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Will m-commerce live up to the hype?

by rebecca diercks
March/April 2001

A recent survey by Cahners In-Stat Group, which has the same parent as Wireless Internet Magazine, contains a mixed bag of news on wireless Internet usage and mobile commerce in general. On one hand, the survey reveals great promise for m-commerce in both business and consumer markets. But the study also indicates that providers will have to refine their services to maximize the technology’s potential.

The survey panel of nearly 200 wireless Internet users, mostly based in the United States and representing a wide range of company sizes, industries and technical expertise, indicated that 45 percent of respondents had used their wireless Internet service to purchase products or make transactions at least once.

Of those respondents who made at least one m-commerce transaction, 60 percent did so for both business and personal reasons, 9 percent for business purposes only and 31 percent for personal reasons only. If the market evolves as these number suggest, m-commerce users will include significant numbers of both consumers and business people.

Despite these hopeful signs, Cahners In-Stat Group does not expect m-commerce to be a strong market until at least 2003. That is because the number of wireless Web users still is relatively small and, secondly, providers still are trying to figure out how to best present and price services. For the next few years, the market will be largely comprised of early technology adopters who tend to acquire the latest gadgets.

The market may grow faster, though, if carriers and vendors can improve the customer’s experience. The good news is that so far, the quality of the m-commerce experience seems to be at least satisfactory to most users. Less than 10 percent of respondents were dissatisfied with their m-commerce experience, while 25 percent were extremely satisfied.

There is much room for improvement, however. The biggest hurdle for providers may be convincing potential customers to give m-commerce a try. Sixty-one percent of panelists that had not yet tried m-commerce said they didn’t have a need to use it. In-Stat believes that “push” applications, which tie potential mobile transactions to other wireless Web services, will be a key to clearing that barrier.

For example, a user may subscribe to a sports scores service. If the subscriber is given a short survey while he signs up and indicates that he is a Chicago Bulls fan, the provider could use that information to let the subscriber know tickets are available for an upcoming Bulls game the next time he checks the NBA scoreboard. The user could be sent a message asking: “Would you like to purchase tickets? Press ‘1’ for ‘yes,’ and ‘2’ for ‘no.’” By pressing the first option the user could initiate a transaction.

Survey findings also indicate that wireless Internet services should be simpler to use. About 37 percent of respondents cited difficulty in making a transaction as the primary reason they haven’t yet used m-commerce. Despite the widely held industry notion that security is a primary barrier, only 19 percent cited security concerns as a reason they had not made a transaction.

The survey suggests there will be a market for both low and high-priced products. The top five products and services purchased over a mobile network were books (45 percent); business-related tickets such as airline tickets (39 percent); music (37 percent); entertainment tickets to events such as the movies or sporting events (35 percent); and stocks and financial transactions (34 percent).

Although touted as the top application for m-commerce, investment and other financial transactions ranked fifth of seven categories. In-Stat believes that although top-tier investment firms such as Fidelity Investments and Charles Schwab have invested heavily in mobile solutions, most customers use those services to research securities and to check stock prices rather than to make transactions. On the bright side for financial services firms, the small number of customers making m-commerce transactions are heavy traders. As of February 2001, Schwab had just over 10,000 active customers using its wireless investment service, PocketBroker, but those customers were making 80,000 transactions per day.

Although m-commerce still is nascent, the survey results are encouraging. In-Stat believes that carriers’ efforts to promote m-commerce should focus less on increasing the speeds of wireless data networks and more on improving the user-friendliness of devices and on developing compelling applications. As the survey and the success of Japan’s i-mode service shows, data speeds are not necessarily constraints to conducting mobile transactions as long as applications and services find traction with the masses.

Rebecca Diercks is director of wireless research at Cahners In-Stat Group.

Interested in joining the Technology Adoption Panel? To learn more about it, please go to www.instat.com/panels.