Mobile Payment Industry News

Saturday, October 25, 2008

"The Limited" Late to the Party

The Columbus Dispatch : Will online shopping click?

Will online shopping click? Big Lots, DSW, Limited hit the Web late in the game

By Marla Matzer Rose
THE COLUMBUS DISPATCH

Three Columbus-based retailers seem to have realized that this "Internet Thing is More Than a Fad"

DSW, Big Lots and the company that's keeping "The Limited" name alive have all begun selling online within the past four months. The moves come several years after a majority of their chain-store peers starting selling in the virtual world.

"Obviously, we're very late to the party," said Kathleen Schneider, area vice president of e-commerce for The Limited.

Investment firm Sun Capital Partners bought a majority stake in the retailer last year, though Limited Brands still owns 25 percent of the chain founded in Columbus nearly 40 years ago.

The Limited started selling on the Internet in September. Schneider said getting online was "one of the first major business objectives" of Sun Capital after the acquisition.

Shoe retailer DSW, which opened its first store in 1991, launched its e-commerce site in June. At the time, the company said it had "deliberately waited" to do so.

"The Web is littered with hastily designed and executed Web sites that yield mediocre customer experiences," said Jon Ricker, executive vice president of strategic business development for DSW. "We have always been extremely proud of the in-store experience we offer our customers and wanted to wait to launch a site until we could replicate that experience online."

Among the bells and whistles on DSW's site are high-definition, 360-degree views of the shoes, Ricker said.

In the early days of e-commerce, shoppers were hesitant to buy apparel online because they couldn't feel the goods. That resistance has virtually disappeared as technology has improved and shoppers have become more comfortable with online purchases in general, said Scott Silverman, executive director of the National Retail Federation's Shop.org digital-retailing division.

"For at least the last couple of years, apparel has been the biggest online seller after travel in terms of dollars," Silverman said. "Most of the national retail chains are selling online. It's hard to think of anyone that's not."

Both The Limited and DSW worked with local Internet marketing firm Resource Interactive to develop their sites. Resource Interactive has worked with international brands such as Coca-Cola and Wal-Mart on a variety of projects.

Silverman said online sales are likely to take less of a hit in an economic downturn than sales at traditional venues such as shopping malls.

"Online shopping offers a way to comparison shop and save money," Silverman said. "It also saves time and gas money, especially with so many merchants offering free or discounted shipping. Plus, these online stores don't see a downturn in foot traffic the way mall stores do when times get tough."

Still, connecting online stores with brick-and-mortar stores is a key component to success for many retailers. The Limited, for example, is promoting its e-commerce site in its stores, and it sees the Web site as a tool that women can use to "pre-shop" before going to a mall store, Schneider said. She added that they'll be testing an in-store Internet kiosk in the Polaris Fashion Place location beginning next month.

Discounter Big Lots has been outperforming retailers of almost every stripe with its off-price and closeout deals. This week, the retailer rolled out an e-commerce site for the first time, with a "Deal of the Day" feature. Each day, BigLots.com features a single brand-name item for sale at a discounted price.

"We're doing this as a test," said Tim Johnson, chief of investor relations and communications for Big Lots. "We've been looking at it for a while as a way to sell merchandise that may not be a good fit for our stores."

The first day's item -- an LCD high-definition TV from Sony or Samsung, priced at about $1,200 -- seemed to generate a lukewarm response from shoppers yesterday, judging by the comments on Big Lots' Web site.

"What's up with Big Lots?" questioned a poster going by the screen name Gina. "Have they watched the news? We are in a recession here. Few people are buying high ticket items... Disappointing choice for the first deal of the day."

"I was excited to see what their 'Big Deal' of the day was," said a poster with the screen name Sandi. "I was hoping for some amazing deal to kick off my Xmas shopping. Are they joking? ...What a letdown."

Several people leaving comments on the site also said they'd found the same TVs for hundreds of dollars less elsewhere.

Johnson said Big Lots has had success with big-ticket items in the past, and emphasized that the feature was in its first day of operation.

"An $899 Samsung flat-panel TV sold out in minutes at Christmas in 2006," Johnson said. "We've consistently heard from our customers that they want better quality and better brands. Maybe online is different; that's why we're testing."

Friday, October 24, 2008

55% of UK Consumers Have Made an Online Purchase

UK E-Commerce Update - eMarketer

One-half of UK Internet users ages 16 and older surveyed by the Institute of Practitioners in Advertising (IPA) said they went online to buy goods or services in 2007.

By 2008, an even greater proportion (55%) of UK adults had bought something on the Web, said the Office for National Statistics (ONS), and 81% of those had made their purchases during the previous three months. For both men and women, rates of recent purchase had risen since 2006.

Timeframe of Last Online Purchase According to UK Adult* Online Buyers, by Gender, 2008 (% of respondents in each group)

BT and Ipsos MORI, in their “21st Century Life Index Report,” found that the percentage of respondents saying they “regularly” shop online had risen from 2% in 1998 to 41% 10 years later. Over one-half (56%) said they had bought something on the Web in the previous three months, and 26% had bought or sold at an auction site such as eBay during that period.

Although the number of buyers and the range of goods bought online were both up, the ONS found little evidence that the average spend per buyer had leapt ahead. Across the board, respondents seemed to be spending the same amounts online in 2008 as in 2006 and 2007.

Is Verified by Visa also Verified by Hackers?

Editor's Note: The more I learn about securing a transaction on the web, the more I realize how unsafe many transactions actually are. Here's an interesting article in the Register regarding Visa's supposedly more program designed to fool cardholders into thinking their transactions are more secure. They call it "Verified by Visa" but first it has to verified by consumers, which means it can be then verified by Hackers.

"VbyV login credentials make it easier for crooks to make purchases online while simultaneously making it harder for consumers to deny responsibility for a fraudulent transaction".

Since card information is can be bought online for as low as $2.50, "Stolen Card Info Plunges to $2.50 in Black Market" and obtaining a DOB is so easy a caveman could do it, it's looking like VbV is more of a marketing ploy than of any real value when it comes to protecting the security of an online transaction. What I found even more interesting was Visa's declination to comment about the story which the Register tells us at the end of this article:

VbyV password reset is childishly simple • The Register

Both VbyV and SecureCode are based on 3DSecure, a name that hints at the introduction of some kind of three-factor authentication scheme. But unlike robust authentication techniques, hackers don't have a hardware token generating one-time passwords to worry about - it's just more of the same.

And since card details + CVV number is no longer considered as secure enough then it's hard to see how card details + CVV number + VbyV login is any more robust.

