Starbucks Pay-by-Smartphone Application: Remarkable Invention

I agree that going anywhere without your mobile device today is very rare. It seems that people perceive their mobile device to be the most valuable thing, and for major companies including Starbuck it doesn’t go unnoticed.

The Starbucks app for BlackBerry and iPhone now lets you pay for your premium coffee using your Smartphone. After you’ve created a Starbucks account, downloaded the Starbucks app, and linked your account; you can simply show a 2D bar code to scan to pay for your latte. The payment doesn’t pull directly from a credit card, but the app itself acts as a Starbucks Card that you add can add funds to in the order to use it.

In addition to paying for merchandise, the Starbucks app lets you check your card balance, monitor your Starbucks reward points and see nearby Starbucks locations on a map or list.

There are many people that find this relatively new invention to be a great feature, providing consumers with just another reason to carry their phone and toss away that bulky wallet. Some people like David Jakubowski thinks it is a brilliant idea.

I couldn’t agree more. I think they've done an excellent job by not just rolling out a technology, but instead really thinking through how to create value for their customers. I did have to seek and download an app, but that app aggregates and simplifies tasks that could previously only be performed through disparate systems, thereby giving me value. Making my wallet a little less bulky also adds value, as does the prospect of a faster moving line in the morning.

I expect there are many benefits on Starbucks' side as well: Increased brand affinity, increased loyalty, increased average sales per customer, reduced wait times over time, reduced credit card processing fees, etc.

I suppose you could call the lack of an Android app a downside, but I expect they'll add Android support soon.

The Future of Groupon?

It seems like just about two years ago Groupon was a barely known company outside of its area origination in Chicago. Fast-forward two years, and now Groupon reportedly talks with Goldman Sachs bankers about a possible initial public offering that could value the company at close to $25 billion after it reportedly turned down the $6 bill offer from Google. However, is groupon realy worth $25 billion? Many question as to whether or not that is so; some say that $6 bill that Google offered a few months ago was way too much. 

Groupon, the Chicago-based start-up, was founded in 2008 as an ultimate social shopping site that connected consumers to local deals. Ever since then, the company has enjoyed a meteoric rise. According to DealBook, at the end of December 2009, the company's payroll numbered 124 people; today it has a global work force of more than 5,900. To date, Groupon has about 70 million subscribers in over 500 markets, pretty impressive for a company that is only about two years old. Although Groupon has dominated the daily deal market, its plan of going public with valuation of $25 bill is still up in the air. Why? Google and Facebook heading to enter the deal-of-the-day arena, and they are moving with vigorous spead.

　

According to BIA/Kelsey's research, there are over 200 players, from small and regional to large and national, in the social-networking-based daily discount arena. "Deal a day has experienced incredible growth during its three-year incubation period beginning in 2008," said Mark Fratrik, vice president of BIA/Kelsey. "We expect this to continue as companies in the space are rapidly adding markets and increasing total user count. They are also subdividing existing metros to provide deals closer to where users live, which we believe will help offset any drop-off that may occur due to consumer fatigue as the novelty of the form fades."

　

You may wonder, so why get into an already pretty crowded marketplace? If you believe the analysts, the market is big and going to get bigger. The "deal of the day" industry will grow to $3.93 billion in 2015 from $873 million last year.

　

Facebook has decided to toss its hat into the "deal of the day" ring by expanding its existing Facebook Deals service to include the bargain of the day.The service will let people share discounted offers with their friends, Facebook said in an e-mailed statement. The service will be introduced first in five cities, including Atlanta, San Francisco, San Diego, Dallas and Austin, Texas, said Bloomberg.

　

Facebook, however,  isn't the only giant to be getting its feet wet in the deal-of-the-day business model. Google announced back in January that it would be launching a service called Google Offers, news first reported by Mashable.

It is sure true that Groupon has become a global sensation; however the long term future of the company is still somewhat unpredictable. With 70 million subscribers spread across 500 market Groupon may be on the top of their game, but both Google and Facebook have hundreds of million of regular users that they can easily funnel to their won local deal offereings.

According to the Yahoon news, no one can really predict Groupon's future. It is a hot property now, but some day its trend-setting customers  may get "Groupon fatigue" and move on. That doesn't necessarily mean that Groupon will go the way of Napster, Friendster, or MySpace, all of which had meteoric rises before crashing and burning. It might. But it also might dominate, like Amazon. Only time will tell and we are yet to see if turning down the Google deal was a wise move for Groupon.

http://news.yahoo.com/s/theweek/20110318/cm_theweek/213326

http://dealbook.nytimes.com/2011/03/17/groupon-valuation-soars-as-possible-i-p-o-nears/

http://www.biakelsey.com/Company/Press-Releases/110303-Consumer-Spending-on-Deal-a-Day-Offers-Likely-to-Reach-$3.9B-in-U.S.-by-2015.asp