Are Mobile Barcodes nearing tipping point?
At the recent Mobile World Congress, I visited the stands of many of the major new mobile barcode companies. Each company stand showcased the potential of barcodes -but the corporate identity and drag queen back stabbing of the players in the industry could hurt the future of the barcode industry.
The way forward is and has to be standardisation, but I fear there is a very long way to go.
This article was published during MWC in the Wireless Business Review
Mobile barcodes could and should be a major force for new apps and services
Whether you want to buy the latest TV from Uniden or call a K-cab taxi in the Iwate prefecture, mobile barcodes are part of everyday life for millions of Japanese. Perhaps even more surprisingly for most of the rest of the world, they have been since the late 1990’s. So why have mobile barcodes been staggeringly successful in Japan and made precious little impact elsewhere when could and should be a major force in m-commerce, mobile marketing and advertising, and more?
Mobile barcodes’ aim is to enable users to enter a request for information or supply information without recourse to the phone’s keypad. Users simply take a picture of a mobile barcode – printed in a newspaper or magazine or on a poster or soft drink can or other type of packaging – with their enabled camera phone and, in the simplest advertising applications, they will be taken to a web or WAP site for more information.
It’s also a way of entering a promotional competition; take a snap the barcode and your entry is logged. A third application might be request a voucher or coupon is sent to you, for instance, for discounted cinema tickets (which has been successful in the UK, run by Orange (www.orange.co.uk). This type of application makes life is more complicated because infrastructure has to be in place for third parties to handle the redemption process.
Advertising and marketing can go much, much further though, as demonstrated last December in Japan when the consumer electronics company Uniden employed people to walk around as “Unidenmen” in spacemen-like outfits that sported a life-size TV screen on their chests. They had barcodes printed on their backs that enabled customers to buy this latest TV model from a mobile showroom or request a map showing them where the nearest mobile showroom was.
The K-cab application enables the taxi company to see, instantly, exactly where the prospective passenger is, even if they aren’t too sure themselves, without them having to enter long and perhaps unfamiliar place names.
Consumers can also create their own barcode, put it on their Facebook (www.facebook.com) or other social networking page so that others have instant, mobile access to their profile. A mobile barcode on a business card means the recipient only has to click on it via their camera phone to enter all the pertinent information into their phone’s address book – just one of many possible internal uses of mobile barcodes by enterprises.
Part of the reason that mobile barcodes are a mainstream phenomenon and piecemeal deployments everywhere else is that the country’s dominant operator, NTT DoCoMo embraced QR (for quick response) mobile barcode technology from Desno-Wave (www.denso.co.jp/en). The operator has about 50m customers, more than half of the Japanese market, and with its support, QR codes could hardly fail to appeal to the world’s most sophisticated mobile application users.
There are few other markets where single operator has such market power. The most obvious exception is China, where China Mobile has about 350m subscribers, the largest operator in the world by that measurement. However, the relative scarcity of camera phones in the Chinese market has prevented the rise of barcode technology so far, which brings us to the second key factor – the technology itself.
There are just too many competing, proprietary technologies all striving to do the same thing, thereby causing great confusion and preventing the creation of a mass market. Shotcodes, semacodes, QR codes, data matrix et al have all been jostling for position. NeoMedia, owner of 30 mobile barcode patents, for a while tried to force the world outside Japan to accept its qode technology as the de facto standard, backed up by law suits, but ultimately had to acknowledge that its approach was doomed to failure and has now become poacher turned gamekeeper, preaching open standards and co-operation.
It has joined the Open Mobile Alliance, which means its intellectual property will be made available at a fair price for commercial use, and with its wholly owned, German subsidiary, Gavitec, the company set up the Mobile Codes Consortium (MC²) in January 2007. MC² has attracted some big hitters, including Publicis Groupe, Hewlett-Packard, Deutsche Telekom, KPN, Nokia, Qualcomm and Telefónica O2 Europe. By last December, its activities had prompted the GSM Association (GSMA) to take up cudgels in support of developing a single global standard whereby every mobile barcode reader can read every mobile barcode (although the main hurdle is that different technologies have developed and adopted different symbologies, that is different means of encoding information – similar to the problems that have bedevilled RFID).