Much was made of how easy it was for a hacker to reset Sarah Palin's webmail account password and gain illicit access to emails, but resetting passwords for Verified by Visa - which supposedly makes online transactions more secure is arguably even easier. To reset Palin's email account a hacker needed to know the Republican VP candidate's birth date, her zip code and the answer to a secret question on where she met her husband. Resetting a Verified by Visa password, by contrast, requires only card details (got $2.50?) and a date of birth.

Register commenter Anthony explains. Barclays Verified by Visa (VbV) allows anyone who has the credit card in their hands to set a new password for VbV with just the card details and the card owner's date of birth. Since the latter is trivial to discover for most people, this adds almost no additional security to the process.

Register reader Jusme reports the same issue. Verified by Visa is one of the reasons I no longer use Barclaycard. Pretty much every time I had to use it the password was not recognised and I had to "reset it", which just meant entering my DOB and a new password, hardly very secure.

Online shoppers who buy goods and service with participating retailers are asked to submit a VbyV or SecureCode password to authorise transactions. These additional checks are typically submitted via a website affiliated to a card-issuing bank but with no obvious connection to a user's bank.

Punters aren't informed up front that a merchant has signed up to Verified by Visa. Sites used to authenticate a VbyV or SecureCode password routinely deliver a dialogue box using a pop-up window or inline frame, making it difficult to detect whether or not a site is genuine.

The appearance of phishing attacks hunting for Verified by Visa passwords are among the reasons some punters are wary of the technology. Once obtained by fraudsters, either by direct phishing attack or through other more subtle forms of social engineering trickery,

An anonymous commenter to our original stories agrees:

Verified by Visa and Mastercard SecureCode are there purely to protect the banks, not the card holder. They offer zero additional protection to the consumer, but allow the bank to claim that transactions using purloined credit card credentials were really made by the card holder. It is as simple as that.

The issue has been noted, and commented on in the blogosphere as far back as June, but has received little attention in the mainstream media, despite the obvious security implications.

Visa and MasterCard ought to be able to defend the password reseting regime they have established, but neither organisation responded to our request for comment at the time of going to press.®

400 Million Mobile Ticketing Users by 2013?

Juniper forecasts over 400 million mobile ticketing users by 2013

Hampshire, UK, Oct. 21, 2008 -- New research has forecast that over 400 million mobile subscribers worldwide will use their mobile phones for ticketing by 2013. However, the study concluded that trials and pilots are not being implemented into full mobile ticketing services as quickly as expected for several reasons including bar code reading issues, lack of reader infrastructure and availability of NFC (Near Field Communications) handsets.

The Juniper Research report found that the leading sector will be transport, followed by entertainment and then sporting events. The Far East and China region is leading the market, driven by adoption in Japan particularly amongst rail travellers. In addition airlines are beginning to offer mobile ticket purchasing. Outside the transport segment, the report identified a number of ground-breaking trials and services, such as by cinema chains in India which buys 37% of all movie tickets sold worldwide. In addition a number of football and baseball teams are beginning to offer mobile options for ticket purchase and delivery; however, many venues still require a printed ticket to gain entry.

Juniper report author Howard Wilcox pointed out: “Mobile ticketing offers exciting new opportunities for ticket issuers to achieve increased sales including targeted last-minute sales campaigns. For example, tickets for the sporting event or movie happening ‘tomorrow’ or ‘tonight’ could be marketed directly to known fans.”

However, Wilcox warned that whilst NFC mobile user trial results such as O2 in London and BART in San Francisco have been encouraging, market traction will be determined by the availability of NFC phones and the speed of installation of NFC readers.

Juniper Research determines the current status and prospects of mobile ticketing with analysis and interviews with some of the leading organisations in the growing mobile ticketing market.

Key findings from the report include:
Total gross mobile ticketing transaction value will reach $92 billion by 2013.
The Far East & China region, together with Western Europe and North America will represent in excess of 80% of this global gross transaction value by 2013.
Mobile ticketing must “make life easier” for users. In this respect, NFC, with its convenience, is a crucial development.
NFC will reach its tipping point over the 2011 to 2013 period.

White papers and further details of the study 'Mobile Ticketing: Transport, Sport, Entertainment & Events 2008-2013' can be freely downloaded from http://www.juniperresearch.com/ . Alternatively please contact John Levett at john.levett@juniperresearch.com, telephone +44(0)1256 830002.

Juniper Research provides research and analytical services to the global hi-tech communications sector, providing consultancy, analyst reports and industry commentary.

Source: Company press release.

For more news and information about opportunities in the prepaid sphere, visit www.sellingprepaid.com

Online Banking Holdups

The Holdup at Online Banks - WSJ.com

At a time of uncertainty in nearly every market, I'm a big fan of online savings accounts, many of which are paying 3% to 4% interest right now. But they have a frustrating quirk: Transferring money between a savings account at one bank and a checking account at another easily takes two days -- and sometimes as many as four.

This delay has become more apparent and more irritating during the continuing financial crisis, as consumers seek two basics: safety and yield. (Yields on these savings accounts have tended to be higher than those on money-market accounts.)
[ING Direct] PA Photos/Landov

Online accounts, like all bank accounts, are protected by the Federal Deposit Insurance Corp. up to $250,000 per account holder. Offerings from HSBC Holdings PLC's HSBC Direct, Emigrant Bank's EmigrantDirect and First National of Nebraska Inc.'s FNBO Direct typically have low minimum-balance requirements. They can be good places for holding your cash reserves or earning interest on money set aside for tax payments or tuition, especially since interest-bearing checking accounts and traditional bank savings accounts typically pay well below 1% interest.

But in a remarkably interconnected, instantaneous world, where a debit-card purchase shows up in our bank accounts right away, it's equally remarkable that online transfers can be so slow.

Here's the hitch: Funds transferred between two different banks or a bank and a brokerage firm aren't really sent "online" in the way we have come to expect. Instead, these large transfers move in steps. Banks have slowed down the process further to reduce the chance of fraud, even though such fraud is fairly rare. (Years ago, Congress forced banks to speed up the clearing of checks and the availability of deposits, but it hasn't addressed electronic payments.)

You may have seen this when you tried to move money to or from a brokerage account. I ran into it most recently when I went to my ING Direct savings account first thing on a Monday morning to transfer money for a new car to my Bank of America checking account. While it showed up as "pending" on Wednesday, it wasn't mine to spend until Thursday.

