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Passbook in the next 12 months

Apple is a media machine. They not only get great coverage for the release of their new devices, they get coverage for their software and their failures (Apple Maps).

A good portion of the media said they were unimpressed with the iPhone 5 update, partially due to the massive number of leaks prior to the launch and the relatively small changes made to the device.

In my opinion I think the customers and the analysts are missing the true value of the iOS6 update. Two features can help Apple get a foot hold in the social space as well as the mobile advertising space.

Facebook has no idea what just hit them – Photostreams

Shared Photostreams are a direct attack on Facebook and Instagram, two of the largest photo sharing platforms. Apple tried to create a social network based on music with Ping but the reality is that photos, not music are a major driver of social based traffic. These photostreams have the power to link friends directly, and ultimately decrease the need to share photos on Facebook. These streams are not only helpful for friend to friend interaction, I think that Apple will release an Enterprise level version of streams soon. Think about Gucci or Ferrari sharing a stream of photos with you from a recent event. When this happens, major brands will have a major incentive to duplicate their efforts on Facebook fan/brand pages.

Given the fact that Apple controls the physical device, this poses a major threat to Facebook’s mobile growth, especially within first world countries. I think the uptake in developing nations will take much longer due to device penetration.

PassBook was also part of the iOS6 release and a handful of major brands have already thrown their support behind it. If you haven’t had a chance to play with it, it is a virtual wallet or keychain that helps you store your membership cards, coupons, and tickets.

The major differences between your current plastic membership cards and paper tickets is how the app interacts with the phone itself. Passbook allows updates to be pushed to the coupons, tickets or membership cards. It also allows the device to push a promotion to you if you are within a certain location.

For example, if you are at an airport gate, and you have your ticket in Passbook, it will automatically tell you if the flight departure is delayed or if the gate is changed.

Another example is that if you walk in to Target and they have a special promotion on dog biscuits, they will push you a coupon that is only valid that day. By the way, Target’s system is pretty advanced and already has some data on who is in your family and what you regularly purchase.

One other major feature with Passbook is that you don’t need to have a branded app to get a passbook coupon. You can receive Passbook coupons via SMS, Email or via a download link at the moment.

What are the implications of Passbook on Mobile Marketing?

1) Passbook coupons are essentially new ad units. Two companies – WooBox and Socialize have already launched capabilities to send out Passbook coupons via SMS. Socialize is more of a shell coupon in some ways. It allows the coupon to be replaced daily by a central ad server.

I could see these new “ad units” being used for app distribution. There might even be a scenario where you are at Best Buy and Amazon pushes you a coupon to increase the “showrooming” effect. Dangerous stuff.

2) Passbook is a training vehicle for the mobile wallet. People are eager to get rid of all of those plastic key fobs and just dump the data into one digital place. This starts training users on having their phone ready to go when they are checking out. This is going to set up the NFC mindset in the coming 12-18 months. If Apple does not include NFC in iPhone6, there may be a contract dispute holding things up.

3) Passbook in some ways could be Groupon’s savior. However, if Groupon continues down the route of just pushing random deals to your device, it gives the user incentive to delete Groupon all together. Groupon essentially has to get smarter about how they distribute coupons/deals given the new capabilities of Passbook.

4) Passbook can be a post shopping cart experience. For instance you buy a plane ticket to Miami. Once you arrive in Miami, Passbook may suggest a better car rental deal, a place for dinner, and spa. This is essentially very similar to the deals you see upon checkout of Expedia or Orbitz. They are upsells but often times they are generic and too far in advance. This gives the airline or travel site the ability another chance at an upsell which is more timely or potentially even impulsive.

5) Passbook will get smarter, a lot smarter. Given the amount of data it may collect, and the fact that Facebook has some OS level integration, it might be able to suggest places around you with incentives. For instance, your Facebook profile knows you like Bobby Flay from the Food network, and you are in NYC near his restaurant. It could potentially recommend going to his steak house and offer you a free desert.  Passbook may also integrate social features – eg – I redeemed a coupon and shared it with my friends. This can be facilitated by the Twitter or Facebook integration.

6) Passbook brings relevancy back to QR codes. For the past few years QR codes have struggled in America to gain popularity since you usually needed an external app to read the code or people just didn’t understand what they are. Passbook will make QR codes a standard and help bring the concept to the masses.

