Commerce of Things 2015

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The Commerce of Things | Copyright VisionMobile - Presented by Braintree | vmob.me/CommerceThings

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Contents

1. The state of e-commerce developers

2. Removing the friction from e-commerce

3. The opportunity ahead: the Commerce of Things

4. Research Methodology

Also by VisionMobile Find out more visionmobile.com/reports

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ABOUT THE AUTHORS

Marlène Sellebråten Analyst Partner

Andreas Constantinou Founder

Alex Veritsis Data Analyst

Marlène Sellebråten has researched and written about the global telecoms, mobile and mobile innovation market for 15 years, working as an analyst, a tech editor and a consultant, for analyst firms such as Gartner and publications such as CommunicationsWeek International (now Totaltelecom). More recently she was editor-in-chief of Sweden’s leading publication on B2B mobile, Mobilbusiness, as well as Sweden’s largest publication on B2C mobile, Mobil, before joining VisionMobile as an Analyst Partner. You can reach Marlène at: [email protected] @MSellebraten

As Founder, Andreas oversees the growth and strategy at VisionMobile. He has been working on the mobile industry since 2000, helping take the very first smartphones to market. Since then he’s worked with the top technology brands including Microsoft, Intel, Google, Amazon and AT&T. In his academic life, Andreas is an Adjunct Professor at Lund University, Sweden, where he teaches Internet Business Models. He is passionate about mapping the future and the economics that will shape how people communicate, work and play. You can reach Andreas at [email protected] @andreascon

As a data analyst, Alex dives head-first in all VisionMobile datasets to unearth meaningful associations and trends in the app economy. Being an active member of the team that distills data noise to data sense, Alex explores correlations and creates visualizations of the Developer Economics survey data and participates in all VisionMobile data-driven projects. Alex holds a BA in Economics and an Msc in Business and Financial Economics from the University of Greenwich. You can reach Alex at [email protected] @VforVeritsis


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Key Messages .................................................................. 4

The state of e-commerce developers ................................... 5 Mobile commerce: A $600 billion opportunity ............................... 5 Smart mobile developers go for e-commerce ................................... 6 The Internet of Things: five connected objects per smartphone owner ......................................................................................... 10 IoT population at 4.5 million and set to double by 2020 ............... 10 Making money: a developer community in need of directions ........ 11

Android catching up on iOS in m-commerce ............................ 12

Removing the friction from e-commerce ........................... 14 Retail: Pinterest’s buyable buttons ............................................ 15 Retail: Zalando ........................................................................ 15 Smart Home: Amazon Dash Replenishment Service (DRS) ...... 15

Smart Home: Amazon Echo .................................................... 16 Smart Office: HP Instant Ink ................................................... 17 Transportation & Food Delivery: Click & Pizza and Click & Go by Telefonica and Telepizza ......................................................... 17 Smart Home: Flic, the smart button ......................................... 18 Smart city: AFA JCDecaux Denmark ...................................... 18 Connected Car: Volvo Sensus connect with Park & Pay ............ 19

The opportunity ahead: the Commerce of Things ............... 20 An unconnected ‘thing’ is a missed business opportunity .............. 20

Affiliate Buttons ...................................................................... 20 Closing the attribution loop ..................................................... 21 Programmatic e-commerce ...................................................... 22

Research Methodology .................................................... 23

TABLE OF CONTENTS


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• E-commerce is already the biggest revenue generator among mobile developers. Mobile developers using e-commerce (for physical or digital goods) have median monthly revenues of $1,000-$2,000 compared to a measly $200-$350 median monthly revenue for mobile developers across all revenue models.

• Yet, only a small share of mobile developers (9%) have chosen to work with e-commerce, based on our 9th Developer Economics survey wave of May 2015, of more than 13,000 software developers. The rise of mobile commerce provides developers with an unprecedented revenue opportunity, if only they can acknowledge it and seize it.

• E-commerce models also generate good returns, with 16% of Internet of Things developers who use e-commerce of physical goods generating more than $10,000 per month, while the equivalent figure for those working with e-commerce of digital goods is 20%. Yet, despite the revenue benefits, only 9% of IoT developers go for e-commerce revenue models.

• Internet of Things is still a field in nascent stages, whether we look at Wearables, Smart Home, or Connected Car verticals. Of all IoT developers, 57% are Hobbyists and Explorers. 59% of IoT developers are earning under $500 per month, based on our survey of 3,150+ IoT developers in our Developer Economics 9th edition survey, which run in May 2015.

