I think it is important for us to recognize and understand the conservative/liberal distinction in our industry. It probably won’t help us agree on anything, pretty much by definition. Any particular issue only makes it onto the political axis if there is a fundamental, irreconcilable difference of opinion about it. Programmers probably won’t — or maybe even can’t — change their core value systems. But the political-axis framework gives us a familiar set of ideas and terms for identifying areas of fundamental disagreement. This can lead to faster problem resolution.’”

Source: Software Engineering Has Its Own Political Axis From Conservative To Liberal

The Decline of Google’s (and Everybody’s) Ad Business

July 24th, 2012 07:06 admin View Comments

Advertising

Hugh Pickens writes “Rebecca Greenfield writes that during their recent earnings call, Google reported a 16 percent decline in Cost-per-Click (CPC), meaning the value of each advertisement clicked has gone down. This follows a 12 percent drop last quarter and 8 percent the quarter before that showing an unfortunate reality of online advertising — unlike the print world, internet ads lose value over time. The daily and stubborn reality for everybody building businesses on the strength of Web advertising is that the value of digital ads decreases every quarter, a consequence of their simultaneous ineffectiveness and efficiency, writes Michael Wolff. ‘The nature of people’s behavior on the Web and of how they interact with advertising, as well as the character of those ads themselves and their inability to command attention, has meant a marked decline in advertising’s impact.’ This isn’t just Google’s problem. Overall, Internet advertising has decreased in value over the years as online advertising continues its race to the bottom. ‘I don’t know anyone in the ad-supported Web business who isn’t engaged in a relentless, demoralizing, no-exit operation to realign costs with falling per-user revenues,’ adds Wolff, ‘or who isn’t manically inflating traffic to compensate for ever-lower per-user value.’ For Google’s overall business, this loss doesn’t mean as much, since it has since expanded its business beyond AdWords — including its recent acquisition of Motorola. For companies that didn’t just buy big hardware companies however, it’s a scarier proposition. Like Facebook, for example.”

Source: The Decline of Google’s (and Everybody’s) Ad Business

A Cashless, High-Value, Anonymous Currency: How?

June 29th, 2012 06:57 admin View Comments

The Almighty Buck

jfruh writes “The cashless future is one of those concepts that always seems to be just around the corner, but never quite gets here. There’s been a lot of hype around Sweden going almost cashless, but most transactions there use easily traceable credit and debit cards. Bitcoin offers anonymity, but isn’t backed by any government and has seen high-profile hacks and collapses in value. Could an experiment called MintChip brewing in Canada finally take us to cashless nirvana?”

Source: A Cashless, High-Value, Anonymous Currency: How?

Is There a Better Way to Evaluate Startup Accelerators?

June 22nd, 2012 06:30 admin View Comments

This guest post comes in response to Tim Devaney and Tom Stein’s ReadWriteStart post, “Startup Accelerator Fail: Most Graduates Go Nowhere,” one of our most buzzworthy stories this week.

The emergence of accelerators has been vital to spurring innovation and entrepreneurship over the last several years, and their continued expansion is essential to creating companies, jobs and market competitiveness. In evaluating the “success” of accelerators, it’s important to consider a range of variables and not focus solely on the number of exits or whether their graduates raise money.

Guest author Arie Abecassis is co-founder of AppStori, a crowdfunding startup for entrepreneurs of mobile apps, and a Venture Partner at DreamIt Ventures. He’s been actively involved in the New York tech community as an entrepreneur and investor, and currently sits on the boards of SeatGeek, Adaptly and BiznessApps.

As the capital markets have evolved in the last several years, accelerators have taken on an important role in attracting, qualifying and supporting innovative startups that may otherwise have a difficult time getting noticed by potential users, partners and investors. One can readily make the argument that the rapid expansion of these programs has been appropriate, as market disruptions caused by technology are creating real opportunities to better serve businesses and consumers.

Startup Accelerator Fail: Most Graduates Go Nowhere” argues that most startup accelerators are failures because very few of their graduates go on to raise venture capital or stage successful exits. But those metrics don’t tell the whole story.

