Microsoft has the Zune. Apple has the Newton. More recently, Amazon has the Fire Phone. All examples of great and innovative companies that swung and missed big after designing products that really didn’t solve any problems for consumers or add any real value to an experience that they were dying to have.
Yesterday (Jan. 17) Google added another product that list. The Google Glass – which around this time last year was being touted as the big holiday season tech stocking stuffer – is officially off the market.
At least in its current form.
Google insists that Google Glass may ride again, but in a different and as of yet undefined form. All that is certain is that, for now, if you didn’t fork over $1,500 to buy this wearable by Google, you’re out of luck.
One failure does not make a disaster, particularly if you are Google and have a war chest large enough to buy a few third world countries. However, Google has ambitions to be more than the most successful search engine in the world – especially as search as a business is being disrupted by lots of players that are out to reinvent it and tap into Google’s search engine ad war chest. For instance, consumers now don’t always start their shopping journey on Google anymore. Amazon, for example, now surpasses Google when it comes to product search, which in turn cuts into Google’s most valuable revenue stream – ads.
Which is why it’s been toying with a variety of ways to enter payments. Google Glass and Google Wallet (and Google Checkout before it) are its early attempts to expand out of its historical sweet spot. But that transition has been less than totally smooth. Google Checkout died, Google Wallet is igniting at the speed of damp wool and Google Glass will someday make someone a lot of money when they sell it to a Silicon Valley tech collector on e-Baylibaba in 10 years.
So, what went wrong, what does it mean, and how can Google do it better the next time around? Here are a few observations, PYMNTS style.
While it’s surely noble that Google’s operating principle hinges on not being evil, when designing Google Glass, it’s possible they might have wanted to consider an addendum that read “also, don’t release products that make users hateful.”
Which seems to have been one of the biggest reasons that Google Glass came to a screeching halt. Users of the product were clumped together with a semi-profane portmanteau – “Glasshole.”
As it turns out, while Google Glass offered many interesting and innovative potential use cases as well as a reason to make some interesting advances to retinal response technology, ultimately it was hard to get consumers to warm up to a product that made its wearers look like robots from the future sent back on a mission to destroy humanity. It got even harder when Google Glass wearers – a distinct and self-selecting group of well-capitalized tech enthusiasts – felt that it was just A-OK to record and photograph everyone and everything that they encountered.
This, as it turns out, did little to endear Google Glass to the general public. And when the company that created a product actually has to directly and publicly explain to their users how to properly comport themselves socially, it’s generally not a good indicator that hockey-sticking adoption is in that particular product’s future.
As sort of a subtle nod to its shortcomings, Google did note in its blog post that shuttered the product that “we began the Glass Explorer Program as a kind of ‘open beta’ to hear what people had to say.”
So here is what Google heard the people say, that perhaps might be useful going forward.
First off- consumers actually do not like to feel spied on. Consumers felt a huge “ick” factor when they encountered someone with that “wearable” – never knowing whether they were being recorded or simply blown off in favor of whatever the wearer was watching on the Internet via the Google Glass.
Google Checkout launched in early 2008 to act as a direct competitor to eBay’s PayPal product. As of 2009, Google’s tiered cost structure was identical to that of PayPal, though when it launched the service Google charged U.S. merchants 2 percent plus $0.20 per transaction, and U.K. merchants 1.4 percent + £0.20. They soon went to a model which was free to merchants.
The backward looking consensus on Google’s first toe-dip into the world of payments is that it vastly underestimated the complexity and difficulty of managing a PayPal-like service.
“The initial failing was the decision to go after the big merchant, to argue to them that the landing page should be on Google instead of the retailer’s. “You can’t tell [major retailers] that the user experience is more important than the merchant site. They’re never going to agree to that,” a former Google exec told FierceRetail. She went on to note that the company had been “naive about large retailers at the time,” and that she was unsure if Google Checkout had “failed fast enough.”
As it turned out, as a search company, Google wasn’t quite used to dealing with data in the way it was now being forced to handle, secure and manage it. While PayPal had spent years building the technological and organizational capacity to processing large batches of online payments, Google, at launch, was ill-suited to handle large numbers of transactions because it’s tech was oriented toward handling large blocks of data ideally in batch mode, according to Quora. This method allows for small amounts of statistically-negligible errors, which creates difficulties in guaranteeing financial integrity. Moreover, organizationally, it was also not able to handle the the drastically increased customer service load the validation false-positive customer transactions required.
Yet interestingly, Google maintains the venture provided enough actionable statistical data about ad clicks and completed transactions that their ad targeting models were sufficiently improved to justify the investment.
