Google will look to gain an advantage over competitors in the daily deals market by providing an integrated experience combining couponing, location and payment but faces challenge in quickly building a compelling business.
According to Jayesh Easwaramony, ICT practice vice president at Frost & Sullivan Asia-Pacific, the benefit of Google Wallet, which was launched last Tuesday, is the "integrated experience" that combines couponing, location-specific advertising and payments compared with other daily deal competitors.
Security tips for Google Wallet1. Use prepaid account
Ovum's Drury advises users to use a prepaid card account for the Wallet service and keep only a small balance on it to minimizes users' finanical exposure to malicious apps.
Google Wallet's weakness lies in the Android Market as it is susceptible to being reverse engineered by third-party developers due to the marketplace's relative lack of publishing controls, he explained. This, he noted, is an "open invitation" for mobile phishing apps that can capture secure customer data.
"Understand the real price at which you are trading your data with Google in exchange for using the Wallet service for no direct fee. There's no such thing as a free lunch coupon," urged Drury.
According to Joseph Steinberg, CEO of Green Armor Solutions, the 4-digit PIN (personal identification number) authentication for Wallet transactions can be cracked by computers "in a matter of minutes".
To mitigate this risk, Steinberg urged users not to store the PIN on their handsets. "It may seem obvious, but there are people who would do it anyway," he said.
Macky Cruz, technical communications specialist at Trend Micro's TrendLabs, also advised users to use different PINs for locking their phones and authenticating purchases, adding that Google prevents the use of obvious PINs such as "1234" or "1111".
3. Secure the phone
Once your mobile phone is used as a device for financial transactions, the importance of securing the handset increases, Steinberg stated.
He advised users to secure their phones with security software, protect the phone with a strong password, and not open e-mail, SMS or MMS messages from unknown parties.
Users should also refrain from lending their phones out to others, who may compromise its security by accident or otherwise, the CEO added.
Adrian Drury, consumer IT lead analyst at Ovum, added that Offers, which is the Internet giant's daily deals platform, will give it the ability to offer cost per transaction models on keywords and display ads when it becomes integrated with the Wallet function. This integration, he noted, gives advertisers a clearly measurable return on marketing investment (ROMI) metric for their product inventory.
He also pointed out in his e-mail that by mapping transactions to consumers' clicking on promoted search items or mobile advertisements, thus enabling retailers or fast moving consumer good (FMCG) brands to dynamically price a product through vouchering, could potentially help Google fend off competitors such as Groupon, Facebook or PayPal.
"This [function] will give Google a commercial and technical advantage over services such as Groupon, which are reliant on large sales forces selling services to just one aspect of the customer's lifecycle," Drury said.
He added that for consumers with NFC-enabled Android handsets, the consumer interaction model is "neater" as there is a streamlined process of redeeming vouchers and printing them out or giving the merchant an e-mailed code.
The Ovum analyst's perspective was reiterated by a Google spokesperson. He said the company's goals are to organize shopping-relevant information and make it easily accessible to consumers as well as connect the right product or offer to the right person at the right time.
"All of these are done with the purpose of helping consumers easily find what they're looking for and make their purchase from the retailer of their choice," the spokesperson added.
As to how Google would compete with existing daily deals competitors, he said "it's great" there are other companies innovating in the payments space as consumers and merchants would have more choice, and the search giant believes choice is a "good thing".
That said, Drury believes Google Wallet will take time to become a "meaningful" option in the daily deals market.
This is because the number of people who can use the service at the moment are restricted to the small number of Nexus S users in the U.S. on the Sprint network who either have a Citibank MasterCard or have purchased a prepaid value card, he explained. There are only limited stores that have compatible NFC point-of-sale terminals to handle such payment transactions, too, he added.
The Ovum analyst also pointed out that the jury is out with regard to whether Google, and its campaign sales platform behind Wallet and Offers, can offer an alternative to the "human-to-human hard sell" by Groupon's "army of direct sales agents" that hunt for businesses to take part in daily deals.
Easwaramony added that Groupon continues to have the early-mover advantage in the still nascent daily deals market, so how Google Wallet will fare remains to be seen.
Drury went on to point out that Google would have to manage the ecosystem well, from major transaction processing and consumer finance service providers to mobile operators, which are the distribution channels for Android-based devices.
For instance, the Google Wallet and Offers products will go directly against operator partners, such as Telefonica's Moments daily deals service, he noted. "Operators will penalize Google and its NFC-equipped Android devices if they perceive a competitive risk," the analyst explained.
Eden Zoller, principal analyst at Ovum, had earlier highlighted in a press statement that another challenge for Google is how quickly it can build up a compelling commerce operation in the face of "very competent" rivals that are aiming to do exactly the same.
He also noted that the Internet giant will have to be very mindful of privacy issues.
"Google Wallet [linking] to location presents a goldmine of customer and transaction data that Google will inevitably want to exploit. But it must only do so in a way that respects privacy and guarantees security. If it fails to do this, it will lose consumer trust and credibility among commerce partners and, without this, its ambitions will come to nothing," warned Zoller.
Groupon declined to comment on Google's entry into the daily deals market.