Recent persistent rumors (see Bloomberg's sources) indicate that Google is planning to start a mobile-payment system at stores in partnership with VeriFone in New York and San Francisco within four months.

     During the last San Francisco Web 2.0 Summit in November 2010, when Google still was a company under “adult supervision" (see Eric Schmidt 's tweet )", former Google CEO Eric Schmidt revealed the next generation of Android phones supporting Near Field Communication technology ). Similarly, recent persistent rumors (see Bloomberg's sources) indicate that Google is planning to start a mobile-payment system at stores in partnership with VeriFone in New York and San Francisco within four months. Google Checkout - the Mountain View company's last endeavor at entering the digital payment market – was not as successful as planned, for among other reasons this solution competes directly against category leader Paypal and a lack of early adoption by merchants. What does Google mean by this move? Is it a trend-inspired endeavor or Google's real core strategy?

The mobile wallet solution for consumers club now has a new challenger among its members. The project using VeriFone terminals and probably Google’s Nexus S smartphone would be launched in four months, but only in two tech-friendly cities. This non-official announcement came just before today's release of the new Nexus S 4G running Android 2.3 Gingerbread, including NFC functionality and co-developed by Google and Samsung. According to the sources, Google will pay for the installation of “thousands” of NFC-enabled terminals across retail locations in both cities. This information nearly coincides with last month's announcement that Verifone POS terminals will include NFC technology in all of its new point-of-sale hardware (see here). VeriFone CEO Douglas G Bergeron stated that "merchant resistance" is the biggest obstacle to overcome when integrating technology into the retail environment. We can presume that the potential Google-VeriFone partnership would only work on NFC-enabled Android phones. At first look, this strategic partnership could break the integration barrier, at least in San Francisco and New York. But, how will Google involve hundreds of thousands of customers throughout a large worldwide network built for transactions, and other concerns without equipping all the world’s retailers?

One part of the answer can be found in the Web 2.0 Eric Schmidt speech. Google's move to enable payments through NFC technology would help them to expand its core advertising business. We should notice that advertising is Google's main source of revenue - AdWords is Google’s main advertising product. To be more precise, Google's total advertising revenue was $28 billion in 2010. For the next 2 years, Google’s most promising growth opportunities are YouTube and local advertising. By getting information about what individual mobile-device users are buying, Google would address a challenging issue: better targeting customers with personalized ads in real life - not only online. The mobile-payments initiative by Google is certainly a new opportunity to help businesseses offer discounts to customers or  offer a new shopping experience for customers . Using a Google Smartphone, users would have not only their purchasing information but also get coupons or loyalty cards when buying in their favorite shops. One Google strategy hypothesis could be a mix between local advertising (Place pages), coupons (Google offers) and mobile payments - a system that would bridge the offline and online world. We await the results of the trial here in San Francisco.
 

By Thibaut Loilier