The Information reported that Google will be launching an MVNO, reselling wireless service from the Sprint and T-Mobile networks. This has little chance of making a significant impact on the U.S. wireless market.
What is an MVNO?
To understand what Google is doing, it’s important to understand what an MVNO is. The acronym stands for Mobile Virtual Network Operator. These are companies that buy network service from companies like AT&T, T-Mobile, Sprint and Verizon at wholesale prices and then resell them to consumers at retail prices. Often, these prices are much lower for low-usage customers than the big brand names. The MVNO handles pricing, packaging, marketing, billing and customer service. (This is a simplification.)
Why do MVNOs exist?
There are three big reasons:
Carriers suck at specialty marketing. Virtually all of carrier marketing is focused on the mass market. Going after smaller segments isn’t their thing. With MVNOs, they let someone else handle that. Consumer Cellular (one of my favorites) targets seniors. Tracfone targets lower income customers. Even retailers like Target (Brightspot) and Walmart (StraightTalk) have their own mobile brands.
Carriers are focused on increasing ARPU, because that’s what Wall Street looks at. If you look at what gets marketed, it’s typically plans that start at $100. Their financials can separate retail from wholesale ARPU.
Carriers have excess network capacity and want to make money for it.
What Google lacks
Customer service. This is something that the company is not known for; although its service reputation isn’t nearly as bad as PayPal’s, it is a brand associated with little to no service. (To be fair, I had a great experience with Google Drive phone support.)
Retail. Google has no retail experience to speak of. There is a reason there is a wireless company store or three every block in urban areas — it works! Even Apple has its own, highly lauded distribution network.
Marketing. Having a hugely successful product with almost no marketing has resulted in Google’s almost complete inability to market products. See: Google Wallet, Nexus, Google TV, Google+…
Some have compared a Google MVNO with Google Fiber. Yes, both are in communications. But Google Fiber is bringing something unique to customers — extremely high speeds. A Google MVNO would have no such differentiation. Being on lesser networks would also make it harder to draw customers from the big two, substantially limiting the market.
It’s extremely bold for Google to try an MVNO. It’s something that not even Apple or Amazon has attempted. And both companies are much better at customer service and retail.
OLO provides online ordering for companies such as Five Guys, Noodles & Co. and Cold Stone Creamery. Guests can order from their smartphones and pick up their order in store without waiting in line.
I met founder Noah Glass earlier this year and was very impressed by his commitment to helping restaurants incorporate mobile technologies.
Mobile has changed a lot of spaces already; I think there’s a lot of potential to improve the restaurant experience for both consumers and operators:
A better consumer experience. We’ve all experienced the lunch rush. Your stomach is grumbling and you just want to eat. With order ahead, you can bypass the line and get straight to your food. Mobile ordering also increases order accuracy because you can see what you’re ordering. I was recently at a bar in Utah and ordered a Hop Notch IPA. The bartender thought I said half nachos. Oops.
Increased throughput for restaurants. People who know what they want aren’t turned off by a long line and go elsewhere.
Reduced operational costs for restaurants. Miscommunication in ordering and unclaimed orders cost restaurants money.
As I’ve noted repeatedly in my writings, local is a hard slog and OLO has shown the dedication and perseverance necessary to succeed in local. The company started off with mobile ordering by text message in 2005. It is also well financed, having recently received a strategic investment from PayPal as part of a $5 million round.
Noah and team are off to a great start and I look forward to working with them to help restaurants take advantage of mobile.
I was in Washington state last week with my friend Amy and her 2-year-old daughter, Sophie. We went to the Northwest Trek Wildlife Park so that Sophie could see her favorite animal (bears) in person for the first time.
At the end of the visit, we stopped in the gift shop and I found an adorable shirt for her. (With a bear, of course.)
I handed the shirt to the clerk and my credit card to Sophie to hand over.
The clerk was having trouble with the scanner. She tried repeatedly to get it to ring up. In that time, Sophie twice picked up my credit card and moved it closer to the clerk.
Although Sophie doesn’t understand retail technology, she does know when something is taking too long.
The experience also made me wonder whether kids will use cash as much as we did, when they are growing up accustomed to seeing their parents (and their parents’ friends) paying for so many things with plastic.
Even the exposure that many of us first had to money — cash that our parents gave us to pay for school lunches — has been replaced in many U.S. schools by prepaid systems.
Foursquare’s new deal with American Express will allow AMEX cardholders to save money on purchases at select retailers including Sports Authority and H&M. As important as the deal is, I think the technology is more important.