What happens during that time? ING sends transactions in batches during the day to an automated clearinghouse, which sorts them and moves them to the receiving bank in a matter of two to four hours, according to Arkadi Kuhlmann, chief executive officer of ING Direct USA, a unit of ING Groep NV, and Elliott C. McEntee, chief executive of Nacha, the Electronic Payments Association, a not-for-profit group that oversees the automated clearinghouses.

In many cases, the receiving bank gets the transfer the same day. Under rules established by Nacha, money that moves on Monday should be available by the end of Tuesday. If the transfer slips to early Tuesday morning, the money should be available first thing Wednesday morning.
[chart]

But the money isn't always available that quickly. Bank of America Corp. says such transfers typically take two to three days. EmigrantDirect says on its Web site that transfers take two to four days, while HSBC Direct says customers should expect transfers to take up to three days. The industry calls this a "three-day good funds model," says David Goeden, an HSBC executive vice president in personal financial services. That is, the bank wants to make sure our funds are good before it lets us have them.

The slowdown for deposits is even worse. I sign in to ING Direct to transfer funds for free to and from my Bank of America checking account. That's because Bank of America charges me $3 to transfer to another bank, which it says is typical in the industry. Because ING doesn't know if the transfer is good until the money is there, it holds deposits for five business days -- a whole week in civilian time -- before making them available, though they will start to earn interest sooner.

The banks say they want to avoid fraud, such as transfers from bad accounts, or when someone else gets hold of your online sign-on name and password and tries to move your money somewhere else. According to numbers compiled by the American Bankers Association, about $969 million was lost to fraud in 2006, the most recent year available, out of about $41.7 trillion in checking-related transactions, a number kept very low in part because of aggressive risk-management practices. But even when attempted fraud is factored in, more than 99.9% of checking transactions are good.

Here's what you can do if you want to transfer money between institutions:

Plan ahead and send transfers early in the day to have a better chance of a faster transaction.
Ironically, you can move your money faster with an old-fashioned paper check. See if your money-market account offers check-writing privileges, or open a small checking account at the same bank as your online account. Transfers within the same bank usually happen the same day.
If the transactions take longer than two business days, complain to the bank where the transfer originated. Nacha doesn't regulate how long a bank can hold onto a deposit "pulled" from another bank to be sure the funds are there. But it does have rules, and can assess fines, if funds "pushed" from another bank aren't credited quickly.
Hang on. Europe already has a much faster system, and systems to speed up the process here are under development, though they won't be ready for at least a couple of years.

Thursday, October 23, 2008

More Mobile Use for Internet Access but NOT Online Banking

Finextra: Mobile Internet users shy away from banking - IBM

Mobile Internet users shy away from banking - IBM
Despite growing interest among consumers in accessing the Internet through their mobile phone, most people still prefer to use a PC when it comes to banking, according to a survey commissioned by IBM.

A poll of 600 people in the US, UK and China by NetReflector found that over 50% would substitute their Internet usage on a PC for a mobile device.

Respondents expect to use the Internet on their handsets for a raft of purposes, including obtaining maps and directions, instant messaging, social networking, e-mailing and reading the news.

But consumers are less convinced about using their phone for banking and trading stocks, with the majority preferring to carry out these activities on a PC.

IBM says the availability of IP wireless broadband and more affordable devices will inevitably change the way companies like banks operate and relate to their customers, but suggests that the opportunities for engagement are greater in emerging markets where the phone is leapfrogging the PC for Internet access.

Although people in the US still prefer to bank through a PC, the use of mobile phones is gaining acceptance. A poll earlier this year for Fiserv found three quarters of US customers would now consider using mobile banking services if offered, up from 49% in 2006.

Meanwhile the push to encourage m-banking take-up in the developing world was highlighted in August when California-based Obopay teamed with microfinance pioneer Grameen to launch an initiative that aims to use the technology to deliver banking services to a billion of the world's poorest people by 2018.

Fortune - MasterCard vs. Visa

MasterCard takes on Visa - Oct. 23, 2008

MasterCard (MA) is at the center of it as well. Concern about credit card debt is front-page news. The company's well-being is closely tied to consumer spending and to the fate of its thousands of business partners: the banks.

"As the economy and our customers suffer, we're going to suffer," says Robert Selander, CEO of MasterCard since 1997. "Our customers' appetites are going to be very reduced next year because of the new challenges they're facing."

MasterCard, which started in 1966 as a bank-owned entity to promote cards and transmit payments, has been fending for itself since 2006, when it went public. Last year it generated revenue of $4.1 billion, up 24% from 2006, putting it close to entering the Fortune 500 for the first time (it ranked No. 548 last year on the Fortune 1,000). The company has gained a reputation as a smart competitor, wielding new technology (key fobs as credit cards), memorable advertising (its "priceless" campaign), and global reach (three billion cardholders and offices in 40 countries).

At the same time, the company is being tested by enormous challenges, including the historic worldwide financial crisis, waves of litigation over the fees it charges, and relentless competition from its larger rival, Visa (V). (That company, which went public this year, already has the revenues to qualify it for next year's Fortune 500.) What makes Selander upbeat in the midst of crisis, however, is talking about potential business he doesn't have yet from people still using paper money for tens of trillions of dollars' worth of transactions.

"One of the great opportunities, for us and our name-brand competitors, is to grow the pie." Or in credit card industry talk, to "plasticize" the world.

In fact, MasterCard is more like an IT company with great TV commercials. It does not lend money to consumers (its customers, the banks, do that) or set rates for their credit cards, but instead collects fees from banks to electronically zip from banks to merchants the billions of tiny loans and withdrawals we all make every day. The more swipes we make - regardless of whether we can afford that new plasma TV or whether banks will have to write down the loans to us - the more money MasterCard makes.

The company's journey to independence began in 1998, when the government filed an antitrust suit against both MasterCard and Visa, alleging that their ownership by a network of banks effectively stifled competition between the two of them - they accounted for 75% of all credit card purchases - and kept rivals like American Express from doing business with the banks.

Visa and MasterCard eventually lost the suit, bringing on more legal action. MasterCard recently settled a suit with American Express for $1.8 billion for damages stemming from the original antitrust case. Discover's similar suit against MasterCard is scheduled to go to trial in late October.

When Selander took MasterCard public, partly to change the perception of collusion driving these lawsuits, the company raised nearly $2.5 billion at $39 a share (symbol: MA), and its shares shot as high as $320 before falling below $160 in the current stock market swoon. In its new incarnation, MasterCard must now compete hard to win the business of the banks, which are combining by the day in a rapid, forced consolidation.

And it's playing with a disadvantage: its size. Visa's market share of global credit- and debit-card transactions is 68% vs. MasterCard's 28%, according to the industry newsletter The Nilson Report. Combined, those advantages give Visa not only a bigger wallet to fund new programs but also superior leverage with the banks.

