The announcement, made just before day 1 at CTIA 2012 in New Orleans, is really no big surprise. MasterCard, like other major payment networks, including Visa, is vying to maintain strong positioning in the growing and increasingly contested mobile payment and wallet space. MasterCard’s PayPass Wallet services announcement is a multi-pronged approach, and centers on three elements:

1) PayPass Acceptance Network, including PayPass Online and PayPass Contactless, which looks to help merchants drive a consistent payments experience in mobile (NFC) and online and across devices (computer, tablet and smartphone).

2) PayPass Wallet, a white label digital wallet capability targeted at banks, merchants, and other partners, and is open to other payment methods (beyond MasterCard).

3) PayPass API, which allows partners to connect their own digital wallets into the PayPass Acceptance Network.

While it’s still early, as most consumers do not yet understand the benefits of NFC-based payments, an increasing proportion of smartphone users are engaged in using their smartphones to move money, buy products and services on their phone, comparison shop, redeem coupons, and start to pay for things – mostly micro-transactions or payments, such as a cup of coffee (think Starbucks app) to movie tickets – using the phone itself. In fact, SmartMeter data from NPD’s Connected Intelligence shows Android smartphone users engaged in mobile payment applications are on the rise, growing 8 percent since August and topping one-third of users by March.

With all that seemingly untapped demand, the challenges for MasterCard and others focused on NFC-based mobile payment and wallet plays are still the same – extending service capabilities more ubiquitously, including more wireless carriers, more NFC-equipped Android smartphones, more merchants accepting mobile payment and digital wallet solutions, and more payment methods (with associated hardware/infrastructure at point of sale).

In the meantime, other non-NFC-based solutions, such as PayPal, may have some running room, but still face some of the same issues to achieving a measure of success – including smart services integration, as well as scaling its solution with large, nationwide merchants, as well as consumer acceptance.

While it still remains to be seen how many of these mobile wallet solutions will make the cut and survive, the market needs to focus on regular, mass market consumer use cases – including lower-value (micro-) payments, such as mobile ticketing (where speed in the payment process delivers real consumer value), and from there moving up to higher-value transactions. Ultimately, the success of mobile payment and wallet initiatives rests on changing entrenched consumer behaviors, and shifting the reliance on, and use of, physical wallets and all of its contents to a mobile/digital version. In order to do this, and facilitate on-the-go consumer transactions and commerce, the ecosystem needs to make sure the process is convenient, simple, and secure for consumers.

While much later than Apple and Google to support in-app billing capabilities, Amazon is certainly in a better position now than it was six months ago to further developer monetization, particularly as Android smartphone users increasingly rely on Amazon’s storefront as a source for app content despite the differential in the sheer number of apps available – tens of thousands for Amazon compared to 400K+ for Google Play.

According to NPD’s Connected Intelligence SmartMeter nearly one-third of Android users accessed the Amazon Appstore from their smartphones in March, up from just 18 percent in August 2011. This in concert with the success of the Kindle Fire, as well as the company’s superior merchandising capabilities and user experience focus (i.e., one-click payments), makes it appealing monetization platform for app developers and publishers.

The real question in in-app purchases lies in the underlying business model, and whether or not they are flexible enough to support media companies’ monetization, particularly in subscriptions. As it stands now, Amazon Appstore follows the standard 70-30 business model for in-app purchases as it does with paid apps, but there does appear to be some level of flexibility baked into the in-app model as the developers’ guarantee of its 70 percent is based on the list price and not the Amazon retail price point charged to consumers.

During Week 1 of the tournament, Android smartphone users, including March-Madness-crazed smartphone users, went to the top mobile website that they typically do – ESPN – for tournament- and other sports-related information needs, including the oh so important brackets to feed the immediate need to update NCAA-related basketball (office- or wherever-, whatever-) pools. Interestingly, according to NPD’s Connected Intelligence SmartMeter, which tracks consumer use of smartphone applications, websites, communications and content services, the NCAA’s mobile website, while a distant second (based on reach), was second. Just last month, it didn’t even show up in the top ten sports websites. To better position the daily data trends, it’s important to look at the tournament broadcast schedule for Week 1: Sunday evening EST – the Bracket Picks are announced; Monday – No games; Tuesday-Wednesday – First Round games; Thursday-Friday – Second Round games; and Saturday – Third Round games.

More general-purpose and popular sports apps, like ESPN Score Center, CBS Sports, and ScoreMobile, were among the top performers during the first week of the tournament, but we also saw some NCAA Championship tournament-specific apps, such as ESPN Bracket Bound and NCAA March Madness Live, rise to the top.

NCAA March Madness Live free version includes scores, bracket capabilities, and live audio streaming; while the premium upgrade ($3.99 one-time fee) includes live streaming video of the games. However, streaming video capabilities on Android are limited based on OS flavor. While Google Play (formerly Android Market), indicates app support for Android 2.2 and up, there have been reported app-support problems with devices in that OS mix – some of which may have contributed to the limited reach figures seen during this Week 1. Who wouldn’t want to watch live games on their smartphones (while at work – with your phone under your desk of course) for only $3.99 (for some three weeks and some 67 games)?

