NFC’s a Shortcut Between Advertisers and Consumers

Walk into a Barnes & Noble to find the No. 1 New York Times bestseller. Tap on the book with a smartphone for information about the author, along with news and reviews. If the consumer walks out of the store without the book, serve up a coupon on their handset. Near field communication (NFC), a short-range, high-frequency wireless technology, will make it possible next year as Google, Nokia, Research In Motion (RIM) and others adopt compatibility features.

NFC will give advertisers and marketers the ability to design campaigns around peer-to-peer applications in a variety of media from social networks to mobile devices.

Add personalization features and the ability to verify and secure data, and advertisers gain a powerful tool, according to Jeff Miles, director mobile transactions worldwide at NXP Semiconductors, a Philips Semiconductors spinoff.

Describing NFC as a shortcut between advertisers and consumers, Miles suggests that NFC will replace 2D barcodes because the chip also allows consumers to make payments from the phone, tie in with browser history, and based on consumer opt-in preferences, personalize the one-on-one experience Madison Avenue executives have been talking about for years.

Many ad executives think they already had that experience, but technology experts know most will realize the difference in 2011.

The ability to secure and authenticate data will give campaigns in Google, Facebook, Foursquare, SCVNGR and other location-based services the ability to confirm check-ins. The advertiser will know that the consumer really did view the ad when they award consumers $20 off their next purchase at The Gap.

When Facebook launched check-ins in August, RealNetworks VP Bill Hanks quickly learned that the technology needed a bit of work. He checked in to the Mercer Island Country Club in Washington on Facebook Places, but did it from his backyard treehouse about three blocks away.

Miles says NFC can validate to the brand that the consumer actually viewed the advertisement or promotion in the store.

The accuracy of location becomes a big problem when advertisers want to verify that someone actually stood in front of the campaign poster promoting the Sony TV equipped with Google’s search engine and services or Cisco’s Flip camera. Bill Slawski, founder of SEO by the Sea, points to a Google pending patent describing the one big limitation of location-based services — accuracy. It also provides an alternative that Google might follow to improve on location information.

Three commonly used technologies include global positioning systems (GPS), cellular tower triangulation, and IP geocoding associated with IP addresses. While the patent suggests alternatives such as Web browser history, maps history, address books, email archives and calendar entries, Miles suggests NFC instead. The technology provides for greater accuracy in location as well as security. “If consumers tap a tag to give up information, they want to make sure it’s with that specific tag,” he says.

Miles estimates that between 5 million and 7 million NFC-enabled smartphones will ship this year and this will climb to 50 million units in 2011. Not far off from estimates at research firms iSuppli or ABI Research. “Depending on the readiness of NFC infrastructure, we expect NFC penetration will be less than 5 million units by the end of 2011 in North America, excluding trial units.”

NFC-enabled device shipments worldwide should reach 296.48 million in 2015 — up from 2.62 million units in 2009 and 4.72 million units in 2010, according to the research firm.

The numbers may seem miniscule, but the rise reflects the adoption of an emerging technology as companies realize the benefits of connecting the virtual with the physical worlds. Jonathan Collins, principal analyst for machine-to-machine communication at ABI Research, says retail stores can use the technology to combine loyalty cards with contactless payment systems. When consumers use the phone for payment, marketers can leverage that one-to-one communication. Even if virtual payments are not available, the retailer could deliver personalized discounts or coupons for extra discounts.

Increasingly, NFC puts the building blocks in place for advertisers and marketers to explore emerging technology to reach consumers. “There were structural issues that companies needed to put in place for mass adoption,” Collins says. “There were issues around standards, architecture in handsets, and security issues for how payment applications would operate. Mobile operators had to invest in the technology first.”

Until 2011, the number of smartphones equipped with NFC technology limits the adoption of applications powered by the shortwave communication. Nokia and Google, and Research In Motion (RIM), as well as the group supporting millions of consumers known as ISSIS, made up of AT&T, Verizon and T-Mobile that plan to offer smartphone payment options, hope to solve these problems.
-Laurie Sullivan, MediaPost

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