It makes great sense for operators to work towards a single, common platform as so far the lack of one has proved one of the biggest hurdles to attracting big brand advertisers. Universal mobile barcodes could enable these advertisers to run national, international, regional or global mobile ad campaigns for the first time, rather than being restricted to partnerships with one operator on a country by country basis.
Not everyone is convinced. Despite its participation in MC² through its subsidiary O2, Telefónica has signed up with Scanbuy to use its proprietary solution, apparently seeing a closed platform as a competitive advantage. Scanbuy also has pilots underway with Vodafone and France’s SFR.
SFR is part of the Association Française du Multimedia Mobile (AFMM) in 2005, which comprises most of the French mobile operators. They are expected to confirm that they have chosen the data matrix standard early this year, which will be used across France, based on Scanbuy’s technology. It also looks like the legal wrangle between Scanbuy and NeoMedia will recommence, as the two were unable to reach agreement in the out-of-court recess they requested,
Other barriers remain. Most US (and some other) operators effectively block their customers from downloading anything they don’t sanction (and profit from directly) onto their phones. Even among those who agree that standardisation is the way forward, there are myriad vested interests, approaches and technologies that could slow proceedings down, allowing a de facto standard to emerge in the meantime, in some markets at least.
On the other hand, money talks and if the operators thought they stood a chance of collectively earning even 5%, say, of Procter and Gamble’s USD9bn annual advertising budget through a common approach to mobile barcodes, they might find the standards route much more appealing. Likewise if Google starts expressing an interest in deploying mobile barcodes – perhaps it will be among the applications suite for Android?
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Great write up.
What is your opinion on the following questions:
First Question:
I wonder what would happen if Neomedia were develop a proprietary 2D symbol of their own?
Would Telefónica, its subsidiary O2, and Vodafone rethink going with Neomedia’s Neoreader?
Second Question:
If the 2 readers, the Noereader and Scanlife, read the same types of codes, with the exception of the proprietary EZcode, and the Neoreader offers the ability to interact with on 1D barcodes, logos, trademarks, slogans, RFID, keywords, billboards, etc., why wouldn’t the mobile industry look at offering their customers the BEST mobile experience and seemless interaction with the physical world where ever they travel?
I hope all of the wireless companies you mentioned are reading this!
Good writing, seems that in all the hugesness of the 3GSM your interest in that old sexy barcode hasn’t faded. No point discussing the key role barcode scanners can play in mobile services and applications.
The Japanese example’s succes can be explained by its closed market. NTT specified phone manufactuerers to enable phones to read barcodes, set up a structure for retailers and media to connect barcodes to online content and knows Japanese consumers use it. Everywhere outside Japan the rules of the market are different. The rest of the world is a world where all should be open and standardised.
Talking about standardised barcodes is only one, the bigger obstacle is all those different phones the software should be ready for, then there should be one method to connect barcodes to online content/services and last but not least can we change human behaviour? The last point is the easyest, after typing url’s once and scanning the next time users are convinced.
For a long time users did not want to install software, could not set up their mobile internet settings, camera’s where too weak and last but not the least mobile internet was too expensive. All this is solvedin most countries.
The biggest challenge is to get the software ready to roll on all phones, who is going to pay this very costly work? Neomedia and Scanbuy thought about financing this comming up with their own switchboard or code standard. But the general idea is that the scanning software should be free but who is going to pay? Where goes the money? To the operators with the traffic and those who really understood the value of this technology and created great new content/services.
Making this work there should be a push and pull thing getting started. All barcode software companies should concentrate on getting the software ready for all phones, M2C should agree on 3 codes (QR, DM and Aztec) and a method to connect barcodes to content/services and the market should stop discussing patents and start creating magic. It can be simple but I see problems because a lot of investments in scanning software would be burned.
If this is not working I set my cards on Android with Googles barcode reader …
Cheers, Ron
Ron,
“All barcode software companies should concentrate on getting the software ready for all phones, M2C should agree on 3 codes (QR, DM and Aztec) and a method to connect barcodes to content/services and the market should stop discussing patents and start creating magic.”
I agree with part of this comment.
What about keywords? Is Google, whose main source of income is keyword based, going to let one click to content from keywords, logos, trademarks slip thru their fingers.