So these days at MasterCard's elegant corporate campus designed by architect I.M. Pei in the Westchester County hamlet of Purchase (so named well before MasterCard moved there), Selander is asking his team to embrace the life of an underdog and a public company, operating in credit-tight markets. In a nutshell, that means squeezing more out of the assets it has, which formerly were "used more for the benefit of our brand and company," says Selander. "We have begun to realize, Hey, we can extend the use of those assets to our customers."

One of its biggest is marketing muscle, primarily in the form of the "priceless" campaign. ("There are some things money can't buy. For everything else there's MasterCard.") Since debuting in 1997, the ads have successfully conveyed a sense of the nonmaterial benefits of spending money, something that MasterCard feels distinguishes it from Visa and others.

The philosophy is evident in the way it designs its credit-card rewards products, which it pitches to banks. The rewards focus on experiences, like free vacations, rather than just objects or privileges. Says Larry Flanagan, global chief marketing officer, the custodian of this one-word franchise: "You've got to avoid the pitfalls of a classic campaign like 'priceless' losing its value."

With that in mind, MasterCard works overtime to woo bank customers with one-of-a-kind marketing angles. Its biggest reward experience - and the subject of the first-ever "priceless" spot - is Major League Baseball. Banks buy from MasterCard the right to put MLB teams on their cards or offer cardholders a trip to the World Series.

MasterCard competes tenaciously with Visa for those sponsorships, such as for soccer's World Cup. A lawsuit over who got to sponsor the event ended in 2007 with $90 million paid by the global soccer federation to MasterCard but the sponsorship going to Visa.

Chris McWilton, president of global accounts, and his team spend much of their time calling and visiting MasterCard's four biggest customers - Citigroup (C, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500), and HSBC (HBC) - which make up nearly 30% of its revenues, to make sure they're happy. Lately he's had his hands full. When J.P. Morgan Chase, a majority-Visa debit customer, bought Washington Mutual (WM, Fortune 500), a majority-MasterCard debit customer, analysts suggested that Chase would eventually switch WaMu's cards to Visa. "It will take a long time to play out," says McWilton.(continue reading)

IBM Says Consumers Prefer Mobile Internet Access vs. PC

IBM Study Finds Consumers Prefer a Mobile Device Over the PC

ARMONK, NY--(Marketwire - October 23, 2008)

IBM today released new survey results which reveal that over 50 percent of consumers would substitute their Internet usage on a PC for a mobile device.

Expanding on the May 2008 "Go Mobile, Grow" study produced by IBM's Institute for Business Value, the survey identifies new findings that validate previous conclusions on how consumers will be open to full adoption of the mobile device as the hub for Internet activity.

IBM surveyed 600 consumers in the United States, China and the United Kingdom on their preferences regarding the mobile Internet. The survey found that communication, travel and navigation applications, as well as news and information services, are expected to increase significantly in popularity and usage over the mobile Internet. With the world's population of mobile-phone users expected to increase from the current 50 percent to 80 percent in 2013, which translates to a staggering 5.8 billion people, the availability of IP wireless broadband and more affordable devices will change the way companies around the world operate and relate to their customers, employees and partners.

"Worldwide adoption of the mobile phone as the preferred device for accessing the Internet is just around the corner," said Dr. Sungyoul Lee, Global Consulting Leader, Electronics Industry, IBM. "With 70 percent of consumers worldwide who believe that the mobile Internet has the potential to add significant to moderate value to their day-to-day lives, the time is now for companies to develop intuitive applications and services that allow people of all ages to effortlessly access and use the Internet while on the go -- anytime, and anywhere."

Internet Adoption

By 2011, 39 percent of respondents said they expect to increase Internet use on their mobile device by at least 40 percent. The Chinese consumers polled lead the world as the fastest adopting society of the mobile web. This finding is in synch (sic) with IBM's previous hypothesis that within emerging and leading edge markets, the mobile platform will be the primary way of interacting with businesses and institutions. These countries have in many cases leapfrogged the PC era and are routinely using their mobile devices for a variety of consumer services.

Desired Content

71 percent of respondents acknowledged that they expect to increase their usage of communication services such as obtaining maps and directions, instant messaging, social networking, emailing and reading the news from their mobile device. Growth markets like China and India are leading this adoption at a rapid pace and are proving to be the most open towards mobile internet than the mature markets. The survey found that consumers still prefer to execute services such as banking, stock trading, shopping and general search on the PC rather than a mobile device.

Age Preferences

The mobile Internet is the most popular among Generation X and Generation Y, as they tend to be more technology savvy and have a greater exposure and acceptance of emerging technologies. Over 50 percent of respondents who chose "Strong to Full substitution" of accessing the PC versus a mobile device were 15-30 years old and believe the industry is doing its best to advance the mobile Web, although most are still unsatisfied with the price and services offered by carriers and handset manufacturers.

Brand loyalty

Consumers are most loyal to their preferred brands for communication services such as email and instant messaging, but the survey found a lack of loyalty for entertainment services. Over 50 percent would like to use the same brand on their PC and mobile device when emailing, banking and instant messaging.

Device Features

While there is an overall consensus that the industry is doing its bit for mobile Web, more consumers desire greater affordability, awareness and better content and applications for the mobile Internet. In terms of device features, the survey found consumers prefer a large screen, high resolution, internal memory, and quick speed data transfer as the most important and desired features in their mobile device.

Implications and Recommendations

In order to stimulate and increase mobile Internet adoption, device makers, mobile operators, Internet service providers, mobile application developers and content providers need to consider the following:

Define their mobile Internet strategy by understanding consumer behaviors and needs to identify the strategy that best leverages their core strengths.
Transform their business model to align with the identified mobile internet strategy: this touches areas such as Research & Development, Marketing & Sales or Services Delivery.
Establish and host a reliable, cost-efficient and scalable infrastructure to deliver mobile internet services to consumers.
Improve devices in terms of processing power, memory, resolution, screen size and intuitive user interfaces. Specifically device makers need to think about how to integrate technologies such as nano projectors and projected virtual keyboards.
Move towards a high adoption of open standards and open source to further grow and nurture the ecosystem.

Stress for Credit Card Industry Until 2010

Credit card charge-off rates in the U.S. continued to rise in August and are expected to surpass the peak rate of charge-offs following previous recessions, according to Moody's Investor Services.

The charge-off rate, which measures credit card balances written off as uncollectible as an annualized percent of loans outstanding, rose 48 percent in August to 6.82 percent, compared with 4.61 percent a year ago, said Moody's in a special report.