Once again, this data is instructive as to how general sports and March Madness-specific/designed content are performing (or not) among smartphone users. NPD Connected Intelligence will be trending the data during the entire tournament, so it will be interesting to watch the ebbs and flows not just daily, which is a bit of a roller-coaster, but weekly and over multiple weeks, particularly as the field of teams continues to whittle, which generally lead to a drop in avid team- and fan-driven interest. But, speaking from personal experience, some (I) will always want to know how they’re (I’m) doing in (my) (not office) March Madness pool(s). [Go Kansas!]

According to NPD’s Connected Intelligence SmartMeter, which tracks consumer use of smartphone applications, websites, communications and content services, “Words With Friends” not only cracked the top ten apps downloaded, but was also among the top twenty most used apps (based on reach) among Android users for the month of January.  Not quite a year after its release (February 2011), “Words With Friends” is encroaching in reach, and exceeding in engagement metrics (time spent/duration per day, frequency of opens/launches per day) the performance of the gold standard in mobile games – “Angry Birds.”

Based on January monthly data, “Words With Friends,” was ranked 8th in terms of apps downloaded during the month, and was one of three games among the top ten, (Star Wars light saber simulator app, BriskSaber ranked 7th, and Angry Birds ranked 9th).  It was one of two games among the top 25 most used apps for the month based on reach, with “Angry Birds” ranking 17th with a nearly 22 percent reach, and “Words With Friends,” just behind, ranking 20th at an 18 percent reach.
Where “Words With Friends” has a clear lead versus “Angry Birds” and other mobile games is in user engagement – including time spent and launches per day– which highlights the addictive, viral, and social elements that the game has on its user base.

Among users of each game, “Words With Friends” was used nearly 5X as much as “Angry Birds” – approximately 20 minutes daily in January compared to 4 minutes for “Angry Birds.” And, “Words With Friends” users launch the game more than six times daily (6.2), whereas “Angry Birds” users launch the game less than once a day (0.7).
Clearly, “Words With Friends,” is a different type of game (social, connected puzzle versus single-player arcade), and is much newer to Android users versus the more mature “Angry Birds,” which has been available on Android longer (since October 2010), but it is still compelling and instructive (for advertisers and others) to track comparative performance metrics of the two leading mobile gaming properties among Android users.

While the numbers are certainly impressive – one-third of sales is from digital sources (online, mobile), doubling of mobile sales (by the end of Q3 2011, HSN had already doubled the mobile sales from the previous year), and sold a half million Android tablets and 700K digital imaging devices in 2011.What’s more compelling is the wide array of targeted (female) digital efforts underway, including interactive TV, shop by remote capabilities, mobile (apps, QR codes), and online (including the launch of casual games, among others). These efforts are audience-focused, integrated cross-channel, with the goal of driving retail sales.

While it’s still early, the launch of online gaming (six months ago) is driving traffic and visits: HSN has seen 30 million game plays, with gaming visitors spending twice as much time on the HSN site and visiting twice as often. The goal is that more time spent = more retail sales. Time will tell if HSN’s preface that it’s not just time spent, but gaming activities themselves, that are synergistic in driving more retail sales. It will also be interesting to see how this and other efforts translate into extensions/enhancements to HSN’s mobile strategy (i.e., in-app gaming, shopping and sharing).

HSN certainly has an opportunity to ride the mobile shopping wave. According to NPD’s Connected Intelligence SmartMeter, which tracks consumer use of smartphone applications, websites and other content and services, shopping sites and applications enjoyed a significant upswing in use, beginning in November. Early results from December show that use increasing as consumers sought out the best deals. And, ultimately for HSN, it’s not just about delivering compelling applications; it’s also about delivering compelling mobile web experience. Regardless of what many consider, mobile website access is still a major access point. Indeed in November, NPD Connected Intelligence saw that shopping websites had a 69 percent reach compared to 53 percent for shopping apps.

HSN’s positioning at the intersection of women, technology and retail is compelling for CE manufacturers. The company needs to continue to exploit not only this powerful audience to drive sell-through of product, but also smartly integrate and optimize how consumers leverage many of these same products – from smartphones to tablets to smart TVs – with its content cross-screen, cross-platform.

While lower price points and the immediacy of digital content has the potential to drive more ubiquitous access and engagement, the net net is that there needs to be significant e-volume growth for publishers to fill the physical shortfall. Over a three month period e-reader and tablet owners are averaging over five and three e-book downloads, respectively, according to NPD’s August 2011 “Entertainment Trends in America Report”.

The primary barrier to e-adoption is device ownership (optimized for e-reading), and the experience (preferences for physical look/feel). Increased variation in tablet form factors, and associated price points (coming from plethora of Android-based alternatives), will fuel growth and increased tablet penetration. This, in turn should drive digital adoption and usage; particularly as the lines blur between the two categories of tablet and e-reader, with the e-reader becoming an application (in many cases) on multiple platforms, rather than being a distinct device category anymore. And while tablets are the preferred device for digital newspapers and magazines, they are also closing the gap with e-readers for consuming books, thus further driving the concept of the e-reader becoming an application, rather than a product.