Who says it needs to be just about codes?
How many physical world objects do you walk past daily? Do you see a 2D code on them? What if I just wanted to say the keyword into the mobile browser to get information?
What if the mobile application has already been developed for that interaction and there is a patent protecting it?
Why not just buy it up, finish the discussions, and continue building a bigger and better platform around it?
Bena,
I enjoyed reading your write up. Thanks for taking the time to write it.
While the UK arm of Telefonica (O2) is a member of the Mobile Codes Consortium, Telefonica Spain (Moviles) is in tight with Scanbuy. I find this interesting and would like to know Telefonica’s strategy here.
Scanbuy uses a proprietary 2D barcode called EZcode. The “Visual Code” as it was originally named, and its recognition algorithm, was developed by Michael Rohs of ETH Zurich. Scanbuy is the exclusive worldwide licensee of the Visual Code technology.
It should be noted that Michael Rohs now works at Deutsche Telekom Laboratories. Deutsche Telekom is a member of the Mobile Codes Consortium.
From my understanding, Scanbuy uses NeoMedia’s patented indirect encoding method for the resolution of their EZcode.
Indirect encoding is the process of linking the target information to an index (364528) and putting that unique identifier into a 2D barcode. The code reader on the mobile phone reads the 2D code and sends the code data over the Internet to a central resolution server that will tell the mobile phone what action is associated with the index.
Thus the reason for NeoMedia’s patent infringement suite against Scanbuy.
Unfortunately I cannot respect a company that blatantly infringes on another company’s intellectual property as is the case with Scanbuy.
Scanbuy should simply license NeoMedia’s patents so both companies can go about their business and continue developing the mobile code ecosystem.
Scanbuy’s founder Oliver Attia was too stubborn and did not beleive in patents (Funny that he now owns some of his own) … I would have hoped Scanbuy’s new CEO Jonathan Bulkeley would have been different. Sadly, Jonathan hasn’t proven himself to be any different.
Best,
Sean
Bena:
Can you please not turn this post into another attack on Scanbuy and others co’s, by the virulent Neomedia pumpers and dumpers. Their stock is kaput, and they still do not give up on attacking every other company that is trying and succeeding in pushing this technology forward.
Take a look at any of their filings. Their stock is, and will be diluted to no end by Yorkville.
Let’s talk about standardization; not patents.
Hi,
I am not attacking Scanbuy or NeoMedia. I was not referring to them at all in this post. I was talking about new players and some Spanish independents I met at Mobile World Congress. I have interviews with them that I do plan on posting soon.
I am going to interview YorkVille as I don’t understand your comment about “stock being diluted” but I will find out more.
Swampthing - great questions.
1. If Neom goes proprietory - then what the hell hpapened to standardisation!
2. The “best mobile experience?”
Please try and name three mobile operators anywhere in the world that have focused on the mobile experience before the best service for “their ARPU”… It ain’t happening.
thanks Bena.
Former Neomedia Believer, Haven’t you contradicted yourself there? I am sorry to say but you are a sweet angel with horns.
O.K. I see your point. Standards for current 2D codes. So where does that leave a proprietary code being used in the industry.
Why would consumers/web users require another reader thus creating more friction in the 2D eco system?
The misconception, keeps getting spread that a standards bodies function is to limit the number of codes or the number of readers, or even the types of codes or readers.
This is false. If this were the case, a standards body would be creating a monopoly, which in the US is not allowed.
A standards body recommends a set of standards, which everyone adheres to. Whether they are using a proprietary code or a code thats already been approved as a STANDARD. Currently, three 2D bar codes are approved as standard codes, and a new standards body won’t do a thing to change that. Those codes will remain standard codes no matter what any other standards body comes up with. The same will be true for the multiple readers that will become available.
As to standards for 2D bar code reading, there are already many different varieties of bar code readers available commercially for POS applications, which read every standard bar code on the markets, such as UPC, QR, Data Matrix, Aztec. These POS readers have been available for years now, and adopting standards has not been an issue with these vendors.
The only difference today, is how to incorporate these readers into camera phones, as opposed to POS terminals at the retail chains etc.