Startup Exits Are Great, but There Are Other Positive Outcomes

Many ventures that work their way through accelerator programs create value in other ways. They can serve as a stepping stone to the next venture, they can lead to finding jobs at other organizations that can exploit the same product knowledge or expertise, or they can remain bootstrapped until they get the value proposition or business model right (what, no funding?). Furthermore, most accelerators have cropped up in the last couple of years, which makes exits a questionable metric, given that it takes four to six years for the average M&A exit, and eight to 10 years for the average IPO.

Is the “Quality Gap” of Accelerators Reality or Perception?

Top-tier accelerator programs such as YCombinator, TechStars and DreamIt (disclaimer: I’m a venture partner) have done an incredible job of building an impressive group of portfolio companies. They have been great role models for the industry at large, but a bit more perspective is required to fully appreciate how broadly value creation is, and will be, playing out. Older programs have the benefit of having more companies in their portfolio as well as greater maturation for these companies. Since the majority of programs have surfaced in the last 24 months, it’s a bit like comparing apples to oranges. In addition, as accelerators build their brands and market themselves more effectively, they will be able to attract their share of the talent pool. How awesome is it that we’ve seen programs like the Ark Challenge pop up, where the focus is to retain the local talent and leverage competence in areas such as logistics and retail?

Given the Objectives of Accelerators, How Do We Measure ROI?

While achieving ROI is certainly an objective for accelerators and is important in assuring sustainability, there are other objectives that drive their formation as well. Typically, local entrepreneurs are catalysts in funding and operating a program, in large part because of their community ties, as well as their interest in “giving back.” So the ROI is not purely economic. That said, there’s increased interest on the part of institutions – including corporations, venture firms and hedge funds – to explore how they can get more involved with these startups on the ground floor.

The next several years will be very exciting for accelerator programs, and they are likely to be standard fare across many more geographies and industries. Like the gold rush of the 1800s, the early settlers have seen early returns. But make no mistake about it, there’s lots more gold in them hills.

Join in on the great conversation around these issues that the original post sparked on Hacker News.

Source: Is There a Better Way to Evaluate Startup Accelerators?

Where To Now For Yahoo? Thompson Out, Loeb & Co In

May 13th, 2012 05:02 admin View Comments

Over the weekend, Yahoo!’s embattled CEO Scott Thompson finally did the honorable thing and stood down. Ex-President of News Corp’s Fox Interactive Media division, Ross Levinsohn, has been named interim Chief Executive Officer. Hedge fund shareholder Daniel Loeb – whose firm Third Point owned 5.8% of Yahoo – and his three cronies have effectively won their long-running battle for seats on the Yahoo! board. The board also has a new chairman: Fred Amoroso, the ex-CEO of digital entertainment company Rovi. Amoroso only joined Yahoo’s board in February and is said to be “one of Silicon Valley’s most enthusiastic proponents of patent warfare.”

So now that Daniel Loeb has gotten his way, what can we expect from Yahoo in the coming months? Clearly more patents, if Amoroso’s appointment is anything to go by. But Loeb had an agenda, too…

Loeb ran a website called Value Yahoo, which at time of writing is down with a server error. The website promoted the views of Loeb and three other board-seeking Yahoo! shareholders: Harry Wilson (who specializes in corporate restructurings and turnarounds), Michael Wolf (ex-President and COO of MTV Networks) and Jeff Zucker (the one who didn’t get appointed; he was ex-President and CEO of NBC Universal). Collectively, these four men called themselves “The Shareholder Slate.”

The Shareholder Slate is only interested in one thing: increasing Yahoo!’s share price in order to make a buck. Loeb and co talk about “increasing value,” but they are referring to monetary value. This isn’t about creating “societal value,” as Henry Blodget described Mark Zuckerberg’s mission at Facebook.

Loeb & Co’s Vision For Yahoo!