• We estimate that there are 4.5 million IoT developers in the world today, a community in an early phase that is set to grow at a CAGR of 17% through 2020.

• IoTisgrowinglargelythankstomobiledevelopers, 53% of the world’s 5.5 million mobile developers in 2014 also worked on IoT projects, growing to 59% out of 6.3 million developers in 2015.

• iOS remains the most lucrative e-commerce platform. 50% of the developers targeting iOS with e-commerce revenue models are pulling in more than $10,000 a month, excluding those who are not interested in making money.

• We believe that Internet of Things will fundamentally change the shape of e-commerce. Any connected object could become a distribution surface and customer acquisition channel for consumables - Amazon’s Dash and DRS service offer an early glimpse of this model. IoT extends e-commerce affiliate and user acquisition schemes beyond websites, mobile, and apps, into any physical surface.

KEY MESSAGES


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Connected buttons such as Telefonica’s Click & Pizza and automatic replenishment services, such as Amazon Dash are only early, if telling, examples of things to come.

Mobile commerce is on a path to grow over twice as fast as e-commerce. Estimated at $200 billion in 2014, m-commerce sales are set to grow $100 billion annually to reach $600 billion in value in 2018, Digi-Capital estimates. By then, global retail is expected to reach a whooping $28.3 trillion in value, in which e-commerce will account for 8.8% (a conservative estimate), according to eMarketer.

E-commerce models also generate good returns, with 16% of Internet of Things developers who use e-commerce of physical goods generating more than $10,000 per month, while the equivalent figure for those working with e-commerce of digital goods is 20%. Yet, despite the revenue benefits, only 9% of IoT developers go for e-commerce revenue models, based on our 9th Developer Economics survey wave of May 2015.

In this paper we explore the untapped e-commerce revenue opportunity for developers, both those working on mobile apps and Internet of Things projects. We then discuss case studies of how connected devices, frictionless payment, and discovery is changing e-commerce. This leads us to a prediction of the e-commerce industry future, which will be structurally disrupted as every connected surface becomes an e-commerce window.

Mobile commerce: A $600 billion opportunity Global retail sales will generate in 2015 an annual turnover of $23.9 trillion (yes trillion!), of which e-commerce makes up 6.7%. By 2018, global retail is expected to reach a whooping $28.3 trillion in value, in which e-commerce will account for 8.8%. Sales of physical goods are here set to lead the growth in e-commerce as digital goods reach maturity, according to Forrester.

1 THE STATE OF E-COMMERCE DEVELOPERS

Imagine a world where every object is connected to the Internet. And comes with smarts. Where every connected object is a window into an e-commerce store. Where browsing, shopping, paying and getting stuff delivered is so frictionless that it has almost become invisible. This future is about 5-10 years away. But there are already signs of it here, today.


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Global retail sales will be close to 50 times the size of m-commerce which is set to grow to $600 billion by then. While analyst estimates vary, they all point to the same trend: e-commerce will represent an ever-growing share of global retail.

Simultaneously, m-commerce will grow rapidly, actually twice as fast as e-commerce. E-commerce growth will be especially fast-paced in China and Latin America. China is the fastest growing m-commerce economy with nine of Internet Retailer’s ten fastest-growing Mobile 500 companies worldwide (based on annual mobile sales). The mobile share of e-commerce in China is already above 50%, according to Criteo, an advertising solution provider for the retail sector.

Estimated at $200 billion in 2014, m-commerce sales are conservatively forecast to grow by $100 billion annually to reach $600 billion in value in 2018, according to Digi Capital.

According to Internet Retailer’s data, countries outside of the US will lead the way when it comes to m-commerce growth, with Europe growing 71% year-on-year in 2015, while Latin America is set to grow 60% year-on-year. These are however pale figures compared to those of China, where the top 14 Mobile 500 e-retailers are collectively on their way to growing mobile sales at an estimated

249% this year. China and the US are together the world’s largest e-commerce markets measured in dollars. And the UK leads all countries in terms of the e-commerce share of total retail sales, at 13% in 2014.

We believe that m-commerce growth is accelerating and will outpace that of e-commerce as more and more services are adapting to smaller screens, smartphone penetration is increasing disproportionately in developing markets that are not yet saturated, and payments on mobile devices get more and more frictionless.