Which was the other part of their problem – data. Merchants like their customers and they like having control of their data. It’s hard to persuade a merchant that a company who makes all of its money on using data to serve ads that a free service wouldn’t come at the detriment of their data being taken and served up to their competitors. Small merchants felt exposed since they couldn’t really do much to fight back – their ad budgets were too small – and large merchants just didn’t want to take the risk.
Plus, with all their savvy, newfound skills in processing payments and knowledge about working with retailers, Google was able to segue this product into the much more smoothly run second attempt at payments and commerce – Google Wallet.
Well, that was the plan anyway…
The Roman army would attempt to conquer the world during the spring and summer. Every March, legions would assemble and march to the last place the Roman army had lost a battle, and re-fight the enemy until they won, at which point they marched on until they got to the next lost battle. The Romans conquered the known world this way, but it took the better part of 2,500 years.
One could reason that Google’s mobile payments strategy bears some striking resemblances to this plan.
Google Wallet has, since its first launch in 2011, almost immediately began suffering lost battles and setbacks, as documented by Karen Webster in early 2014 in The Incredible Shrinking Google Wallet.
“Google Wallet’s first version was NFC, and available only on the Sprint Nexus S 4G using a Citi-MasterCard and/or the Google Prepaid Card loaded into that wallet. Any consumer who was even remotely interested in using the Google Wallet had to buy a new phone, live in one of the few areas with NFC density (Manhattan, for example) and either get or already have a Citi MasterCard – not just any MasterCard. Not surprisingly, adoption was slow. Just ask any Duane Reade clerk in Manhattan whether they had ever seen anyone use Google Checkout—they were one of the few merchants who took it. You will get a quizzical stare to maybe a “yeah, I saw a one person try to do that once.”
While more users did evenutally sign on to Google Wallet – after about a year that had worked up to 1 million downloads – merchants taking the service just didn’t materialize.
“Merchants still didn’t seem to be happy campers either but for different reasons,” Webster noted. “They got pretty uptight about Google having access to (and monetizing) all of the juicy transaction data generated from transactions happening via the Google Wallet. Practically speaking, they didn’t have all that much to be worried about – with NFC technology still at the core, few handsets with NFC chips in them and few merchant acceptance outposts – there weren’t that many transactions being done. But still, the thought gave them pause and didn’t do much to get them interested in signing on.”
Within a few months of launch, the entire executive team that had created Google Wallet had either been fired or quit. By the summer of 2013, most of the reconstituted executive team had also been replaced, removed or terminated. Vocal critics at this point declared Google Wallet a flop, but Google persisted and saw some additional, but limited traction, among merchants and increased interest, particularly as HCE emerged as a possible work around for NFC (carrier networks other than Sprint were unwilling to give Google access to the NFC secure element necessary to make payment transactions).
However, by end the end of the summer of 2014, Google had replace the Wallet’s executive team yet again, still with not much traction among users.
Then, in late 2014, Google Wallet got lucky in a strange way – a competitor emerged. Apple Pay launched – and like Google’s mobile payment scheme was also reliant on using an NFC technology. Merchants who were not interested in enabling NFC before Apple got in the game, took a greater interest in accepting mobile payments, and Google was in some sense able to draft on the interest Apple generated.
The reality is is, however, that even Apple Pay is experiencing no small amount of friction in its quest to get ignition using an NFC-based platform, and as long as Google is tied to NFC it seems likely it will too face that problem.
There are upsides here for Google though. It seems possible that at least Google may soon win a battle it has been standing and fighting for a few years now–access to the secure element on non-Sprint phones. Rumors are circulating that Google could be entering into a ~$60 million deal to purchase SoftCard, the telecoms largely failed attempt at a mobile payment system.
Google hasn’t provided any comment other than a general statement saying there has not been any indication that a deal has been discussed.
“We don’t have a comment, background, deep background, off the record steer, nod, wink or any other verbal or non-verbal response to these sorts of rumors,” Google said in an emailed statement.
Though a “curious marriage” Karen Webster did write yesterday that it might actually offer something valuable for both companies. For the founding companies of Softcard, it offers as painless a way to pull the plug as possible while saving face. For Google, the possibilities are a bit more wide ranging.
“Softcard’s carrier relationships would offer Google Wallet the chance to have its “Wallet app” loaded and installed each time a customer bought a phone, sort of like Softcard/ISIS claimed last year was driving 60k downloads a week. “
Plus, at $60 million price tag – the risk for Google is low, though the payout from the investment far from guaranteed.
And, there are some benefits that are just intangible, like Tapper, the Softcard Muppet.
However, beyond the technological challenges associated with getting merchants into the NFC camp, Google faces the same problem with its mobile wallet to a lesser extent that it faced with the now departed Google Glass.
It needs to solve a problem for consumers or add value to what they are doing. If that happens, consumers will buy and merchants will follow suit. And those consumers need to be more of a critical mass than the early adopter tech crowd that bought Google Glass.