Quick Response Codes Part II - Automatic Mobile Web Access

For a few years now, Japanese consumers have been using barcode scanning software on their camera phones to automatically surf the Web while mobile. It's an idea that might seem slightly bizarre to North Americans now - but perhaps not for long.

We started to look at the background and context of mobile barcode scanning in Part I of this multi-part series. We'll continue here with a look at how - if at all - the QR code phenomenon might cross the Pacific.

Users in Japan point their cameras at Quick Response (QR) barcodes printed on billboards, magazine pages or bus shelters. The camera captures an image of the two-dimensional (2D) code, automatically decodes the contents - usually a URL - and passes it to the onboard WAP browser, which downloads a page.

Is this one more example of how the Japanese pioneer technologies and modes of communication that later sweep the world? Or an example of a technology that only works in the Japanese market?

Michael Liard, a research director at Allied Business Intelligence Inc. (ABI Research), is inclined to think it's Japan first, then the world. "[The Japanese] are technology leaders," he notes. "Their consumers are very tech-savvy. And they like the next big thing."

Cell phone use is also more prevalent in Japan, and broadband 3G mobile networks have been the norm there for several years, while they have only begun to appear in the U.S. in last 18 months. And Japanese consumers do seem to relish the notion of making their mobile devices as multi-functional as possible, Liard notes.

Ken Dulaney, vice president of mobile computing at Gartner, admitted knowing little about QR codes before we called - a telling fact on its own. But Dulaney made this interesting comment about the two markets in an e-mail exchange.

"The U.S. is a much more difficult area to get the kind of discipline installed to make this happen," Dulaney wrote. "In Japan they have organizations like NTT DoCoMo [the former PTT and largest mobile carrier] that have enormous power to push these things through."

"So while it's a good idea, unless there is major leadership on this initiative [in the U.S.] from someone like the Post Office or the Government, it never happens. Ask yourself why you don't have electronic chips in your banking cards for security. Other geographies have this. We just cannot get agreement."

Still, at least one company, ScanBuy Inc., a U.S. firm that recently launched the first major North American trial of mobile 2D barcode reading in San Francisco, believes the concept can be transplanted - albeit with some slight tinkering to the business model.

For the San Francisco trial, ScanBuy partnered with beta customers Citysearch, a national online publisher of local information guides, and Antenna Audio, a producer of self-guided audio tours.

Citysearch is posting 2D barcodes in the windows of restaurants and other participating establishments - 580 of them. When users with ScanBuy's ScanLife barcode reading software installed on their mobile devices point their camera at a barcode, they're automatically taken to a Citysearch review of the establishment. (The software is downloadable from the company's Web site.)

Antenna Audio's application is more exciting. It's posting barcodes at tourist attractions around San Francisco. Users can scan the codes to automatically launch an audio tour of the site, which plays through the device's speaker or attached headphones.

So the uses to which the technology is being put are similar to those in Japan. QR codes are mostly used there to automate Web surfing so users can get to advertising and marketing materials more quickly and easily. Bus riders can also get location-specific schedule information.

ScanBuy uses slightly different technology, though - EZcode visual codes, a simpler though less data rich technology than the QR codes used in Japan. (Its software can also read QR codes and a third 2D visual code format, Data Matrix.)

The American company, more importantly, is pursuing a markedly different business model. In Japan, it was mainly the mobile carriers - as Dulaney correctly surmised - that pushed the QR code concept.

Any organization, or individual, can generate and post QR codes. The software that carriers pre-install on phones will scan the codes and perform whatever action is encoded in them, without any intermediation.

The payback for carriers? Increased data traffic on their then newly-built 3G networks.

"But with data going flat rate everywhere," explains ScanBuy CEO Jonathan Bulkeley, "increasing ARPU [average revenue per user] from consumers is not where the real upside is for carriers anymore."

Instead, ScanBuy hopes to "monetize the transaction" - and generate revenue in a much more traditional way, from advertisers. It will then share revenues with carriers and/or, in some markets, device manufacturers. In Japan, advertisers basically get a free ride.

In the ScanBuy architecture, there are three components: the code itself and the scanning software on the device - as in the Japanese model - plus, in the middle, a server that registers codes, receives requests from users' devices, connects them to advertisers' websites (or performs other encoded actions) and records the interaction.

The codes are only useable when registered with ScanBuy. The company has exclusive license to the EZcode technology from the Swiss university that developed it. While it is currently distributing the ScanLife device software online, it expects carrier or manufacturer partners will preload it on devices in future.

There will be different software for different regions - similar to DVD player firmware. The North American software, for example, will only read North American-registered codes.

ScanBuy expects advertisers will pay three to five cents per click - per website visit from a ScanLife user. The pitch is that advertisers don't just get exposure to qualified consumers for their messages, they also get detailed location- and demographic-specific reporting on those consumers.

"Seventy percent of the value [to advertisers] is in the reporting," Bulkeley says. "And 30% is in simplifying the interaction for the consumer."

"So we bill Coke [if The Coca-Cola Company were an advertiser], and we share the revenues with the carrier. That's the model for us in the U.S. The carriers control what software goes [on the device] here."

It gets more complicated in markets where carriers don't have as tight control over devices. Where device manufacturers sell directly to consumers - and agree to pre-load the ScanLife software on their devices - they get a share as well.

Will this model work?

The reporting ScanBuy promises may well have value to advertisers. But the ScanBuy strategy seems predicated on continuing tight control of devices by carriers and manufacturers, making it possible for them - and ScanBuy - to control this market. And on mass distribution of software creating a critical mass of users in short order.

Both assumptions seem open to question.

As Bulkeley points out, right now, only 5% of phones in the U.S. market can use free, downloadable QR code scanning software. But that percentage is bound to increase, possibly rapidly, as smartphones and PDA phones capture a larger share of the market here.

Will some advertisers question why they should pay ScanBuy when they could distribute their own QR codes and reach a growing audience of users and get at least some of the same benefits for nothing?

In the final part of this series, we'll look at possible timelines for the spread of QR codes in North America - or EZcodes. And we'll consider another question: is this all there is to mobile barcode reading? Is it just another advertising mechanism? We think not.

TAGS:

Windows, smartphones, chips, carriers, e-Mail

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