Smart mobile developers go for e-commerce Our research shows that mobile e-commerce is by far the largest revenue opportunity in the app economy. As we'll see, e-commerce as a revenue model is likely to provide the highest median monthly revenue to mobile developers. Indeed, one in three mobile developers who use e-commerce revenue models make more than $10,000 per month. Yet, only a small share of developers, 9%, have chosen to work in that field, based on our 9th Developer Economics survey wave of May 2015. We believe that more developers will join in as off-the-shelf inventory selection, frictionless payment systems and fulfillment-as-a-service become more prevalent.


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The Internet of Things is still a field in its nascent stage, whether we look at Wearables, Smart Home, or Connected Car verticals. Of all IoT developers, 57% are Hobbyists and Explorers, with a goal to learn, have fun, build something for their own use, and in some cases explore new business opportunities. As such, it should come as no surprise that 59% of IoT developers are earning under $500 per month and 79% less than $5,000 per month, based on our survey of 3,150+ IoT developers in our Developer Economics 9th edition survey which run in May 2015.

Selling physical goods, that is devices, together with software licensing are already the preferred ways of doing business for IoT developers. Among IoT developers, 18% of those working with the sale of physical products make more than $10,000 per month. This

compares to 22% among IoT developers working with software licensing, the highest revenue-generating revenue model for IoT developers.

E-commerce models also generate good returns with 16% of IoT developers working with e-commerce of physical goods generating more than $10,000 per month, while the equivalent figure for those working with e-commerce of digital goods is 20%. Yet, despite the revenue benefits, only 9% of IoT developers go for e-commerce. When it comes to choosing a revenue model, 19% of IoT developers prefer to work on selling physical goods, which places this way of doing business on par with software licensing and contract work (both at 19%), excluding developers who are unsure about their business model.


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The Internet of Things: five connected objects per smartphone owner In parallel with the rapid growth of e-commerce and m-commerce, Internet of things (IoT) has started to find its mark and is steadily leaving the hype phase to become a revenue-generating reality. By 2020, the number of connected objects is set to reach a volume of 26 billion worldwide, according to Ericsson. Of all those connected devices, almost 15 billion will be phones, tablets, laptops and PCs.

That translates to nearly three connected things for every person on the planet or nearly five connected things for every smartphone user, forecast to have grown to 6.1 billion by 2020, reaching 70% of the world’s population. These forecasts exclude passive sensors and radio frequency ID tags. Looking at the amount of connected objects around us already today makes this forecast seem conservative.

Revenue-wise, estimates are equally impressive. From $655.8 billion in 2014, the worldwide IoT market is set to grow to $1.7 trillion in 2020, IDC forecasts. This implies the IoT market will grow with a compound annual growth rate (CAGR) of 14.7%, with devices, connectivity and IT services making up the majority of the IoT market in 2020. Modules and sensors alone should by then represent 31.8% of the total IoT market.

IoT population at 4.5 million and set to double by 2020 Based on our research data from over 7,000 IoT developers through the November 2014 and May 2015 Developer Economics survey waves, we estimate that there are 4.5 million IoT developers in the world today, a community in an early phase that is set to grow at a CAGR of 17% through 2020.


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In addition, 53% of the world’s 5.5 million mobile developers in 2014 also worked on IoT projects, growing to 59% out of 6.3 million developers in 2015. Out of 6.3 million mobile developers in 2015, 19% were professionally involved in IoT while 40% were involved in IoT as hobby or side project. We forecast the number of mobile developers will grow to reach 7.9 million people in 2017.

When it comes to verticals targeted by developers, the smart home segment is their primary focus, today as well as tomorrow. Indeed, more than three out of ten of IoT developers (32%) are working on smart home solutions and 35% are planning to do so in the future. These numbers tell a tale of a market segment coming of age, with a greater user reach as well as greater platform maturity.

Retail is the second largest vertical targeted by IoT developers today. However, possibly due to the lack of maturity and the fragmentation of this market, whereby much of the activity has thus far consisted of early stage trials, retail ends up at the bottom of IoT segments developers are planning to work with in the future. Some IoT developers may have faced serious challenges on this vertical and will need incentives to get back on that horse. The third largest IoT vertical is Industrial IoT, with nearly a third of IoT developers working on such a project and nearly one in four planning to do so in the future.