Plainly put, Loeb and his partners want to optimize Yahoo!’s assets. Their main complaint with Thompson was that he didn’t do enough with Yahoo!’s Asian interests. In particular Yahoo! currently owns 42 percent of Alibaba, a Chinese B2B e-commerce company. Alibaba connects Chinese manufacturers to companies around the world looking for suppliers. According to Loeb and co, Alibaba is worth $35 billion and has “significant growth potential.” Specifically, they think it will help drive Yahoo!’s share price upwards: “a 20 percent increase in the value of Alibaba would drive almost $2.00 in value per Yahoo! share.”

On its Agenda page, Loeb and co outlined their desire to implement “significant organizational changes to strategically allocate capital and talent toward Yahoo!’s greatest strengths and brightest opportunities.” Its list of 9 initiatives is wide-ranging – and rather vague. For example, they want Yahoo! to grow in the video and mobile segments; which would be in the strategic plan of just about any media company you could name these days.

How Did Scott Thompson’s Strategic Plan Differ From Loeb’s?

At his first earnings call last month, Yahoo! CEO Scott Thompson talked about reducing Yahoo’s size and becoming more focused on its core business. He remarked that Yahoo! would be “doing away with everything that does not contribute to its core business of profit-driving ads and e-commerce.” He went on to say that Yahoo will get smaller by consolidating its various platforms and jettisoning 50 properties. Yahoo! has already cut 2,000 jobs in order to reduce costs and streamline the business.

So it seems like Thompson had a narrower strategic focus and was more intent on cost-cutting. He also wanted to find new revenue by aggressively licensing Yahoo’s intellectual property, a plan he put into place in March by suing Facebook for alleged patent violations.

Patents aren’t mentioned at all on Loeb’s website, however new chairman Fred Amoroso will likely push for more legal maneuvers. 

What can we expect of new interim CEO Ross Levinsohn? Even though he has a proven track record as a leader in Internet corporations, it’s likely his role will be focused on steadying the ship while Amaroso and Loeb agree on the new strategic direction for Yahoo. Loeb has been plotting for many months to steer the Yahoo ship into higher stock price waters; now it looks like he will get an opportunity to do that.

Where To Now For Yahoo?

I’m not entirely convinced that Daniel Loeb’s motivations are good for Yahoo! long term. They seem more focused on making money for Wall Street shareholders, than returning Yahoo to its roots of being a true innovative force on the Web.

However, the Value Yahoo website and its suggested solutions for Yahoo! do at least demonstrate the passion needed to turn Yahoo! around. The Yahoo! board has gone through five CEOs in recent times, so it really is desperate times. Let’s see if Loeb and co can turn the beleaguered company around – for the benefit of shareholders, employees and Internet fans in general.

Source: Where To Now For Yahoo? Thompson Out, Loeb & Co In

The Future of Yahoo: What Daniel Loeb Really Wants

May 8th, 2012 05:30 admin View Comments

Last week it was revealed that current Yahoo! CEO Scott Thompson had falsified his résumé, by including a degree in computer science that he never earned. The man who dug up this piece of dirt was hedge fund manager Daniel Loeb, whose firm Third Point owns a 5.8% shareholding in Yahoo! and who has been trying to get a place on Yahoo!’s board.

It’s likely that Loeb will succeed in bringing down Thompson, which means Yahoo! will need to hire its sixth CEO in five years. But what exactly does Loeb want, other than to take sweet revenge on the CEO who blocked his bid for a Yahoo! board seat? It turns out that Loeb has his own purple-colored website, which lays out his vision for Yahoo!’s future. How does it compare to what Scott Thompson has implemented so far?

Called Value Yahoo, the website promotes the views of Loeb and three other board-seeking Yahoo! shareholders: Harry Wilson (who specializes in corporate restructurings and turnarounds), Michael Wolf (ex-President and COO of MTV Networks), and Jeff Zucker (ex-President and CEO of NBC Universal). Collectively, these four men call themselves “The Shareholder Slate.”

Whatever you think of Thompson’s little white lie, let’s be clear about the motivation of his accuser Daniel Loeb. The Shareholder Slate is only interested in one thing: increasing Yahoo!’s share price in order to make a buck. Loeb and co talk about “increasing value,” but they are referring to monetary value. This isn’t about creating “societal value,” as Henry Blodget described Mark Zuckerberg’s mission at Facebook.

