Leap of Faith

Industry confident of clearing m-commerce hurdles

The planets are aligned and all the elements of the wireless zodiac are falling into place.

But astrology is a notoriously inexact science, and whether the promise of mobile commerce will descend successfully from outer space to cyberspace is still a question for the sages.

"The Holy Grail of m-commerce," Probe Research analysts say, "is the quest to turn cell phone subscribers into customers who will purchase goods and services with their mobile phones."

Though there are big hurdles — standards, security, presentation — to overcome before that vast revenue can be tapped, vendors say theyre betting on the technologys potential.

Accenture, a consulting company, projects that revenue from m-commerce will reach $55.4 billion by 2003. Some analysts estimate 45 percent of electronic commerce will be m-commerce by 2004, with as many as 1.3 billion Web-enabled mobile devices in use worldwide.

Broadly speaking, m-commerce is the ability to make commercial transactions from a wireless phone, personal digital assistant or, someday, wearable computer — like that guy on television who scares the pigeons in the piazza. A second application — making mobile employees in companies more efficient — may be closer to reality than are retail uses.

"We see m-commerce as being one of our largest markets over the next few years," says Grant Ross, vice president of solution delivery at EHPT USA, a joint venture of wireless powerhouse Ericsson and Hewlett-Packard. EHPT is retooling its billing software for the emerging m-commerce market. "We see the whole area of m-commerce and content management and wireless broadband as being the way the industry is headed."

And while the hype is reaching a crescendo, the actual delivery of m-commerce in the U.S. is still mostly limited to test markets and television commercials.

It is no accident that most of those commercials take place in European settings. There are twice as many Wireless Application Protocol-enabled cell phones in Europe — about 2 million — as in North America. In Japan, about 18.7 million users receive wireless Web content under the i-mode protocol. The U.S. has been slow to adopt wireless Web technology, in part because of the six or seven interoperable wireless standards. Europe, by contrast, has settled on the global system for mobile communication standard (GSM).

Experimenting With Ads

In the U.S., perhaps the most ambitious m-commerce experiment has been an advertising test being conducted by marketing company SkyGo along the high-tech corridor between Denver and Boulder, Colo. The company handed out 1,000 free, WAP-enabled phones, then pushed a minimum of three advertising messages to users each day.

SkyGo Chief Executive Daren Tsui says the trial consisted of interactive branding ads. Kentucky Fried Chicken, for instance, ran trivia games in which the correct answer to the days question resulted in a coupon for a free drink with a chicken sandwich.

"There is a lot of misunderstanding about advertising on wireless devices," Tsui says. "People think it is just cramming banner ads onto the phones. But there is a lot of consumer participation."

Tsui says response to the test, which ended Jan. 31, was favorable. "Were seeing that 60 percent of the participants found the wireless ads to be valuable; 27 percent say they would likely switch to another wireless service provider if they can receive this kind of service."

Evan Grossman, a senior vice president at HookMedia, which manages advertising across all forms of digital media, is considerably more skeptical about the promise of m-commerce.

"In the U.S., we are at least two years away from being able to reach a meaningful audience through wireless devices," Grossman says. "At some point, I think you have solutions without problems. Fundamentally, a lot on the publishers side — as opposed to the actual clients and advertisers — think that wireless is going to be used to broadcast to people or ring people up every time they pass a Starbucks or a McDonalds, which we think is incredibly unrealistic," he says.

Hiring a few college kids to hand out fliers in front of Starbucks is probably more cost-effective than m-commerce advertising, he says. SkyGo would not release any cost data for its test.

"Right now, and for the foreseeable future in the United States, there are not enough people using the devices that are reachable across a single network," Grossman says. "We are advising our clients to be testing in the wireless space, but given the lack of standards and the lack of reach, for the next two years it is not going to change their bottom line at all."

Still, most of the pieces that have to be in place to make m-commerce successful are already available. Americans are at ease with their cell phones and with Internet shopping, so moving to m-commerce wont require re-educating the public to use the technology. Experience has shown that the more you have to modify behavior, the less chance the technology has, EHPTs Ross says.

Americans in particular are sharply protective of their privacy and suspicious of potential threats to it. "Mistakes can be very costly in terms of destroying consumer trust," says Ann Lynch, an analyst at Probe Research.

So wireless security is growing more sophisticated. In Europe, handsets contain subscriber-identity module cards, which verify user identity and enable inter-network roaming.

Software enabling payment via cell phone is made more secure by storing payment data on servers, rather than in the handset, explains Scott Geddes, vice president for m-commerce at the German firm Brokat. The company last month rolled out its version of a wireless wallet, which manages information like credit-card numbers, shipping addresses and other payment data.

New devices are also coming into the market. Ericsson will soon offer the R380, which is a combination PDA and phone.

As wireless devices get faster, smarter and cheaper, software platforms to power the m-commerce equation are emerging at light speed. Mitch Bishop, vice president of marketing at software developer Mobileum, says the new platforms are allowing developers to "write a single application and have it work on whatever device is out there," regardless of standards and manufacturers.

"There is an Oklahoma land rush on the part of application developers and the people supplying them to put the infrastructure in place to make this happen," Bishop says.

Serious Lessons

But then there are the dreaded "lessons from e-commerce." probe says that the U.S. was just messing around with e-commerce when Internet penetration was at about 20 percent; the serious stuff only started when the Web started reaching about 40 percent of Americans.

Similar penetration rates for Web-enabled wireless devices will probably be required before sustainable m-commerce can develop.

So far, few Web sites are equipped to accept m-commerce transactions, though there are exceptions. Brokerage firms Charles Schwab & Co., E*Trade Group and TD Waterhouse have joined Mobileum in an m-commerce initiative. And DealTime, "the worlds leading source of information on how to buy things online," has tailored its applications to mobile users.

Garrett LePaw, DealTimes vice president of wireless and emerging platforms, says that so far, "the user base is quite small . . . but weve seen a steady ramp-up." He expects the new, more flexible and user-friendly devices to help drive the increase.

The consensus seems to be that it will be 2004 or 2005 before the U.S. sees the three As of m-commerce — anything, any time, anywhere.

However, Niraj Jetly, global practice director for m-business solutions at Breakaway Solutions, says that existing m-commerce technologies can be used now within companies to increase efficiency, allowing workers to access corporate information anywhere.

Companies can use existing technologies to channel information to their mobile employees. Jetly estimates that in large companies, about 20 percent of workers — usually those near the top of the decision-making ladder — are not usually working at their desks, but are roaming about the building, the country or the world.

"When they are actually in front of the customer, they dont have access to the business intelligence they need," Jetly says. Mobile devices can be used to efficiently push the information to the sales force, the shop floor, the truck driver, or, perhaps, to the executive facing a delayed flight.

"As it applies to consumers, they would like to access information any time, anywhere, from any device," he says. "They would also like to have a rich experience. So they need faster connections, some location-sensitive technologies and application structure in place," Jetly adds. "But that is not going to happen right now. It is going to take another three to four years."