Making money: a developer community in need of directions

Mobile and IoT developers appear to be a community in need of directions when it comes to making money. Despite the fact that e-commerce has the potential to earn mobile developers top dollars, the business model is not getting the attention it deserves. Indeed, the top four business models prioritized by mobile developers


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(Advertising, Contract work, Pay per download and Consumable in-app purchases) all contribute on average lower monthly revenue than e-commerce.

E-commerce might be an intimidating direction to take, especially the e-commerce of physical goods as it involves inventory and fulfillment management, not to mention customer and billing management. At the same time, e-commerce and fulfillment services such as Amazon Mobile Affiliate APIs are available off-the shelf. Developers only need to choose the items they need to sell and build an online store.

The potential within e-commerce is not just untapped, and not just substantial, but gets only bigger as more and more objects get connected to the Internet, potentially turning them into prime contextual e-commerce real estate.

Android catching up on iOS in m-commerce Traditionally, iOS users have spent more money on m-commerce compared with users on other platforms, as have users on tablet and the web. According to App Annie, iOS users tend to spend up to four times as much on apps compared to Android users. But data by Criteo suggests that Android is catching up with iOS in terms of transactions, if not yet in total transaction value. Although iPhone users are still on average better off than Android users, and hence more likely to spend more money on goods and services of all kinds, the higher Android penetration mitigates this state of facts. At the same time, following Apple’s inroads in China, the gap between iOS spending and Android spending might be expanding rather than retracting, according to App Annie’s data.

Based on our research, 50% of the developers targeting iOS and who have chosen to make money from e-commerce, excluding those who


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are not interested in making money, are pulling in more than $10,000 a month. This reflects both the greater disposable income amongst iOS users and the higher standards that Apple has set for iOS apps that make it into the store.

And while developers targeting iOS might be doing best out of m-commerce, 36% of Android developers selling tangible goods are also making a comfortable income, that is more than $10,000 a month, according to our research.

Excluding Hobbyists and Explorers, and counting only those developers building apps for a living, about 44% of all developers are targeting both iOS and Android. Android remains overall the most popular platform, as it is targeted by 71% of all mobile developers. A vast majority of mobile developers working with e-commerce choose Android as their primary platform (47%), versus 14% that choose iOS as primary, despite the fact that, to date, iOS has proven to provide higher monthly e-commerce revenue.


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Here’s some of the commercial developments we discuss in this section.

• Amazon’s Dash button allows you to re-order washing powder, with the press of a button; delivery and payment is all taken care of effortlessly.

• With Amazon Echo, Amazon goes one step further, by letting consumers order goods and access information just by a casual conversation with Alexa, Echo’s built-in intelligent virtual assistant.

• By clicking on a Pinterest buyable button, the user goes from “I want this” to “I bought this” in just one action.

• Zalando lets shoppers take a photo of a piece of clothing and matches it to related or alternative clothing products, driving impulse purchases.

• By letting consumers purchase goods directly off of street furniture posters, JCDecaux lets consumers act on an impulse purchase while removing payment friction.

• Connected buttons by Flic or by Telefonica, let you order a pizza or a taxi just by pressing a single button, no questions asked.

These moves are all part of a bigger structural trend that will see every connected surface become a prime e-commerce real estate.

2 REMOVING THE FRICTION FROM E-COMMERCE

The next few years we’ll see friction gradually disappear in e-commerce. Transactions will become intuitive and almost invisible to consumers. The groundwork for this frictionless e-commerce era has already been laid out, as we’ll discuss in this section.

Vertical Case Company

Retail Pinterest Buyable Buttons Pinterest

Retail Zalando’s photo and order Zalando

Smart Home Amazon Dash Amazon

Smart Home Amazon Echo Amazon

Transportation & Food Delivery

Telefonica’s Click&Pizza and Click&Go

Telefonica, Telepizza, Cabify

Smart Home Flic button Shortcut Labs

Connected Cars Volvo Sensus Park & Pay Volvo, Parkopedia, EasyPark

Smart City E-commerce from street furniture

AFA JCDecaux, Powatag

Smart Office HP Instant Ink HP


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Retail: Pinterest’s buyable buttons Social network Pinterest, which lets its members pin pictures of things of interest, introduced buyable pins earlier this year, transforming the site into a mobile shopping mall. As Pinterest describes it itself, if Facebook is a place where a user shows things they have done, Pinterest is all about showing things a user wants to have. Adding buyable pins is hence a logical next step to take Pinterest users from “wanting” to “having”.