Loeb & Co’s Vision For Yahoo!

Plainly put, Loeb and his partners want to optimize Yahoo!’s assets. Their main complaint with Thompson is that he isn’t doing enough with Yahoo!’s Asian interests. In particular Yahoo! currently owns 42 percent of Alibaba, a Chinese B2B e-commerce company. Alibaba connects Chinese manufacturers to companies around the world looking for suppliers. According to Loeb and co, Alibaba is worth $35 billion and has “significant growth potential.” Specifically, they think it will help drive Yahoo!’s share price upwards: “a 20 percent increase in the value of Alibaba would drive almost $2.00 in value per Yahoo! share.”

On its Agenda page, Loeb and co outline their desire to implement “significant organizational changes to strategically allocate capital and talent toward Yahoo!’s greatest strengths and brightest opportunities.” Its list of 9 initiatives is wide-ranging – and rather vague. For example, they want Yahoo! to grow in the video and mobile segments; which would be in the strategic plan of just about any media company you could name these days.

How Does Scott Thompson’s Strategic Plan Differ From Loeb’s?

At his first earnings call last month, Yahoo! CEO Scott Thompson talked about reducing Yahoo’s size and becoming more focused on its core business. He remarked that Yahoo! would be “doing away with everything that does not contribute to its core business of profit-driving ads and e-commerce.” He went on to say that Yahoo will get smaller by consolidating its various platforms and jettisoning 50 properties. Yahoo! has already cut 2,000 jobs in order to reduce costs and streamline the business.

Without knowing the specifics of what Loeb (or a Loeb-appointed CEO) would do with Yahoo!, it does seem like Thompson has a narrower strategic focus and is more intent on cost-cutting.

Thompson also wants to find new revenue by aggressively licensing its intellectual property, a plan he put into place in March by suing Facebook for alleged patent violations. Patents aren’t mentioned at all on Loeb’s website.

What Should Yahoo’s Board Do?

There’s no question that Scott Thompson should go, after getting the CEO position under false pretenses. He may even be gone by the time this article is published.

I’m not entirely convinced that Daniel Loeb’s motivations are good for Yahoo! long term. The cynic in me thinks it’s a clever Wall Street ploy to make a quick buck; and haven’t we all been taken in by a few of those in recent years!

However, the Value Yahoo website and its suggested solutions for Yahoo! do at least demonstrate the passion needed to turn Yahoo! around. The Yahoo! board has gone through four (almost certainly soon to be five) CEOs in recent times, so it really is desperate times. They may as well give Loeb one board seat, at the very least, to see if he can walk the talk.

Source: The Future of Yahoo: What Daniel Loeb Really Wants

Experts See Parallels Between Dot-Com, Social Media Bubbles

May 2nd, 2012 05:32 admin View Comments

First in a five-part series.

When you spend a week interviewing people about a social media bubble and whether it exists, one of the things you notice is that people who insist there is no bubble make little mention of revenue and business models. They talk about the depth of which social media has permeated the culture and niche markets, but rarely mention the fact that the most frequently used social networks ultimately rely on the fickle relationship between users and advertisers.

Indeed, the deal that got the whole social media bubble discussion rolling was Facebook’s $1 billion purchase of Instagram, a company that has no revenue. If you think this is starting to sound a lot like the dot-com boom in 1999, you’re not alone. And several experts say you should be worried.

“Bubbles don’t happen just because of exuberance, but also through the calculated moves of companies who know how to game the system.” – Social media podcast host Bob Knorpp.

This week, ReadWriteWeb will look at the current social media landscape and try to answer the question of whether or not we’re in a social media bubble that, like the dot-com bubble did in the 1990s, could wreak havoc on the tech sector and the broader financial markets.

We’ll check in with people raising red flags following last month’s $1 billion purchase of Instagram by Facebook. We’ll look at Facebook’s motivation for that deal, which firms are likely to emerge from the current growth period intact, and we’ll ask if now is the best time to launch a new social network. Finally, we’ll talk with people who are optimistic that social media is poised for more growth and believe the bubble fears are, well, inflated.