As this technology advances, there will be multiple UNIVERSAL readers available, as well as readers for proprietary solutions. By the time 2D codes become mainstream, the smart hone will have all the memory one needs to handle the software size, without the software being too bulky for the small foot print allowed on todays devices. In just a year or so, your cell phone will be your traveling computer, replacing lap tops in many instances.
The standards bodies goal is to come up with a set of universal rules, which all the developers will follow, so that the many devices, and the many codes, and the many readers, will all work together to achieve the same end user results. Their objective is not to limit the number of codes, devices, or readers.
The winners and losers will be determined by the consumer, as is the case with any software out there to date. Not the standards body.
Bena, the comment about dilution is a very valid one. Neomedia is authorized to issue 5 billion shares of common stock, and to date they are above that limit. When considering this you have to look at their financial statements, and all the convertible instruments listed in them. YA right now is in control of over 3 billion shares, should they elect to convert their debentures, preferred stock, and their warrants to purchase. As long as those instruments are still out there, NEOM must reserve those shares to allow for conversion if YA decides to exercise their right. On top of that there are over 1 billion shares already issued to common shareholders etc. Then there are the employee stock options etc. When you add up the number of committed shares at the current pps, NEOM is over the 5 billion total, and has no stock left to issue for new funding etc. Thats the massive dilution the poster was referring to. Neom went from a couple hundred million shares spoken for, to 5 billion shares spoken for in about 2 years time.
[Quote Brewskih] As to standards for 2D bar code reading, there are already many different varieties of bar code readers available commercially for POS applications, which read every standard bar code on the markets, such as UPC, QR, Data Matrix, Aztec. These POS readers have been available for years now, and adopting standards has not been an issue with these vendors. [end quote]
In retail there are only a few percent of the barcode readers 2D barcode enabled. High troughput check out scanners are laser based and cheap handhelds CCD technology. See VDC reports for exact percentages.
Propriatary 2D codes now are used because those who offer these codes offer the complete infrastructure for marketeers and thus concentrate not only on technology but also on the complete proposition to customers.
HMM. OK. I have an interviewed scheduled with to find out more about the dillution. I am not an expert on that - but the focus should be the future goal?
Mobile digit are big in Germany.
Bena
I really have to wonder in whose interest 2D barcode standards are?
The carriers: If they want to follow the toll charge pay per scan model (based on the very successful pay per click web advertising model), they will need to control the toll booth. The only other way they can monetize 2D codes is by increasing data usage, and this is a stretch.
The handset makers: Half of me asks, do they really care? The other half says they should be able to drive sales of smart phones via increases mobile web usage.
Mobile Application Developers: Looking at current and past standardization efforts (OOXML, CORBA, J2ME, Passport, etc) I can’t see how well standards really drive adoption.
I’m not saying standards will go away, just that they will likely lead to the 2D mobile barcode nirvana so many here are predicting. In my mind, at least in the US market, the carriers hold the keys.
I just can’t see the carriers, who control which decoders get on the handsets, not using 2D barcode scanning to generate a new revenue stream.
Knowledge is power, cash is king?
Hi Bena,
Good luck with the interview. Yes future goals should be a focus. However, from a new product viewpoint, financial stability is equally important to focus on. Especially in a new and evolving technology, which may ne a minimum of a year away from producing real revenues that can be used to keep a company operating, while the technology is getting accepted by the masses.
If I were a multi-billion dollar company, would I expose my company to a product from a company which may not be around in a year when this technology takes off mainstream? Would I take the risk of adopting the one technology solution, of a company that is in dire financial crisis, or would I adopt the technology of the competitor, who is more financially stable, and will more then likely still be around when the technology becomes mainstream, to offer their support with my advertising campaigns and their solution?
That is why the dilution mentioned here is critical. Neomedia has stated in their public filings, they have enough cash to go until around the end of April I believe. They have no more stock to issue to raise funds, because of the 5 billion shares of dilution they have already allocated. They have tried and have been unsuccessful in obtaining outside funding other then YA. YA typically requires they pay a large fee and issue some type of stock warrants as a condition of future funding(just look at the last funding by YA, and I believe the interest alone was a ridicules 13 percent).