7) Retailers may see compressed margins due to the increase usage of coupons. In the past major brands put out coupons for two reasons, one for branding the other to increase sales. They always assumed that only a small portion of the coupons would actually be redeemed. If people are always armed with a coupon, retailers may need to adjust their margin forecasts.

8) Passbook starts to push coupons and membership cards into the male market. Traditionally coupons have always been redeemed at a higher rate by women. This app is genderless and will start to allow men to have their info without having to carry around bulky cards or coupons.  This change in demographic could inherently change what types of coupons we see and will necessitate advertising agencies to re-assess persona profiles.

9) Passbook’s secret weapon is its ability to push notifications to your locked screen. This allows people to know what the deal is without even opening an app. This instant push information is incredibly powerful for influencing purchasing decisions. Think of it like the specials board at a restaurant.

10) In the developer documentation for Passbook they have reserved a template for “Generic.” This wildcard placement will be the hot bed of innovation and/or scammers.

11) Apple has issued design “guidelines” around how your passbook should look. This limitation is good in some ways but I think advertisers may need to learn how to boil marketing messages down significantly.

12) Since Passbook is also time aware, this may allow certain retailers to offer various promotions throughout the day. This will ultimately lead to a much heavier workload for small businesses but hopefully it will also result in more business throughout the day. For instance, Burger King offers free super sizing on Saturdays from 2 to 4 pm. As soon as it turns 2 pm and you are near a Burger King, Passbook may push a notification to you.

13) Passbook takes a lot of fluffy social metrics like engagement and amplification and adds a layer of performance to them. REDEMPTION or in other words REVENUE. Brands looking to see real returns on mobile marketing initiatives are going to love Passbook. It will finally give them more concrete data on how their marketing incentives are working. It may also give them insight into location specific improvements, persona validation etc.

Where does Passbook fall short?

I think Passbook has a long way to go. First, it really needs to integrate with a payments service or a major bank to set up the mobile payments part of the strategy. Without that integration, it may end up being a novelty app.

Passbook is an Apple product. If this were available on Android, I would certainly use it. This isolation may make certain large brands hesitant to integrate with it since it only touches a portion of their customers.

The major issue that I see is that Passbook is not a simple experience. The Target App is integrated with Passbook but it is relatively hard to find, and requires a SMS authentication procedure. If Apple can make the integration process easier, adoption and usage rates could skyrocket. Right now, the process of adding a card or coupon to your Passbook is too convoluted. If you are wondering how to get the Target app into Passbook follow these directions.

Passbook is not supported in the iPad at the moment. I see tons of people traveling with their iPad and I know I would be likely to put my plane ticket on there. If the iPad mini comes out, there is a reason to open up Passbook to other devices in the Apple portfolio.

Right now Passbook uses a stacked tab layout. It seems reasonable for 5-10 passbook items but once people start getting the hang of it and the brands realize the power, I could see people having too many options. This may require a UI redesign or create the need for folders or a search function. At the end of the day, I am sure Apple will find a way around the UI issues but I could see it getting messy fast.

The last major issue I can see is that this app will create too many expectations from consumers and force everyone in to the Bed Bath and Beyond model of offering 20% off all the time. American consumers are highly price sensitive and once they get in the rhythm of getting a good deal, it starts to eat into brand loyalty. This was evidenced by Groupon and its impact on small businesses. Many small businesses never saw any repeat customers from their initial offering partially because there was a competing deal going on the next week.

Overall, Apple has the ability to really revolutionize mobile commerce with this app. It may also unlock a whole new mobile advertising model which will trump the standard banner model.

I highly encourage all the analysts to read more on the Passbook app, it will be the new iTunes for Apple.

Here is a list of current apps that support Passbook:

iPhone5’s implications for Advertisers

September 12, 2012 Apple announced the new iPhone5 which was widely leaked prior to the event. As many suspected the phone is thinner and longer which allows for a larger screen.  This larger screen has several implications for online advertisers. Outside of the screen several enhancements to the phone’s hardware and operating system also will impact advertisers.

Considering that Apple’s products contribute so much of the current mobile traffic, I think it is time Advertisers start to plan for these changes in their respective media plans.