While the traditional pins are red, buyable pins are blue and signal that the merchandise on display can be purchased right through the Pinterest app. Buyable pins offer a simple and secure checkout to the site’s mobile app users. Payments can be processed via Paypal, ApplePay or credit card. Users need only enter their personal billing information once, reducing friction in the shopping experience.

For brands and merchants it is a novel way to reach customers while retaining full control over the shopping experience, as Pinterest does not take a cut from the sales or handle shipping and customer service. For buyable pins, Pinterest has partnered with five major e-commerce platforms: Bigcommerce, Demandware, IBM Commerce, Memento and Shopify.

As of November 2015 there are over 60 million buyable pins to choose from and the service is available to iOS and Android users in the US.

Retail: Zalando Online fashion retailer Zalando allows users to get buying recommendations based on clothing items they have spotted around

them. For example, users may notice someone wearing a jacket that they like. They can take a picture and based on its product assortment, the Zalando app will propose a set of jackets that are similar to the one just seen on the street. If the user likes it, they select it and can there on proceed to checkout.

Here Zalando is offering both impulse shopping and purchasing convenience. Customers are no longer browsing a stand-alone web shop but choosing one item that they stumble on that’s worthy of buying.

Smart Home: Amazon Dash Replenishment Service (DRS) Amazon DRS combines Internet of things with e-commerce to provide a frictionless shopping experience that is is a win-win for consumers and brands alike.

Launched in March 2015 to Amazon Prime customers in the US, Amazon DRS is an API that enables reordering and automatic replenishment of physical goods either manually from connected buttons or automatically from connected appliances and devices. DRS powers Amazon’s dedicated connected buttons, Dash Buttons, as well as connected devices that measure consumable usage using infrared sensors, scales or other mechanisms, for example Brita’s water dispensers.

With the thumb-sized Wi-Fi-connected branded buttons, consumers can place orders in one-click without having to input any billing or shipping details as these are catered with via their Amazon account. Dash buttons will typically be used for consumables that are not associated with a device, such as sport drinks or tooth paste. Orders via connected appliances are instead placed automatically when supplies are running low, here again without requiring any further


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action by the user. Users just need to pre-define what quantities they want to order for which products when it is time to replenish those.

Device makers will have two options for integrating with DRS: either they can integrate a physical button right into the device or they can use sensors to measure consumable usage in real-time in order to enable automatic reordering.

Consumers get the benefit of skipping the hassle of entering shipping and payment information, whereby the payment process is made close to invisible. From a consumer perspective, the benefit is convenience and not having to think twice about re-ordering consumables. As Dash Buttons are branded, they also create a tighter relationship between them and the brand. Dash buttons act on the consumer’s intention to buy before they change their mind.

About 250 products ranging from pasta to baby formulas are already eligible for DRS, and Amazon has also added new connected device partners. Since the launch of DRS with three brands - Brother, Whirlpool, and Brita - Amazon added eleven new partners, among which General Electric and Samsung, which is indicative of appliance manufacturers’ growing interest in the service.

DRS is only the beginning as Amazon has already filed a patent for anticipatory shipping, whereby its backend infrastructure can anticipate consumers’ future orders and place these in waiting at the closest shipping hub so as to improve delivery times.

Smart Home: Amazon Echo Launched at the end of 2014, Amazon Echo is a hands-free voice-controlled device that allows users to access internet services such as information and music as well as order goods via voice commands in the comfort of their home. Amazon Echo can also control smart

home appliances through its integration with Philips Hue, Samsung SmartThings, WeMo smart plugs, Insteon and Wink home products. It also allows Amazon Prime customers to re-order products by simply asking Echo to place an order.

Echo is powered by the Alexa Skills Kit, a free SDK that enables customers to interact with devices in a more intuitive way using voice. Examples of these skills include the ability to play music, answer general questions, set an alarm or timer.

Amazon also offers Alexa Voice Services, a second SDK that allows other device manufacturers to integrate the same capabilities as Echo has, into their own devices. Alexa Voice Services is to Echo what Dash Replenishment Service is to Dash Buttons; an e-commerce platform for connected device manufacturers.