So the question that you should be asking in that interview is, where will the funding come from that will be needed to sustain the companies operations going forward to get through that next year that it will more then likely take, for the technology to start to become mainstream in all markets?
With no funds, and a 4.6 million dollar payment still due 12Snap from the acquisition fiasco, how do you go forward to reach those future goals, especially in a new technology, which still isn’t accepted by the mass markets yet? How do you convince a prospective client to adopt your solution and not your competitors?
Thats why the dilution in this particular case is so critical and has to be considered. Normally this isn’t the case and the company still has stock it can sell to raise capital. This situation currently is quite different with NEOM.
As an investor, those concerns are magnified ten times, and are even more relevent. And NEOM needs an investor to infuse capital into the company badly. Someone other then YA preferably.
BTW….for the record NEOM was not the one started MC2. It was mainly HP Labs who started it with their partner Gavitec, whom they had a partnership with before NEOM acquired Gavitec. Neom by default was brought into the fold, since they had recently acquired Gavitec. Gavitec and HP Labs had been working together for a long time before NEOM bought Gavitec. HP Labs was using Gavitecs lavasphere technology in their GLASS reader for aover a couple years now. Even those posting here on your blog supporting NEOM have in other forums stated, if not for Gavitec NEOM would not be in the MC2. Of course thats opinions, but very valid ones considering all the facts.
Hi Bena, When have Scott Shaffer and his associate have discussed other Physcial World Connection (PWC) companies’ financial results? Never.
Please tell us where is the money? Outside of Asia (Japan and Korea), most PWC companies have wasted their time and money. However, they still believe 2d barcodes will soon rule the earth.
If I wanted to talk about stock market/finacial results, I would go to “The Motley Fool” forums.
Hi dlethe01.
I am sorry, I don’t want you to stop reading us -but I am just responding to all feedback. I am more interested in how to make barcodes, search and advertising rule - as well.
I fear its because even though I am trying to shake the fact I have been analyst for 13 years - it sometimes comes out on GoMo.
bena
Hi Bena,
The Pondering Primate, has in fact included Neomedias financials in the comments section of his blog, and the poster above is well aware of this because he has commented on that very issue in another stock message forum. One of the reasons he started including links to Neoms financials in his responses, was because of the same individuals, viral attacks on other companies in the space through his comments section of various developments he blogged in. The viability of a company financially, is very relevant to the discussions, if one is promoting that company in their blog or even discussing the probability of their success or failure, as you have done after the MWC.
And several of your posters here do not have the same objectives as yourself, in seeing bar codes rule because, anytime some in this space makes strides or accomplishments, these same posters are quick to attack them both in the message forums, and the blogs including your own blog here. One just needs to go back to the comments about William Buckeley from Scanbuy to illustrate that fact.
As for making bar codes rule. That will come in time, because in my opinion bar codes aren’t going away and are not just a fad. Any technology that leads to better access to information will eventually be a hit. The problem is, this is a new technology and there are still many issues to be resolved, before the mainstream buys into this new technology. And this is very often the case with new technologies. The average mobile user outside Asia, doesn’t know this technology exists, and until massive, very public campaigns are launched to make them aware, that will be the case, in my opinion. Technical blogs or company web sites, will have very little impact on that, because the average consumer isnt reading these blogs. But you start putting a 2D bar code on a show like Americas got talent, and allow the user to click it to vote their choice, and watch how quick the user starts getting informed and using the technology. Thats just one example, but the same applies in the market place. Put signs with a bar code over products, with a message to click the code for a discount, and watch how quick the consumer learns about the technology and how to get the software for their device.
Among the issues involved are
1. Better and lower cost data rate plans by the carriers
2. Successful marketing campaigns that involve the user voluntarily, in order to get them to want to use the technology for something they see a benefit from.(just look how testing your vote to popular reality shows, really increased the number of users texting on their mobile).
3. More openness from the carriers, on what they allow on their platforms, as far as third party applications.
4. Public awareness or the 2D bar codes and the benefits to the user.(As you pointed out, even some big names in the industry, still think they scan the codes instead of taking picture of the codes). In my opinion this is the largest step that can be taken, and the more creative the campaigns, the higher the success rate will be.
These are just a few of the issues that will speed up mass adoption.
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