Moody's said it expects the industry to remain under pressure through the end of 2009 as a result of the worldwide economic crisis and worsening underlying collateral performance as the credit card asset-backed securities market shows signs of increasing stress.

Although the balance sheet strength and liquidity of the sector’s largest credit card issuers remains quite strong, the uncertainty and tempo of the turmoil will test even the stalwarts’ ability to adapt.

In its mid-year report released last month, Moody's forecasted the sharp deterioration in credit card delinquency and charge-off rates. Earlier this month, Standard and Poor?'s highlighted the worsening performance in August of credit card ABS.

For details, see Credit Card Sector Faces Challenging Period Ahead.

50% of Canadians Unable to Pay Off Credit Cards

Epoch Times - Plastic Nation: Canadians Drowning in Credit Card Debt

Roughly 50 per cent of Canadians are unable to pay off their credit cards every month according to Credit Canada, a non-profit agency that provides free credit counselling.

Debt loads have been increasing steadily since 1990, and by 2007 the average Canadian was in debt to the tune of $80,000, mortgages included.

“Canadians have a ferocious appetite for credit and for debt like our American cousins, and the result is that it’s not sustainable,” says Laurie Campbell, executive director of Credit Canada.

“People have put themselves in this situation where they’ve got cars on lease or on loan, they have a huge mortgage on their homes and they may have $30,000 to $40,000 on lines of credit and unsecured debts such as credit cards and that’s just not sustainable.”

Students are in an equally bad situation, graduating with the highest debt loads they’ve ever had, and it’s not just a result of high tuition fees, Campbell says.People have put themselves in this situation where they’ve got cars on lease or on loan, they have a huge mortgage on their homes and they may have ,000 to ,000 on lines of credit and unsecured debts such as credit cards and that’s just not sustainable.

“Students have large credit card debt on top of their student loan and they can least afford this type of debt because they’re generally not working during school and they come out of school with these grand ideas of getting the perfect job, but often end up with a $15/hr job and they can barely make their rent and their living expenses never mind paying back the huge amount of debt.”

In a study on household debt released last year, the Vanier Institute for the Family found that the poorest 20 per cent (2.6 million households) had a net worth of $34 billion. However, their debts came to $40 billion. The richest 20 per cent had debts worth $186 billion but held $3.5 trillion in net assets. The study also showed that the poorest 20 per cent were more likely to have student and vehicle loans and credit card debt.

One of the reasons for rising personal debt may be that, according to some studies, Canadians don’t read the contract that comes with their credit card and are largely ignorant about how the credit system works, George Grass included. “At the time, I didn’t know that 90 per cent of your payment goes on interest and 5 per cent goes on the principle. So it takes a long time to pay off and then of course the interest keeps going up because the debt is not going down very fast,” he says.

Consumer debt is on the rise in many countries. Numbers released by the U.S. Federal Reserve Board showed that household debt in the U.S. topped $2 trillion in 2006, and that doesn’t include mortgages. In Canada in the same year it was $1 trillion.

Astronomically high interest rates are no help, and New Democrat Leader Jack Layton recently criticized the banks for not passing on the full central bank's interest-rate cut to their customers. While it is expected that profits for 2008 will be down, Canada's six banks reported 2007 profits of a record $19.5 billion. “The fact that the banks charge 18 or 19 per cent interest is ridiculous, it’s unjustified,” says Amir Rubin, assistant professor of business at Simon Fraser University.

Rubin adds that while Canada didn’t experience the “sub prime fiasco they had in the U.S., we certainly had a run-up in the pricing of houses and increased level of mortgages, and that probably contributed a lot to the debt levels of the Canadian household.” There is a domino effect from this massive debt load that Canadians are carrying, says Campbell, manifesting in health problems, addictions, marriage break-ups and less productivity in the workplace, to name a few.

Grass says that before he got help from Credit Canada to consolidate his debts and get his monthly payments down to a manageable amount, he was “at the end of my rope and thought of all kinds of crazy things. I became a very miserable person. My nerves were shot.” As for saving for that rainy day instead of relying on credit, Grass says that by the time the bills were paid, there was nothing left over to save. According to the CGA-Canada study, 25 per cent of Canadians do not engage in any type of savings activity, not even for their retirement.

CIBC senior economist Benjamin Tal says savings rates went down because net rates went up. In recent years people were making a lot of money in the stock market and in the housing market, he explains, and this was their way of “passively saving.” “But beyond that, now with the housing market levellng off we will see a situation in which people will go back to old fashioned saving, especially in an economic slowdown,” Tal predicts.

Regarding the economic slowdown and the situation in the U.S., Campbell says that when large numbers of people can’t sustain their home and have to sell, “the whole housing market falls apart.”Canada, she says, must avoid the same scenario.“We have an opportunity to learn from what’s going on down south — we’d better be quick on our feet.”

New Research Report on Credit Card Rewards

Credit Advisory Service

Credit Card Rewards Programs 2008: Trends, Challenges, and the Demand of Innovation

NEW RESEARCH REPORT BY MERCATOR ADVISORY GROUP

United States credit card issuers are facing many challenges today. The weak economy and turmoil in the financial industry are making it harder for issuers to deal with the soaring costs of their reward programs. Rewards have become a key driver of card acquisition, usage, and retention. The pressure from the uncertainty surrounding the disputation and pending bill about interchange fees, which is the main funding source of card rewards, also pose a significant threat to the survival of today's credit card rewards programs. At the same time, consumers' needs and expectations are also changing, calling for credit card issuers to offer more attractive and relevant products and services. Merchants, while pushing for more regulation on interchange fees, also face their own problems to attract and retain customers and encourage spending. All these factors represent challenges as well as opportunities to the credit card industry.

Terry Xie, Director of Mercator Advisory Group's International Advisory Service and principal analyst on the report, comments, "The credit card industry needs to think about rewards programs in a new way. No longer can they take the old funding mechanisms for granted and hope to survive and prosper by just doing what everyone else is doing. There is an urgent need for taking a new look at the relationships between merchants, consumers, and issuers to rethink the value proposition for each party involved. With insights into customers' needs, innovative thinking, and the help of new technology solutions, some players will gain a significant competitive advantage over others that fail to adapt."

The most recent report from Mercator's International Advisory Service provides an update of some new developments in credit card rewards programs in the United States since February 2007.

The focus is on major and potentially fundamental challenges for the credit card rewards market. With limited upsides (and potentially a deep dive on the revenue side) on the horizon, credit card issuers need to rethink how they design and structure rewards offerings. It is possible that this mandate will drive innovations that revolutionize credit card reward programs, perhaps more so than we have seen in a long time.