Hardware changes that affect Advertisers:

  • Currently there is no mention of NFC or near field communications which Android phones have been pushing. This means that mobile banking might not become mainstream until next year.
  • The LTE web access which is relatively fast web access is going to increase consumption of information greatly. It will increase the number of web pages you access, the number of videos you watch and the number of apps you check for updates. All of this increases the number of impressions per micro-tasking session. For example if a person is standing in line at Starbucks, you used to just check Facebook, but now you might check Facebook, the weather, and the news.
  • The LTE web access will be so fast, that I can see more and more casual users getting rid of their laptops in favor or their phone and tablet. This clearly requires new ad formats and media plans that take into account more mobile inventory.
  • The larger screen creates black bars on the sides of older apps if they are not upgraded. This could be a new ad spot for something similar to a takeover unit that wraps around the app.
  • The larger screen is longer which has implications on the usability of the phone. People’s thumbs will not grow longer, which means the upper left corner of the screen is actually too hard to reach for most people. Once app developers realize this, they have two options, move the navigation controls to the bottom or make their apps in landscape mode for two handed use. Each of these scenarios potentially moves where ads can be placed in apps and the actual size of the ad unit. Being at the top of the page on a long phone may be the new “below the fold” unit. Just bad CTRs. Being near the navigation of the app will be key to higher CTRs.
  • Given the new physical format of the device, lots of accessory providers are going to be buying advertising this holiday season. There may be a minor bump in online ad competition due to this.  This also takes away spending money from other sectors.
  • Considering that Apple has been rather aggressive with Samsung in terms of patent lawsuits, you may actually see Samsung beef up their advertising of the Galaxy S3 to counter act Apple’s advertising. Once again pushing CPM rates up higher over the holiday season in the tech vertical.

Software changes that affect advertisers:

Apple’s new phone will ship with iOS6. For the most part this is Apple’s first big push to start to eliminate it’s dependence on Google products like Maps and YouTube. From what we have heard, YouTube will not be a default application on the iPhone. YouTube has already announced a native application for iOS6 to counter this. I suspect most people will download this on day one of owning the phone.

  • As Apple pushes out Google, this changes user behavior in terms of how they search and get other basic info. Most of which we used to get from Google. This potentially will reduce Google’s mobile search penetration on Apple devices and therefore lower AdWords revenue from Apple devices. If Siri gets your info via another service, you stop visiting Google Search.
  • The strike at YouTube actually gives advertisers more potential options of video advertising. I think you will start to see new ad units in the native YouTube app over the coming months. This will be an area of strong growth for Google in my opinion especially with the LTE web access.
  • The changes to the email in iOS6 allow you to mark people as VIP which sends them to a different inbox, similar to Google’s priority inbox feature. This potentially puts a major damper in email advertising on mobile phones. If your email ads are not being seen or open your ROI is going to be lower.
  • Given the faster web access, more and more people will be checking their emails on their phones. If for some reason they don’t use the VIP mailbox, and they open your email ad, you need to make sure your email renders properly. Having responsive email design will be paramount to ensure high CTRs.
  • PhotoStreams can now be subscribed to. This is huge for advertisers, especially fashion advertisers. Being able to subscribe to celebrities streams and I am assuming brands, you will see what photos they are taking, similar to Instagram or Facebook. If Advertisers play this well, you will get iPhone5 users to subscribe to your stream and push coupon images to them or pics of new menu items or new clothes in store. This will be a major way to drive traffic to your store and/or website. It will also put a major dent into Facebook, Instagram and Pinterest assuming there is no integration. If Facebook is smart, they will allow the iPhone to publish its photostreams directly to Facebook. As an advertiser it will be important to understand how photostreams work. You may find yourself buying a paid spot in Kim Kardashian’s photo stream sooner rather than later.
  • Passbook seems a bit like TripIt in that it keeps your tickets and travel info in one place. This feature has major potential to monetize geo-location ads. This is  if Apple opens that up. Right now it is more of a pipe dream.
  • Apple switching to its own maps interface, potentially reduces the importance of Google Places or business pages. The effect of this is still yet to be seen but for smaller local advertisers, I would keep asking my customers where they are finding my listing to see if there is a major shift in user behavior.
  • New apps means more consumer spending which means less expendable income for other purchases during the holiday season. In other words Apple will dominate your wallet in the coming months.

Some exciting changes coming up for the advertising world given the new iPhone. Stay tuned for more updates and please feel free to comment.