The launch of the new Apple TV, also equipped with Siri voice control, heralds Apple’s march towards the voice-controlled smart home market. It remains to be seen though how Apple executes on its vision. The new Apple TV, linked to millions of iTunes accounts and its myriad of users already acquainted with spending money via their iOS devices, is in any case a mighty contender to some of the services Amazon Echo offers. Similar efforts by Google with Google Now, Microsoft with Cortana or Jibo and Homey are all heading in the same direction.


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Smart Office: HP Instant Ink HP Instant Ink is a connected service that lets a printer order ink based on consumption. Ink, shipping and cartridge recycling are all included in the monthly subscription service that promises to deliver convenience (“you never need to run out of ink”) and cheaper supply as users pay for the number of pages they print, not for the number of cartridges they buy.

This is how it works: the consumer buys an eligible connected printer, signs up for a plan based on the number of pages they normally print and HP mails Instant Ink Cartridges, removing the need for manual ordering. No annual fee is charged to the user who can cancel its subscription any time.

Billing and service starts when the user inserts its first HP Instant Ink cartridge. As the printer tells HP when to send more ink, users get ink before they even realize they need it. Postage paid shipping material is also included to recycle used cartridges. The user’s credit card is charged 30 days after they insert their first cartridge and then every 30 days.

HP’s post-paid subscription ink service offers users convenience as it removes the hassle of running out of ink while at the same time making payment automatic and frictionless. For HP, it is a good way not only to plan and streamline its sales of ink but also a good way to increase loyalty to its brand and products, especially since many printer users buy cartridges from other suppliers.

Transportation & Food Delivery: Click & Pizza and Click & Go by Telefonica and Telepizza In November 2014, Telefónica piloted a number of connected buttons under the Click & Go brand. These are connected smart buttons, which can turn the push of a button into a food delivery or a taxi order.

Telefónica released Click & Pizza with restaurant chain Telepizza and Click & Go with online private driver company Cabify. Both buttons build on Telefónica’s Thinking Things Open, a software and hardware platform for building connected objects.

In the case of Telepizza, the wirelessly connected button lets customers order a pizza (pre-defined earlier) with just one click. Once the order is taken, the customer receives a confirmation e-mail or SMS with the order summary. The service makes ordering a pizza easier as customers tend to order the same type of pizza and only need to use the button to do so.


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The Click & Pizza button is limited as it can only perform two tasks: ordering and canceling. Telefónica is now working on the next iteration of the button where payment will be integrated, providing for a frictionless pizza ordering experience. The first button with integrated payments will be in partnership with Delsuper, an online grocery ordering service.

“The major benefit with Click & Go is that it is a very simple and frictionless way of offering a service, it removes earlier barriers and, as with all buttons, the customer does not need to think, only click and order.” Pablo Marin Soto, Global Business Manager IoT at Telefónica I+D

With Click & Go, a connected button placed in hotels and shops, users can order a cab with just one click. The button also allows the user to choose the type of cab being ordered. A receipt with the name and number of the driver on it can be directly printed from the button device, adding a level of re-assurance to the user experience. There is no configuration by the end-user required as the button comes equipped with a SIM card. For Cabify, this means being able to roll out the same service to their customers on all of their markets, including Spain, Mexico, Peru and Chile.

There is an added convenience with Telefonica’s smart buttons as they contain a SIM card and therefore do not require a smartphone or a PC to operate.

Smart Home: Flic, the smart button Shortcut Labs used crowdfunding to take its smart button, Flic, to market, which has now started shipping. Contrary to other smart buttons, like Telefónica’s Click & Pizza or Amazon’s Dash button, Flic lets the end-user decide which functions they want to associate

with the button, for example take a picture, dim the lights at home or ring a friend in a specific situation.

Flic is a wireless button that one can stick or carry anywhere thanks to a powerful backside adhesive and a clip-in. The button can respond to different triggers, click, double-click and hold, and therefore execute three different commands. It needs to connect to an iOS or Android device in order to operate.

In addition to pre-set functions, Flic also supports IFTTT and Zapier, which allow Flic to connect to hundreds of services, for example logging your location to a spreadsheet each time you press the Flic button.

To extend the functionality of Flic, Shortcut Labs have created an SDK that lets developers integrate Flic with iOS and Android applications. The company has also recently entered a partnership with Domino’s Pizza, whereby the pizza chain’s customers will be able to order a pizza by the click of a Flic button, very much like Telefónica’s and Telepizza’s Click & Pizza.

