Near Field Communications – Part (2)

In my first post about NFC, one of the readers posted a comment about the advent of smart posters which are essentially RFID tagged posters that will enable end-users to interact with the poster by merely tapping their cell phones over the smart tags. The tag on the smart poster will be easily identifiable by the NFC Forum symbol (see figure). One example of a usage model is that of a smart poster that announces a concert. To get tickets to the concert, all the user needs to do is to tap the tag and the mobile browser will be automatically directed to the concert landing page. Taking this a step further, it is conceivable that NFC based apps will allow for user details to auto-populate fields (name, address, credit card info etc) in ticketing forms (for this concert, for eg) – the user clicks the purchase button and Viola! The user has the tickets!

NFC Forum Logo - Tap this tag!

While this interaction will take the phrase “interactive advertising” to new heights, it is worthy of mention that in all likelihood the RFID tag(s) on the poster will be a passive tag. Meaning that the tag on the poster will not be powered. That would mean, that the cell phone will need to contain a RFID reader which obviously will be powered by the cell phone battery.

This will increase the BOM and like every new technology, the RFID reader feature will start out a the top of the mobile phone product food chain as manufacturers will demand a premium. It is one thing to have a passive RFID tag in the cell phone, but it is an entirely different ball game to also have an active RFID reader on the cell phone. In such situations, it is conceivable that the cell phone RFID tag could be a hybrid – meaning both active and/or passive. As a consequence, the smart poster adoption will take root over time as the NFC ecosystem matures and as end-user demand/interactions increase(s).

If you think about it, the smart poster’s arrival into the marketplace will create some interesting monetization opportunities. Cost per Impression (CPIm) could now also very well become Cost per Interaction (CPIn). Each time there is interaction with the smart poster, intermediaries/affiliates could make some money. And if these links are used for purchases, then there’s some more money for the affiliates. This almost becomes like the web, but in a 3-dimensional world. So, a strategically placed poster in a crowded mall could drive a lot of interactions, netting the mall operator some decent change. Yet another channel could be magazines, where again there’s additional revenue opportunity for publishing houses for these interactions.

Nokia's NFC Campaign Logo

In terms of additional monetization opportunities, RFID vendors are poised to have a windfall as NFC takes root. Silicon vendors who design and develop RFID readers will get some real estate on mobile phones and that’s an opportunity up for grabs. Companies such as Impinj, TI, Atmel, Renesas, Broadcom etc. And of course, NFC based mobile apps will be yet another avenue for monetization. And then there are those firms who have IP that they will license in various segments such as mobile-banking, m-Commerce etc.

I personally know of a start up called Tyfone located in Portland, OR (where I stay) that has spent a number of years developing IP in the mobile-banking space. Jack Dorsey, one of the founders for Twitter co-founded Square, a startup that facilitates secure mobile payments via an external dongle. Visa recently made a significant strategic investment in Square. Apple recently announced the availability of the Square card-reader in the Apple store. Talking about monetization opportunities – Square takes a flat fee for each transaction (2.75%) and as of today they process around $1M worth of transactions every day. So, do the math. And Square helps monetize others – those who provide services on the go – garderners, taxi drivers, plumbers, private chefs, tutors, contractors, electricians etc. And this is just one vendor! There are other’s coming along too.

If I were to place some bets on NFC adoption, I think the current paradigms will change in advertising, mobile payments/banking and travel will be impacted and may change in the next few years.

In my next post, I’ll try and give a market purview of the NFC space and talk about some risks. In the meantime, what are you thinking about NFC?

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6 Responses to Near Field Communications – Part (2)

  1. Pingback: Near Field Communications – Part (3) | Pixel Ballads

  2. Pingback: NFC Update – 1 | Pixel Ballads

  3. Pingback: What has this Angry Bird got to do with NFC and GPS?.. | Pixel Ballads

  4. Pingback: NFC Update – 2 | Pixel Ballads

  5. Pingback: A note on NFC security | Pixel Ballads

  6. Pingback: Mobile Technology and the “Unbanked” (M-Pesa) – Part 3 | Pixel Ballads

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