We’ve heard a lot about NFC lately. Products like Google Wallet can talk to the payments network and transmit your credit card, loyalty program and promotion information.
I’m sure it will happen over time, but the benefits are marginal at best. Yawn.
What’s really exciting is what you could do if you flipped the model and had the payment networks talk to your phone. That’s exactly what foursquare is doing. When you redeem an offer, American Express sends a confirmation to your phone.
The payment network can reach out and touch your phone. That’s huge. That enables a lot of possibilities:
Risk reduction and increased convenience. If you’ve ever been traveling and had a card rejected because it was flagged as suspicious, you know how frustrating this can be. Instead of declining the transaction, it would be routed to your phone where you could authorize it. This also saves a phone call to unblock your account. Fraud reduction, more transaction volume and operations cost reduction. A credit card company’s trifecta.
Online transaction authorization. Similar to above, a notification to your phone could be used as secondary verification of online transactions.
Parental authorization. Parents could provide a restricted prepaid card to children. On every transaction, they could remotely approve or deny it. Some merchants could be automatically authorized. This would be a great addition to American Express’s PASS product line.
Promotions. Offers based on your recent purchases and location could be sent while you’re in a shopping mood. If you just made a purchase at mall, you might get an offer for discounts on dinner and a movie.
Access for the blind. A text-to-speech engine on the phone could provide an overview of the merchant and amount to help the blind.
An application like this also eliminates the two-sided market problem that NFC has. As much as Google would like to have NFC terminals everywhere, that will take a long, long time. Merchants don’t have to do anything to the installed terminal infrastructure to make this happen. It’s all between the backend and your phone. It also works with a much broader base of phones than NFC.
This type of integration also eliminates the need for training retail employees and doing POS integration. These are both significant hurdles to running promotions.
I stopped in at Radio Shack last week to take advantage of foursquare’s 20% off newbie special on an iPod Touch. (It’s a great deal. 20% off a current generation Apple product is tough to find.)
The clerk I talked to had no idea what I was talking about. He reluctantly brought over the manager. She had no idea what I was talking about. She stared at the offer on the screen and couldn’t figure it out. She tried calling another store. Again, no idea what was going on. Then she called Radio Shack’s POS support line and was on hold for about 20 minutes.
If I were an ordinary customer, I would have been fed up and left. But I like to see how these things play out and consider it market research, so I let it go on. I amused myself as the manager spent her time on hold trying to sell me batteries, extended warranties, screen protectors, armbands and pretty much anything else that was within reach.
I asked if she could just override the system and add the discount. No, store managers don’t have that discount. Finally, she randomly entered promotion codes and figured it out.
Thirty minutes after I entered the store I left with my iPod. During that time she couldn’t help other customers. It was’t a great experience for me, the other customers, the store or foursquare.
Clearly the offer code was not a single use code or she wouldn’t have been able to guess it. Either Radio Shack needs to get much better at training or they need to put POS instructions right on the foursquare offer. (They also need to better staff their POS support desk. No one ever picked up.)
This isn’t limited to foursquare or Radio Shack. I run into this all of the time when trying to redeem mobile offers. My default expectation is that it won’t go smoothly.
That’s one thing that appeals to me about Square’s Card Case and Register. Because the POS system is integrated with loyalty rewards and promotions, here shouldn’t be a disconnect between the offer that I see on my screen and what the merchant sees on hers.
The tip line. A somewhat passive-aggressive solicitation for money. It’s long been the norm at full-service restaurants, but it also appears at many places where I wouldn’t ordinarily tip. If I order and pick up my food at the counter, a tip seems unnecessary. If I pay cash, there is no default expectation of a tip. (Though there might be an easily ignored tip jar somewhere.) But paying by credit card, the tip is closer to an opt out. I have to explicitly draw a line through the tip line and write in a total. I’ll admit to tipping at places I wouldn’t ordinarily tip because of the subtle pressure. Sometimes I’ll pay with cash to avoid the situation.
Changes in payment systems are changing this dynamic. Increasingly, credit card companies aren’t requiring signatures for low-value transactions. With MasterCard’s Quick Payment Service, transactions under $50 can be processed without a signature. It’s faster for the consumer, moves the line quicker, but removes the opportunity to tip on plastic.
Square’s payment service offers a tip option:
This implementation is the equivalent of the physical tip jar: if you go through the normal transaction flow and just sign, there is no tip. You have to explicitly click the box in the upper right corner to add a tip. (I haven’t seen what the tip experience is like with Square’s new Card Case.)