Smart city: AFA JCDecaux Denmark In 2015, outdoor advertising company AFA JCDecaux entered a partnership with m-commerce platform Powatag in order to enable Danish consumers in 20 cities to purchase items via their smartphones directly from street furniture advertising posters. To start with, posters will display QR codes but NFC could be introduced in the future. The campaign is to start rolling out in Q4 2015.

In this case QR codes have been integrated with Danish P2P Payment solution Mobilepay. This means consumers with the Mobilepay app, used today by two million Danes, can go through


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with a purchase without having to be re-directed to a brand’s web page where they are required to enter their payment information. That payment friction has been removed.

Connected Car: Volvo Sensus connect with Park & Pay Sensus Connect, Volvo’s built-in infotainment and navigation system, has integrated a Park & Pay solution that enables drivers to find available parking spots and pay for their parking time right from their car.

Drivers enter their destination into Sensus Connect and the navigation system will display all possible parking alternatives at the destination using Parkopedia’s geographical parking data. Once the driver has chosen a parking spot, they can start their parking time right from the navigation system provided it is connected to the EasyPark parking payment platform. They can then shorten or extend the parking time from the EasyPark mobile app.

The service shows what can be achieved through partnerships, here between car maker Volvo, parking location data provider Parkopedia and parking payment specialist EasyPark. The service saves drivers the hassle of looking for a parking spot, and paying for the right amount of time. Payment is also automated through the application.


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Risk-taking entrepreneurs, commodity hardware, and cheap access to capital are forming the perfect storm that will allow Internet of Things to reshape e-commerce as we know it today.

An unconnected ‘thing’ is a missed business opportunity Today, it is well understood that adding computing and Internet to a car, a watch, a thermostat, or a chair can allow the manufacturer to capture value beyond the purchase of that object and into data-driven business models. Car makers can now offer post-sales services, like vehicle diagnostics that alert you when it is time to have your car serviced by a dealer. Or smartwatch apps that alert you when you’ve forgotten to lock your car. While these services may not all directly generate revenue, they may be an extra selling point and extend customer loyalty. Watchmakers can create stickiness as you can now use your watch to unlock your front door, or control your thermostat without leaving the couch. Thermostat makers can now expand into energy management. Office furniture makers can now extend their business into productivity management or even wellness with examples such as the Tao chair that lets you work out from the comfort of a connected chair.

Makers of connected ‘things’ can subsidize them to make money from data-driven services. We suspect that new norms will form in industry after industry, as goods manufacturers and services vendors experiment with these new business models. What is clear is that selling unconnected ‘things’ will increasingly look like a missed opportunity. So will requiring multiple actions to finalize a transaction.

Affiliate Buttons We believe that Internet of Things will fundamentally change the shape of e-commerce. With IoT, washing machines can now not just deliver detergent just in time by knowing when your supplies run out, they can also recommend the right detergent, based on your usage, type of clothes, on demand. Car makers can recommend where you buy your gas, by understanding your drive journey, availability of gas stations, pricing on-demand discounts, and gas station commission - in fact Google’s Waze does this already. Watchmakers can command a commission from health insurers, as they can monitor your heart rate, temperature, fitness habits and determine what risk zone you

3 THE OPPORTUNITY AHEAD: THE COMMERCE OF THINGS

The rise of mobile commerce provides developers with an unprecedented revenue opportunity, if only they can acknowledge it and seize it. It is not just inventory, payment and fulfillment infrastructure that is falling into place.


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are in. In short, IoT makers can now afford a negative BOM (bill of materials) “à la Dell”, by subsidizing the cost of hardware with the revenues from bundled e-commerce services.

Internet of Things will allow any connected “thing” to become an affiliate for e-Commerce goods that are consumed together with the “thing”. Any connected object could become a distribution surface and customer acquisition channel for e-commerce goods and services of every kind and description. IoT extends e-Commerce affiliate and user acquisition schemes beyond websites, mobile and apps, into every physical surface. Amazon’s Dash and DRS service that we discussed earlier offers an early glimpse of this model.

E-commerce affiliate sales can happen in two ways: firstly, by pre-sales hardcoding of the e-commerce service into the physical object. Think how Telefónica’s Click & Pizza gets the order fulfilled right there and right then. Affiliate sales can also be dynamic. Think how BMW can recommend a different brand of oil for the maintenance of the car based on price, oil efficiency observed on the car and many other similar cars, and the driver’ analyzed behavior on the road. Naturally, the more makers like BMW can track user behaviour, the more value they will capture as an e-commerce affiliate. Their succeeding in doing so will highly depend on how well they can track user behavior, how they can engage users in doing so as well as how qualitative the gathered data is.