Bubble concerns have been whispered for months, but when Facebook acquired Instagram, people started expressing those fears out in the open.

“If you cannot deliver sufficient profits over time to justify a given valuation, it doesn’t matter how many users you have,” said Richard L. Harris, CEO of Intent Media. “The end result must be market disillusionment, followed by valuations falling to the levels justified by the underlying profits of the business.”

Is Facebook the Next AOL?

Harris draws some parallels to the current bubble and the dot-com bubble of the late 1990s, while conceding that the Internet is much bigger than it was when most of us still relied on dial-up connections. He also expects the current obsession with social media companies to produce some long-term winners – just as the last bubble gave us Amazon and Google.

“The current number of Facebook users probably exceed ALL Internet users back when AOL bought Time Warner. So yes, it’s different in that regard,” Harris said. “But it’s also worth remembering that a fixation on growing user numbers and a lack of focus on profits is actually eerily similar to the last bubble.”

Bob Knorpp, host of The BeanCast and The 2 Minute Rundown with Peter Shankman, said Facebook’s acquisition of Instagram was shrewd sleight of hand aimed squarely at bolsterings its initial public offering, reportedly set for next month.

“Facebook needs to show value to potential shareholders, but is lacking a mobile strategy and has only the core brand as an asset,” Knorpp said. “So right before the IPO, they buy a hot mobile-only company, they value it at a billion dollars, then turn around and presumably say to shareholders that they now own a billion dollar asset. They have, in essence, created a billion dollars of value out of thin air.”

“You will know a bubble when you see a brand-new social network raises $20 million, or $50 million or goes public when you’ve never heard of them” – Scott Cherkin of Complex Media.

The problem? It’s not really a billion dollars to anyone who bothers to look up Facebook’s sleeve. And the move is classic bubble blowing.

“Instagram, while being a very innovative mobile-based company, has no discernible monetization strategy, so Facebook is not generating real value for potential investors, but rather more speculation of future value,” Knorpp said. “Bubbles don’t happen just because of exuberance, but also through the calculated moves of companies who know how to game the system.”

Potential Reach vs. Real Reach

Perhaps the biggest similarity between recent valuations and the valuations of dot-com companies more than a decade ago is that they are based on “potential reach.” That, more than anything, suggests a bubble to Mike Seiman, CEO of CPX Interactive, a digital advertising company

Valuations are being based on the idea of ‘potential reach’ – which is virtually unlimited,” he said. “But when the reality of a crowded space makes this kind of scalability impossible, models are quickly discarded for the next big thing.”

The trick for investors in any industry, but perhaps particularly in the social media space, is determining which business models are viable.

“If there is a difference between the 1999 bubble and the 2012 version, it may be that in 1999 investors probably held onto models that had no real business model for too long, while today models that may have a real model are being churned through too quickly if it is perceived that they are not the magic bullet promised by the overzealous business plans,” Seiman said.

Coming Tomorrow: Who Will Survive The Social Media Bubble?

Image courtesy of Shutterstock.

Source: Experts See Parallels Between Dot-Com, Social Media Bubbles

5 Experts Weigh In on the Future of Mobile Money [Part 2]

April 25th, 2012 04:10 admin View Comments

What will money look like in 2020 and beyond? Will smartphones, smart cards and digital wallets kill the paper bill? The infrastructure needed to change the nature of transactions is already being built. There are issues to be tackled. The evolution of currency is not something that will happen overnight. But if the technologists and transaction companies have their way, the new era of currency will be embedded within a smartphone. How will it come to pass?

Infrastructure

In Part 2 of analyzing the future of money report from Pew, we take a look at the specific comments of the experts and examine them against the reporting we have done on this topic. For instance, Rob Scott of Nokia said:

“The primary impediments to adoption have been, and will continue to be, the participants (and wanna-be participants) in the payment value chain. Operators will continue to attempt to insinuate themselves into the process at a premium rather than simply accepting their long-term fate of being minimum-margin bit pipes for the masses. Transaction processors will continue to assert they are adding value when, in fact, they add none. Banks, if we are lucky, will be once again tightly hamstrung into serving their original intended purpose, leaving opaque and exotic financial instruments to the likes of Goldman Sachs and Morgan Stanley who have long since shed the term ‘bank’ specifically for this reason.”