Is that the right experience? It depends on whom you ask.
Square today announced its Register and Card Case products to complement the existing Square reader and smartphone applications. While Square has been focused on the merchant experience, this move expands its role on the consumer side. (Consumers have been able to receive receipts by email or text message when making purchases at Square merchants.)
With the new application, customers will be able to search for nearby Square merchants, see what’s on their menu and view receipts for previous transactions. Customers can also pay right from their mobile phone and the payment is confirmed on the merchant’s iPad.
Merchants will have the ability to accept a payment without swiping a card. They can also keep better track of what they’re selling. A loyalty program allows businesses to reward loyal customers. Unlike check in based systems which involve users to self-report, this system would be harder to cheat.
One open question is whether these transactions will be treated as card present transactions for Square. I expect that Square will charge merchants the swipe rate for these transactions. If they’re paying out the card-not-present rates, this will eat into their margins.
What we’re seeing here is only the beginning. There are a lot of important problems that can be solved with the data that Square will be collecting:
It’s 2 a.m. and I’m hungry. What’s open? This is a problem that search generally handles poorly. Yelp has done the best job of collecting this among anyone I’ve seen. (Google tries, but its data is less comprehensive.) Even when the data are collected, they are often inaccurate. (Holidays, business was slow so we closed early, etc.) The Square Register could contain a virtual Open and Closed indicator that is visible to consumers.
I have a craving for a dosa. Where can I get one? With menu item data, Square could answer that question — at least for its merchants.
I have a receipt, but I can’t remember who I was with. The Square app could allow users to flag tax-related transactions and record notes like who you ate with.
I want to tell someone about a place I ate at, but can’t remember the name. (And want credit.) People are generally bad at remembering place names. Merchants could also offer rewards for new customer referrals, much like online merchants do.
I’m in a hurry and I need an order to go. Consumers could order right from their mobile phones, the order would pop up on the merchant’s screen and the merchant could select an estimated pickup time. For the merchant, this also reduces the risk of nonpayment for phone orders that aren’t picked up.
Updating Web sites is hard. Most local business Web sites I go to are horribly out-of-date. Menu items and pricing can be more than a year old. Hours are often wrong. Maps are hard to find. Square could take the data from the Register system and generate Web pages with dynamic information, including today’s specials and hours. Some card issuers and payment processors have offered Web site creation, but these have mostly been low quality efforts.
I don’t have a mobile presence. Very few local businesses have dedicated mobile sites. At best, you get a hard-to-read version of the main site. At worst, you see sites created by incompetent flash designers who knew nothing about user experience. These render blank on an iPhone. Square-generated mobile Web pages would provide easy access to key info such as location, hours and menus. Google says about 40% of searches on mobile devices are local in nature — as a result, this is becoming increasingly critical.
I don’t have time to enter data multiple times. Square could also generate a PDF that could be printed for in-store menus. Data entered once gets used for POS, paper menus, Web site, mobile site and promotions. This not only saves on work, it eliminates inconsistencies which can cause customer service problems. Getting a bit crazier and thinking further out into the future, a Square app on an Apple TV could show promotions in store.
I want to get people to try new items. Square could use transaction history to entice regular customers to try things on the menu that they haven’t tried before. With promotions, you want to spend your promotion dollars on transactions that wouldn’t happen otherwise. Paper coupons are dumb in this regard. Say you’ve got a raspberry tart that you think is amazing. You could find all of the customers who haven’t ordered it and send them a promotion.
I want to know what my customers think of me. An email after the fact could prompt users for feedback and generating a net promoter score. It can also be a way of drumming up more business. For example: “Would you recommend us to a friend?” If the customer says, no, you can ask why. If yes, you can ask for friends right then and there. “Whom would like to recommend us to?” The referral can be coded so that the business can thank the original customer for the referral. A Square app could also provide more actionable data than the typical Yelp review — a restaurant would know when they ate, what they ordered, etc. This would make it easier to identify problem employees or dishes.
I want to know how I’m doing compared with other businesses in my area. I charge $3.50 for a slice of pizza. How does that compare with others? How does my revenue compare? Of course, this all needs to be done in a way that protects business anonymity. Data would only be available when there is enough participation so that a single businesses’ information can’t be identified. Participation should be opt in, with the carrot being access to data. The key here is that data needs to be in a meaningful context. I’ve seen many startups that just want to throw data at businesses. That’s not good enough. Square will also need to answer the “So what?” What decisions should I make based on that data?