Highlights from this report include:
The card industry is seeking solutions to reinvigorate credit card rewards programs in response to the soft economy, regulation, fuel prices, and consumer behavior.
Gas cards and miles cards both have their challenges in today's economy.
Merchant-funded rewards programs have a tremendous amount of potential to revolutionize credit card rewards programs due to new value propositions to different parties.
Premium merchants might become a scarce resource as they are heavily sought after by card networks, issuers, processors, and independent merchant discount networks.
Data analytics offer a new level of targeted marketing and promotions but their full potential will not be realized until combined with merchants' involvement, likely in the format of a merchant-funded discount network.
New innovative rewards programs such as non-transactional rewards and programs combined with non-traditional rewards components are emerging.
This report contains 32 pages and 7 exhibits. Members of Mercator Advisory Group
have access to this report as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits. Please visit us online at http://www.mercatoradvisorygroup.com/. For more information call Mercator Advisory Group's main line: 781-419-1700 or send email to info@mercatoradvisorygroup.com.

Purchase

Wednesday, October 22, 2008

Paradigm Shift: Retails 70%-22% Lead over Web Changes to 44%-49%

e-Marketer came out with their Holiday Sales Forecast and although I'm aware and have posted many times about the impending shift from retail stores to the net, I was still taken aback by the graph on the left. Take a look at the DRAMATIC shift from last year to this year. It's paradigm in nature.

Last year 70% (as a percent of spending) of Internet Users shopped at Retail Stores compared to 22% who shopped online.

This year, that 70% number has dropped to 44% and Internet Shopping has gone from 22% to 49%.

So here's the shift: Last year Internet loses 70% - 22% but in one year the Internet takes the lead 49% - 44%. Wow...

HomeATM looks like it is well positioned to take advantage of this fortuitous "changing of the guard" if you will. Retail consumers are running to the other side, credit card usage is declining, while debit card usage is growing and PIN debit is the last remaining vestibule for online payments.

I love the coincidence that PIN debit is also known as "online" debit. Looks like everybody is getting online this Holiday season and our "gift" to Internet Retailers is the ability to make consumers cards "present"

I also love the irony of the fact that HomeATM plans on making "Card Not Present" Internet Transactions a "Thing of the Past"! I love this game!

Online Holiday Sales Forecast - eMarketer

OCTOBER 22, 2008
Jeffrey Grau, Senior Analyst

This year online holiday sales (excluding travel) will total $32.1 billion, up 10.1% over 2007. This is a sharp decline from growth rates in the low-to-mid 20% range seen over the past few years.

The weak economy is placing downward pressure on e-commerce sales this season. That pressure accentuates the already declining sales growth, which is a sign of the inevitable maturation of the online shopping channel.

US Retail E-Commerce Holiday Season Sales, 2003-2008 (billions and % change)

Financially strapped consumers will use a variety of strategies to save money on holiday gifts. More than ever, they will turn to the Internet to get gift ideas, find bargains and locate retailers that stock desired products. Shoppers will shift a larger share of their purchases from stores to the Internet to save gas money and avail themselves of retailers’ free shipping offers.

The main engine of e-commerce growth is incumbent online buyers who are shifting a greater percentage of their total spending from stores to the Internet.

The spending shift from stores to Websites is expected to continue this holiday season, according to a recent survey sponsored by ATG and conducted by the e-tailing group. This year 49% of holiday gift spending among US Internet users will occur online, compared with 44% in stores—making this the first time the Web has surpassed the store as the preferred channel for Internet users to purchase holiday gifts.

Leading Channels Used for Holiday Shopping According to US Internet Users, 2007 & 2008 (% of spending)

Tuesday, October 21, 2008

When Credit Gets "Waxed", Debit will "Shine"

In the midst of this economic crises, I have shared my belief many times that "debit card" use which has been growing at an impressive rate these past 5 years, will continue to stay on course. As credit limits get waxed, it is the debit market that will come out shining...

Here's an article from the Green Sheet which touches on that subject:

The Green Sheet 2.0 :: GS Online

Payment ship navigates economic storm

This is the month that was for ISOs, merchant level salespeople (MLS), and acquiring banks. Federal regulators seized the assets of Washington Mutual Inc., the nation's largest savings and loan, and sold them to JPMorgan Chase & Co. for $1.9 billion. Citigroup Inc. planned to acquire Wachovia Corp.'s retail franchise and banking operations for $2.16 billion, but Wells Fargo & Co. made a counter offer of $15.1 billion.

On Sept. 29, the Dow Jones Industrial Average finished the day down 777.68 points, or 7 percent, making it the largest percentage drop in the history of the stock market. Meanwhile, lawmakers haggled over the $700 billion financial institution recue package. It finally passed both houses of the legislature on Oct. 3 and was signed into law by President Bush.

The news has been ominous - but how will this affect the payments industry?

"The bailout plan was hoping to inject enough capital into the marketplace. The problem at the other end is that it's tightening up the credit because everyone is hoarding their cash. It's not a mortgage issue at all." The rescue package is designed in part to get financial institutions lending again by ridding the market of what is known as toxic mortgage-backed securities - mortgages that exceed 30 percent of a homeowner's gross annual income - that lenders fear could cause borrowers to default.

Acquiring side benefits

As a result, access to loans could be reduced, and this could ultimately prompt a significant interest rate cut by the Fed. However, this could possibly create a benefit to the payments industry. "I think credit is going to be a lot tougher to get than it used to be, and I think as a result debit card will increase at the same time," said Dee Karawadra, founder, President and Chief executive Officer of Impact PaySystem.

"If and when credit is no longer available then [consumers] will start jumping into the debit card sector," he added. Karawadra believes that merchant cash advance services could benefit from the credit crunch. "Cash advance is readily available, it's a lot easier to access than a loan, plus it's an additional revenue stream for our side."

And the sense of panic seems to be lacking in the payments industry. Adam Elliot, President of ID Insight, Inc., said that U.S. Bancorp is taking a unique approach. "Everybody's cutting back on credit, but USB is actually doing the opposite. They're out pushing it even harder on home equity and mortgage and credit cards, because they see this big vacuum and they're kind of swooping in to fill it up," he said.

Clicks, cliques, and confidence

Martaus doesn't believe things are going to get as bad as the picture mainstream media paints. "If you're involved in the volume side of things, part of the discount package, you might see a little downturn," he said. "Per location sales are down a little, but ISOs are in the "click" business [number of transactions], so acquirers who keep those click numbers up are going to be ok.