Of the many comments within Pew’s report, this one strikes to the heart of the issue. The name of the game is infrastructure. When the payment processors and banks put a debit and credit card in the hand of every consumer and a card reader in every retail location, that is when the first evolution of digital currency occurred.

“I don’t think it will be security concerns that will stall the adoption of NFC so much as the effort involved with getting the infrastructure for its use in place on a national scale in the United States,” said Steve Jones, professor of communication at University of Illinois-Chicago.

Banks are in danger of becoming the dumb pipes of the mobile payment industry. To a consumer, banks serve a purpose. Hold onto my money, loan it to me at times and protect me against bad guys. The question for the next evolution of currency becomes: What value do they add?

As Scott notes, the payment processors think they can add value. Where the Visas, MasterCards and American Expresses of the world will be most beneficial in this next evolution is providing the terminals that will be the entrance point to consumers and mobile payments. Can they give retailers in-depth analytics into how users interact with their brand? These aren’t services they offer traditionally.

“The driver here will virtually 100% be whether or not the credit card industry decides it can make more money through changing technologies,” Jonathan Grudin, principal researcher at Microsoft, said in the report.

The Value Chain

As it stands now, many consumers will say, “what is really the difference between a swipe with my card and a tap with my phone?

There is none.

This will be one of the greatest barriers to widespread adoption of mobile payments and changing the nature of currency. The concept of a mobile payment – a digital payment made from a device – is foreign. No matter how much the financial institutions and payment processors want to move consumers to a new form of currency, consumers will go with what is easy, what is trusted, what is convenient and what gives them the most value.

“A smart phone that can swipe me into the subway, buy my latte and bagel, and serve as an ID to get me into my building may well be a privacy nightmare, but it’s also a harried urban commuter’s dream,” said Perry Hewitt, director of digital communications and communications services at Harvard University.

The best scenario is a smartphone that is not only your wallet, but has access to multiple accounts and can offer value other than the simple role of being a pipe from one portal to another.

“Perhaps we’ll have cards that contain a key to multiple accounts. There are some serious discussions of alternate forms of currency, growing in volume as economies seem increasingly shaky. I suspect there’ll be innovation here – evolution not just of the medium of exchange but also of the value it represents,” said Jon Lebkowsky, principal at Polycot Associates and president of the Electronic Frontier Foundation.

Trust is also a significant issue. According to Opus Research, 35% of consumers have concerns about handing their phones to cashiers. Security is a genuine concern. Banks and payment processors and the makers of the digital wallets need to ensure the viability of the transaction and that a consumer can trust their money on their smartphone. Security, while a less glamorous portion of the currency equation, is probably the biggest entity within the value chain.

“This is a tough one, but it seems that convenience and a guarantee of privacy and security is enough for most people. We went from holding our own money, to trusting banks, to trusting credit card companies – an even more convenient way to spend will be welcomed,” said an anonymous commenter to Pew’s report.

The experts have weighed in, courtesy of Pew. What do you think? Is 2020 too early for the next revolution of currency, based around mobile technology and the cloud? It is less than eight years away. Checks and cash still dominate the landscape. Is 2030 more likely? 2040? When you step up to a cashier in the next couple of days, think about the currency that you are handing over. Can you imagine doing it another way? Let us know in the comments.

See Also: What Is The Future of Mobile Money? (Part 1)

Source: 5 Experts Weigh In on the Future of Mobile Money [Part 2]

5 Experts Weigh In on the Future of Mobile Money [Part 2]

April 25th, 2012 04:10 admin View Comments

What will money look like in 2020 and beyond? Will smartphones, smart cards and digital wallets kill the paper bill? The infrastructure needed to change the nature of transactions is already being built. There are issues to be tackled. The evolution of currency is not something that will happen overnight. But if the technologists and transaction companies have their way, the new era of currency will be embedded within a smartphone. How will it come to pass?