White goods manufacturers can now extend their business models across the product lifecycle. They can also own the device real-estate that offers e-commerce discovery and distribution, and act as a customer acquisition channel for e-commerce goods and services.

More likely, this customer broker role will be seized by more agile e-commerce players.

Closing the attribution loop More importantly, Internet of Things will allow e-commerce to stretch across the breadth of the customer journey. Consider how limited e-commerce is today in understanding the customer journey: you search on Google for something to buy, click on what fits your purchase intent, including advertisement links, which leads to a purchase on the device being used. Along that path, Google receives a payment (typically on a cost-per-click, CPC) from the advertiser on the assumption that a small percentage of those clicking the link will buy, making the business case for paying the CPC. There is no way for advertisers to know when a real purchase was made in a brick-and-mortar shop, let alone make someone with purchase intent visit that physical shop in the first place. This is the holy grail of advertising business, that is being able to track consumer behavior from awareness to intent to purchase to purchase, and across web, mobile and increasingly a number of physical connected touch points. By embedding the e-commerce discovery and distribution surface on physical objects, and more connected touch points across the customer journey, you are now able to cross the last mile from awareness to purchase intent to purchase.

Put simply, connected devices will become the optimum point-of-sale for e-commerce, search boxes and app stores for services, at the ideal place and ideal context of a purchase intent.


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Programmatic e-commerce Consider billions of “things” doubling as e-commerce points of sale (PoS). This will result in the unbundling and extension of PoS for e-commerce outside the web (think Amazon.com), app and product (think Kindle) silos controlled by e-commerce players. It will lead to programmatic auctions for e-commerce Call To Action (CTAs), as the most market-efficient way for matching demand with supply. This will mean that the programmatic, real-time bidding (RTB) for

ads today will carry over to e-commerce and into the real world.

More importantly, by retaining attribution across the customer journey and touch points, programmatic e-commerce will be able to monetize by Cost-per-Action (CPA) in the physical world while providing enhanced value experience beyond what the comparable but unconnected appliance could ever bring. We can clearly expect a major reshuffle of the advertising industry and a further cycle of VC investment and consolidation that it will entail.


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For the purpose of this report, VisionMobile has done market research around e-commerce, m-commerce and the Internet of Things, as well as analysed data from Developer Economics 9th edition, which reached an impressive 13,000+ developers. We have also scanned the market for the most relevant use cases, talked to key players active in the field of e-commerce and the Internet of Things, as well as analyzed secondary macro-economic data on the researched markets.

Developer Economics 9th edition, with 13,000+ respondents from 149 countries around the world, is the most global research on mobile, desktop, IoT and cloud developers combined ever conducted. This large-scale online developer survey was designed, produced and carried out by VisionMobile over a period of five weeks between May and June 2015.

Respondents to the online survey came from over 149 countries, including major app and IoT development hotspots such as the US, China, India, Israel, UK and Russia and stretching all the way to Kenya, Brazil and Jordan. The geographic reach of this survey is truly reflective of the global scale of the developer economy. The online

survey was translated in 7 languages (Chinese, French, Portuguese, Japanese, Korean, Russian, Spanish) and promoted by more than 70 leading community and media partners within the app development industry.

To eliminate the effect of regional sampling biases, we weighted the regional distribution across 8 regions by a factor that was determined by the regional distribution and growth trends identified in our App Economy research. Each of the separate branches: mobile, desktop, IoT and cloud were weighted independently and then combined. The survey gathered responses from developers across mobile platforms including Android, Amazon Fire OS, BlackBerry 10, Firefox OS, iOS, Java ME, Jolla Sailfish, Mobile Browser, Tizen, Windows Phone, Windows 8 and Ubuntu Phone. To minimise the sampling bias for platform distribution across our outreach channels, we weighted the responses to derive a representative platform distribution. We compared the distribution across a number of different developer outreach channels and identified statistically significant channels that exhibited the lowest variability from the platform medians across our whole sample base.

RESEARCH METHODOLOGY


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distilling market noise into market sense

Commerce of Things 2015

Technology

Transcript of Commerce of Things 2015