"I'm just getting ready to publish a research project on this, but the typical ISO that I talk to said 'Don't bother with this stuff, I'm too busy closing business.' The ISOs themselves aren't even looking up. When you see the wild fluctuations in the market, ISOs are having swings in their values, but they are less volatile than the market as a whole," Martaus added.

He believes that this is less about money and credit than it is about confidence. "All we are looking for is some decision maker to say 'here's your confidence back'. The problem is we are in an election cycle, and these guys are more worried about re-election than they are about doing the right thing for their constituents and the rest of the country," Martaus said. "The people [on Capitol Hill] just need to start doing their job."

Editor's Note: Yeah, maybe the cartoon on the left is not that far off as politicians can start taking debit card payments (under the guise of the IRS) for the increased taxes we're going to pay over the next century...

Fiserv's View on Next Gen Payments

Payments News: Next Generation Payments Viewed as a Competitive Opportunity - October 20, 2008

Next Generation Payments Viewed as a Competitive Opportunity

U.S. financial institutions see moving toward a next generation payments system, including a payments hub (framework of common, reusable services), as important to remaining competitive according to a recent analysis conducted by the Global Payments Solutions division of Fiserv. Larger banks seem to be moving faster than smaller banks on this, as smaller banks wait to see what vendor packages come to the marketplace, say Fiserv payments analysts.

"From our analysis, financial institutions are looking to converge middle office processes through the deployment of a payments hub to achieve operating efficiencies," said Mike Ringuette, general manager, Global Payments Solutions, Fiserv. "Most are expecting that they can compete better in existing commercial markets and expand into new ones with a next generation payments solution."

Fiserv's analysis of customer priorities revealed that larger financial institutions expect to have re-architected payments systems up and running within the next 18 months. This short timetable appears to be driven primarily by corporate bank customers who use multiple payment channels and are demanding faster, more seamless payment streams, as well as a single view of payment activity. While traditionally thought to be the purview of smaller financial institutions; nearly all tiers of banks are researching outsourcing and server-based application options.

The analysis also indicated that next generation payments systems will need to more effectively address both processing efficiency and risk mitigation across payments channels. "Banks continue to feel pressure to reduce costs in their payments operations," said Ringuette. "Yet, there's also a strong demand to better ascertain risk exposure across all payment channels - ideally through a single-monitoring function. At Fiserv, we are looking to extend and enhance our current processing capabilities to financial institutions of all sizes to meet those needs."

"With the payment environment substantially reshaping, the traditional payment silos in banks are slowly giving way to a more pragmatic approach to payment processing," said Susan Feinberg, senior research director of Wholesale Banking, TowerGroup. "To achieve these more holistic client-facing payment services, banks will prioritize service-oriented architecture (SOA) and workflow projects allowing them to offer unified payment services, even when the payments processing and settlement continue to be siloed."

Monday, October 20, 2008

Bad e-Conomy Good for e-Commerce?

E-commerce bargains to boost sales in US

A study reveals that because of the economical situation, US consumers are turning to e-commerce bargains and this could lead to a boost in online sales.

Nearly a third of the consumers involved in the study have revealed plans to do more research online to find the best bargains.

45 percent of respondents visit consumer review websites to research and purchase products both on the internet and in brick-and-mortar stores, while almost half have stated that regular promotions are the main reason why they visit again an online store they have used before.

The study also indicates that 56 percent of consumers plan to cut back on their offline spending, while only 44 percent plan to decrease their online spending.

The study was conducted by affiliate marketing firm Linkshare.

Security Hole in Payments Terminal Supply Chain

Javelin Strategy and Research » A security hole in the payments supply chain

written by Tom Wills

A security hole in the payments supply chain
Supply chain security is a term most often associated with the risk of terrorists planting dirty bombs in shipping containers. But last week it claimed its place in the payments industry lexicon when a big compromise of the supply chain feeding the EMV-based Chip & PIN payments ecosystem came to light in the UK.

It seems that criminals implanted invisible electronic components in a batch of newly-manufactured Chip & PIN point of sale terminals destined for the UK and other European countries, which siphoned off account information when cards were read during a purchase, then sent it over to Lahore, Pakistan where other evildoers captured it and proceeded to rack up “tens of millions” (of Pounds, which means even more tens of millions of Dollars) in bogus transactions. The tampering happened either at the factory in China where the terminals were manufactured, or shortly afterwords while in transit.
This is big, not only because of the major fraud losses involved, but because it represents a whole new threat category in the industry which will take considerable effort, coordination and expense to protect against. Think about it … how do you secure a factory that makes POS terminals (which is likely to be in a country where security is a big challenge to begin with), and the containers the products are put in for shipment, and the trucks or trains that take them from the factory to the seaport, and the ships that take them across the ocean to their destination markets, then another port and more trucks and trains, and the warehouse they end up in before being distributed via even more trucks to the merchants who finally put them on their countertops to take card payments.

It’s non-trivial, and judging from the magnitude of this incident, non-optional as well. And there’s the question of who will pay for all this security. The card companies may pressure the terminal vendors to take this on, but tackling it thoroughly is likely to be beyond their budget, or that of any individual player in the supply chain. I’ll be really interested to see how this story unfolds, especially if the bad guys feel inspired to repeat this kind of attack, which wouldn’t surprise me a bit.

Aite Releases Report on Money Transfer Compliance Issues

Aite Group, LLC Report #200810201

A New Report From Aite Group
Emerging Compliance Issues in the Money Transfer Market

In many cases, it is the unknowns facing the industry - rather than overly prescriptive regulations or overzealous regulators - that concern money transmitters the most.

Boston, MA, October 20, 2008 – A new report from Aite Group, LLC reviews key compliance challenges facing U.S. money transmitters, and examines the evolution of key issues such as AML, agent liability and enforcement actions. The report presents recommendations for money transmitters hoping to better prepare themselves for upcoming compliance challenges.

Money transmitter companies (MTCs) range dramatically in size, and therefore have very different technology and business process requirements. However, due to the risk of these services being used for illicit purposes, all MTCs face the same strict regulatory requirements. Among the greatest challenges to MTCs are that they face different regulations from various states, there is little organization within the industry to establish best practices, and there is uncertainty regarding future regulatory mandates. Money transmitters view their compliance efforts as competitive differentiators, particularly in terms of cost advantages they can derive from meeting compliance mandates effectively. As such, homegrown technology systems for compliance have permeated the industry. Vendor systems have begun to gain some traction with smaller money transmitters only recently, especially as they offer tools specifically to allay bank concerns over money laundering.