For newspaper and magazine publishers, the bad news is that the impact of digital is also causing a significant percentage of consumers who read e-content, 28 and 24 percent respectively, to purchase less physical/print copies. But unlike books, many are not filling the gap with paid alternatives. Thirty-two percent say that they are accessing (potentially general purpose in the case of newspapers) Web sites to fill their needs.

While The New York Times, among other newspapers, is looking to digital pay walls and subscription models to combat shrinking print revenues, it is still early – with 11percent of consumers who own a connected device and access reading content online saying that they subscribe to digital magazine and 12 percent to digital newspaper subscriptions (which may be bundled for free with print editions).

This highlights the challenges for digital-only newspapers, such as The Daily, which is not only trying to move the needle in an early market and monetize current cost structure, but is also doing so without a physical/print product, online presence, and associated branding assets to help drive distribution. Despite this, The Daily, and another News Corp. property, the New York Post, were the only media properties (and non-gaming apps) to crack the top ten grossing iPad apps list in Apple’s “Rewind 2011”.

While most consumers do not yet understand the benefits of NFC-based payments, the U.S. market has been somewhat primed for phone-based payment schemes, thanks in part to the Starbucks app, which allows you to pay for your coffee with a glance at your phone. According to NPD Connected Intelligence’s July 2011 “Connected Operating System Survey,” however, only 9 percent of smartphone users had made a payment using their smartphones within the past three months, which is no doubt far less than the number of smartphone users who frequent Starbucks. But the interest is certainly there – significantly, of those who have not made a payment using their smartphones, 43 percent are interested in doing so.

With all that seemingly untapped demand, the challenges for Google Wallet centers on extending its service capabilities more ubiquitously, including more wireless carriers, NFC-equipped Android smartphones, and credit card companies (with associated hardware/infrastructure at point of sale).

But Google is not the only mobile payments game in town, and the mobile payments market — not unlike other mobile market initiatives — is extremely fragmented, both in terms of varied technology approaches (NFC, apps, hardware/software, etc.) and the players (wireless carriers, financial institutions/credit card companies, PayPal, Verifone, and Square, among others), some of which are pursuing multiple approaches simultaneously.

The result is likely to be a mish-mash of NFC-based solutions that may, or may not, work at any given location and will limit device choices for consumers. The small step for mankind may be tripped up by the realities of the fragmented market, if the parties don’t work closely together.

Can Android smartphone momentum be sustained? According to “Android: Variation and Value-Add,” a new report from NPD Connected Intelligence, Android looks set to remain in a dominant position. It is far and away the preferred OS for smartphone owners and intenders who plan to replace their current devices or buy their first smartphones in the next six months. And while Apple is right behind Android, the big surprise is positive momentum for Microsoft Windows Phone 7 (WP7). In fact nearly half of consumers surveyed were considering the WP7 platform, which is a far cry from the 2 percent of smartphone purchases that the platform has been tracking at to date.

Of course it is one thing for consumers to express interest in a platform, but it’s quite another to successfully convert this interest into purchases. For Microsoft and WP7 there are fundamental market awareness and OS ecosystem lock-in challenges that need to be addressed, before the platform has a fighting chance. And there needs to be a greater range of OEMs and subsequent devices supporting the platform to help boost consumer awareness and interest further.

Google’s plan to acquire Motorola Mobility for $12.5 billion could help in this; driving current Android-focused OEMs to at least consider a device

“Cord-shaving” is the real story in broadband video. More than twice as many broadband video consumers surveyed for our report reported had reduced (or “shaved”) their pay TV spend (9 percent) versus outright dropped their pay TV service (4 percent). And another 11 percent are likely to reduce their pay TV subscriptions in the next year, while 4 percent are at risk to cut the cord.

For OTT providers, such as Hulu, which is currently “in play,” and Netflix, which has experienced phenomenal growth, but is also facing economic hurdles in maintaining and extending its content deals, a cut in pay TV subscription does not necessarily relate to a proportional growth in OTT use. However, as consumers continue to look to ways to cut back on entertainment bills, this may be good-ness for OTT players in delaying or reducing win-backs for incumbent pay TV providers.

In the report, Connected Intelligence has also identified three main scenarios for broadband video consumption and has forecasted the opportunity: the home; nomadic settings that are fixed viewing situations away from home such as work, coffee houses, flights, etc.; and truly mobile, on-the-go situations, such as standing in line, waiting to board a flight, waiting for a walk sign before crossing the street and so forth.

While we expect that home, with its wide array of devices to access broadband video, will remain the most popular location for broadband video, nomadic access will rival it as it experiences rapid growth, driven by video-friendly and enhanced form factors, including tablets, climbing cellular access speeds and more free Wi-Fi make video consumption at fixed locations ever more practical. Comparatively, we believe that the constraints of watching premium video content while truly on the go will limit growth for this scenario.