Infrastructure

In Part 2 of analyzing the future of money report from Pew, we take a look at the specific comments of the experts and examine them against the reporting we have done on this topic. For instance, Rob Scott of Nokia said:

“The primary impediments to adoption have been, and will continue to be, the participants (and wanna-be participants) in the payment value chain. Operators will continue to attempt to insinuate themselves into the process at a premium rather than simply accepting their long-term fate of being minimum-margin bit pipes for the masses. Transaction processors will continue to assert they are adding value when, in fact, they add none. Banks, if we are lucky, will be once again tightly hamstrung into serving their original intended purpose, leaving opaque and exotic financial instruments to the likes of Goldman Sachs and Morgan Stanley who have long since shed the term ‘bank’ specifically for this reason.”

Of the many comments within Pew’s report, this one strikes to the heart of the issue. The name of the game is infrastructure. When the payment processors and banks put a debit and credit card in the hand of every consumer and a card reader in every retail location, that is when the first evolution of digital currency occurred.

“I don’t think it will be security concerns that will stall the adoption of NFC so much as the effort involved with getting the infrastructure for its use in place on a national scale in the United States,” said Steve Jones, professor of communication at University of Illinois-Chicago.

Banks are in danger of becoming the dumb pipes of the mobile payment industry. To a consumer, banks serve a purpose. Hold onto my money, loan it to me at times and protect me against bad guys. The question for the next evolution of currency becomes: What value do they add?

As Scott notes, the payment processors think they can add value. Where the Visas, MasterCards and American Expresses of the world will be most beneficial in this next evolution is providing the terminals that will be the entrance point to consumers and mobile payments. Can they give retailers in-depth analytics into how users interact with their brand? These aren’t services they offer traditionally.

“The driver here will virtually 100% be whether or not the credit card industry decides it can make more money through changing technologies,” Jonathan Grudin, principal researcher at Microsoft, said in the report.

The Value Chain

As it stands now, many consumers will say, “what is really the difference between a swipe with my card and a tap with my phone?

There is none.

This will be one of the greatest barriers to widespread adoption of mobile payments and changing the nature of currency. The concept of a mobile payment – a digital payment made from a device – is foreign. No matter how much the financial institutions and payment processors want to move consumers to a new form of currency, consumers will go with what is easy, what is trusted, what is convenient and what gives them the most value.

“A smart phone that can swipe me into the subway, buy my latte and bagel, and serve as an ID to get me into my building may well be a privacy nightmare, but it’s also a harried urban commuter’s dream,” said Perry Hewitt, director of digital communications and communications services at Harvard University.

The best scenario is a smartphone that is not only your wallet, but has access to multiple accounts and can offer value other than the simple role of being a pipe from one portal to another.

“Perhaps we’ll have cards that contain a key to multiple accounts. There are some serious discussions of alternate forms of currency, growing in volume as economies seem increasingly shaky. I suspect there’ll be innovation here – evolution not just of the medium of exchange but also of the value it represents,” said Jon Lebkowsky, principal at Polycot Associates and president of the Electronic Frontier Foundation.

Trust is also a significant issue. According to Opus Research, 35% of consumers have concerns about handing their phones to cashiers. Security is a genuine concern. Banks and payment processors and the makers of the digital wallets need to ensure the viability of the transaction and that a consumer can trust their money on their smartphone. Security, while a less glamorous portion of the currency equation, is probably the biggest entity within the value chain.

“This is a tough one, but it seems that convenience and a guarantee of privacy and security is enough for most people. We went from holding our own money, to trusting banks, to trusting credit card companies – an even more convenient way to spend will be welcomed,” said an anonymous commenter to Pew’s report.

The experts have weighed in, courtesy of Pew. What do you think? Is 2020 too early for the next revolution of currency, based around mobile technology and the cloud? It is less than eight years away. Checks and cash still dominate the landscape. Is 2030 more likely? 2040? When you step up to a cashier in the next couple of days, think about the currency that you are handing over. Can you imagine doing it another way? Let us know in the comments.

See Also: What Is The Future of Mobile Money? (Part 1)

Source: 5 Experts Weigh In on the Future of Mobile Money [Part 2]

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