"Despite the fact that AML issues and related regulations pertaining to money services businesses, including MTCs, have been a priority for regulators since 2001, industry participants agree that regulatory responses are still a work in progress," says Eva Weber, analyst with Aite Group and author of this report. "Obligations around data security, privacy, anti-money laundering and payments require constant monitoring, and money transmitters of all sizes should plan for regulatory impact. Not surprisingly, it is often the unknowns facing the industry - rather than overly prescriptive regulations or overzealous regulators - that concern institutions the most."

This 16-page Impact Note contains three figures and three tables. Clients of Aite Group's Retail Banking service can download the report by clicking on the icon to the right.

Related Aite Group Research:

* Trends in Anti-Money Laundering Compliance: Evolving Practices and Strategies
* Resources for Anti-Money Laundering Compliance: Retail Banks on Technology and Staffing Trends
* Competing in Money Transfers: A Market Overview

Google Checkout and PayPal Partnership?

De-emphasis Of Google Checkout Could Signal Partnership With PayPal

If Google continues to de-emphasize Google Checkout, it could mean a partnership with eBay's PayPal, according to a UBS Investment research note published Friday.

Google is not marketing Google Checkout as aggressively as it has in the past, and the equity firm doesn't expect that the Mountain View, Calif. company will do any couponing this year. Google, rather, is waiting to see if Checkout can gain traction without being pushed too hard.

UBS suggests the change may imply a potential partnership with PayPal is possible. The online auction site reported a disappointing fourth-quarter outlook on Thursday, followed by J.P. Morgan Securities downgrading eBay's stock, while several other brokerages cut the target price

Western Union Teams with Orascom Telecom for Mobile Remittance

Western Union, Orascom to Pilot Mobile Money Transfer Service

Western Union has announced that it has created an alliance with Orascom Telecom Holding S.A.E. ("Orascom Telecom"), one of the largest mobile operators in the Middle East, Africa and Asia, to work together to introduce mobile remittance services in select markets. According to the companies, "the services aim to make low-principal, high-frequency remittances more convenient to the millions of consumers who send money every day."

Orascom Telecom, which was established in 1998, operates six mobile networks with a combined total of 77 million subscribers, including Djezzy in Algeria, Mobilink in Pakistan, Mobinil in Egypt, Tunisiana in Tunisia, Banglalink in Bangladesh, and Telecel Zimbabwe in Zimbabwe. In addition, in early 2008, Orascom Telecom acquired a license in North Korea to operate mobile services.

"Orascom Telecom mobile networks are in areas with high populations of people who have limited access to financial services," said Naguib Sawiris, Orascom Telecom Chairman and CEO. "We believe this alliance, supported by our current mobile subscribers throughout the Middle East, Africa and South Asia, presents an effortless method to bring financial services to many of the world's families for the first time."

Western Union, together with its affiliates Orlandi Valuta and Vigo, maintains the industry's largest global money transfer Agent network with more than 355,000 locations in over 200 countries and territories.

"As the need for remittances continues to grow, so does the desire for new channels to conduct quick, convenient and affordable money transfers," said Gail Galuppo, Western Union Executive Vice President and Chief Marketing Officer. "Western Union is already offering this convenience with mobile money transfers from select locations, and we look forward to working with Orascom Telecom to offer this option to their subscribers in the future."

Several of the countries where Orascom Telecom operates are among the top receivers of remittances in the world. For example, according to the World Bank, Bangladesh received US$6.6 billion in remittances in 2007; Pakistan received US$6.1 billion, and Egypt received US$5.9 billion.

The Western Union(R) mobile money transfer service is currently available from select Western Union Agent locations in the United States, the Middle East, Asia-Pacific and Europe to Globe Telecom and Smart Communications subscribers in the Philippines.

The mobile money transfer service connects mobile operators to Western Union's trusted global "hub" for processing cross-border remittances. Once connected to Western Union's service, mobile operators use their own "mobile wallet" software to enable person-to-person mobile money transfers over Western Union's global remittance network. The Mobile Money Transfer service enables consumers to transfer money to or from mobile wallets and is being introduced into the global network of Western Union Agent locations for cash-to-mobile and mobile-to-cash transactions.

The agreement with Orascom Telecom is part of the pilot program of Western Union and the GSM Association, a global trade association representing over 750 GSM mobile phone operators, to facilitate the development of cross-border mobile money transfer services.

Bad News for Bloggers?

I don't readily agree with this article. Sure, there are a couple blogs that are "mainstream," "for instance, the left-leaning Huffington Post and Daily Kos.

My take is that most bloggers cover news and offer insights on a specific or specialized subject they are personally familiar with, whereas with "mainstream media" the exact opposite is true.

In my view the "Paparazzi" would be a much closer analogy to "mainstream media" than bloggers.

However the point is well-taken. I think what they're trying to say is that blogging has gone from a "Deep Thoughts" philosophy, to a more information based professional format, and readers have subscribed to that change in droves.

Blogging Becomes Mainstream - eMarketer Paul Verna, Senior Analyst

Blogging has become so pervasive and influential that the lines between blogging and the mainstream media have disappeared. That is the main finding of a Technorati-sponsored survey of bloggers conducted in July and August 2008 by Decipher.

“Blogs are now mainstream media,” said Richard Jalichandra, CEO of Technorati, in an interview with eMarketer. “We’ve certainly seen that with the number of professional, semiprofessional and passion/enthusiast bloggers who are creating real media experiences. At the same time, you’re also seeing mainstream media come the other direction to add blog content.”

comScore Media Metrix found that blogs had 77 million unique visitors in the US in August 2008.

Among the Technorati survey’s own findings, one of the more eye-opening ones was a 2-to-1 male/female ratio among bloggers worldwide. A closer look at the gender breakdown by geography shows that bloggers in Europe and Asia skewed even more heavily male (73% each), while US bloggers showed a less drastic gender split, with 57% males and 43% females.

Demographic and E-Business Profile of Bloggers in Asia, Europe and the US, July-August 2008 (% of respondents)

Mr. Jalichandra acknowledged that the gender skew could be at least partially attributed to “the type of people that come to Technorati and register.” In other words, if Technorati’s user base leans male, then its survey data would naturally reflect that bias.

Another important caveat to the gender data is that the “State of the Blogosphere” report was limited to adults. Other surveys of blog use among US teenagers indicate that younger bloggers are predominantly female.

One-third of respondents had been contacted by a brand or agency to be a brand advocate. That number correlates closely with the percentages of bloggers worldwide who frequently share personal experiences with companies or brands (34%) and frequently include product reviews (37%).