Analysis: After Google Buys Motorola, What’s Next for the Payments Ecosystem?

Just when you thought things couldn’t possibly get more exciting in the mobile world, Google up and buys Motorola (view press release). Google’s planned acquisition of Motorola is just plain big news. Could it be a giant stepping stone on the way to creating a tightly integrated mobile ecosystem that will reshape commerce – or a misstep by now giving other handset makers more of an incentive to consider alternative operating systems?
(More: Google Does Cards)

A few quick thoughts:

This is Google’s first major acquisition of a company that produces physical goods. It just so happens that those physical goods are handsets that power their Android operating system, which accounts now for roughly 40% of all smartphones sold in the United States, according to Nielsen. The lack of Android integration into Motorola’s Xoom tablets has held sales back too, according to its CEO. But Android’s popularity and growth was a function of having it available across handset manufacturers. They may be betting that this move will make them look, feel and operate more like Apple (or DoCoMo). The big risk is that this sounds an awful lot like Nokia’s deal with Symbian, where Nokia owned Symbian but wanted competing handset manufacturers to use it, too. Interestingly, Nokia’s shares jumped the most they had in 1.5 years on this news. Of course, a big part of the problem with that was that Symbian didn’t really know how to be a mobile phone platform.

The notion, though, that Google can now more directly influence the shipment of phones with Google Wallet features – NFC or no NFC – is potentially pretty powerful. If you were Google and had control of Android + control of the handsets that shipped with Android already loaded on it, wouldn’t you also include Google Wallet features that users could just easily activate? It is a very efficient way to get millions of consumers walking around with phones with Google Wallets just ready and able to be used at physical merchant locations. And these wallets don’t just influence interactions at the physical point of sale. Having Google phones with Google Wallet features can make it incredibly easy for them to facilitate online transactions, too. (Do I hear a comeback in the works for Checkout?) Obviously, this will take some time, but it is potentially a way for them to more readily get the consumer side of their mobile payments platform on board.

Google phones with Google Wallets that include offers is also potentially destabilizing to Foursquare, GrouponNow, Facebook Deals and any other player that is banking on the combination of phones + GPS to power offers to consumers. And it’s not just because they have the ability to serve offers, as I’ve said before. It’s because they have the power to adjust their business model to make it more appealing for merchants to opt in, on top of now having millions of consumers with handsets and wallets to use at their locations.
(More: “Googling” mPayments Ignition?)

We’ll obviously know more as this takes shape and others react. And how are other players reacting? My predictions:

– In spite of Nokia’s uptick in stock price, Nokia and Microsoft should be worried. Besides Apple, they face another integrated software platform and hardware maker. But unlike them, one that has a highly successful software platform and a big American handset presence.

– The stock price went up supposedly because investors thought other handset manufacturers would turn to Microsoft. I don’t think so. First, I suspect that handset manufacturers will trust Google more than they trusted Nokia. Everyone knows Google isn’t interested in making money from handsets; they are interested in furthering their advertising and offers ambitions. Second, it isn’t clear why Windows would be more appealing than Android, given Microsoft’s tight connection to Nokia.

ISIS might be a little worried today, too. While they have signed multiple payments providers to their wallet platform and multiple carriers, they have no real way to quickly diffuse their wallet. Now, Google does – with a compelling value proposition for consumers and merchants.
(More: Google, Apple, ISIS: Which Will Ignite NFC Payments)

– PayPal – now here’s an interesting one. Will PayPal customers be able to use their PayPal accounts on Google phones? No reason to think they won’t or can’t, at least online. But as part of a wallet that might come integrated into the phone and is able to be used at the physical point of sale, well, it seems doubtful, or at least not easily done.

– MasterCard is probably really liking this, especially since they are the only payment platform powering Google Wallet today. Depending on how things shake out and get distributed, this could be a huge advance for them in the mobile commerce space and could sort of make up for the fact that they haven’t much of a compelling mobile strategy at least so far.

RIM – Yikes! I have this sinking feeling in the pit of my stomach that the days of tactile keyboards on mobile phones are coming to an end sooner than I’d like.
(More: First Blackberry with Built-In NFC Support)

Now, as exciting as this is, there is a lot that could go wrong. Google has clearly nailed the market for online advertising and search but has missed the mark on other things, like Google TV, Google Video and even Google Checkout. So, this is not a slam dunk by any stretch. But, it sure makes the mobile landscape interesting. So, what’s next for Google? Buying a payments system maybe? Can’t wait for next Monday!

Ask the Industry: How do you think Google’s acquisition of Motorola will impact the payments sector? Share Your Thoughts

Karen Webster is the CEO of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.


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