Online payment specialist PayPal, a unit of Internet auction giant eBay, has
introduced PayPal Mobile to North America. The wireless version of its service
enables users to buy goods and exchange money using their phones. Transactions
are conducted by secure text message.
Music heavyweights Universal Music Group and MTV already are supporting the
technology.
UMG will use PayPal Mobile to sell CDs by the Pussycat Dolls, Mary J. Blige
and Daddy Yankee in direct-marketing initiatives. Rollout is imminent. And MTV
plans to use it to sell basic merchandise from its Web store, including T-shirts
and DVDs.
Other big-name media and entertainment brands, including 20th Century Fox
Home Entertainment, Bravo and the NBA Store, hope to drive similar impulse buys
by offering items for purchase via PayPal Mobile.
"With the overwhelming popularity of mobile phones, the time has never been
better for the merging of e-commerce and wireless devices," PayPal president
Jeff Jordan says.
To be sure, the opportunity is huge. PayPal claims more than 100 million members.
In addition to purchasing goods, PayPal members can send money to other individuals
as well as to participating charities and merchants.
"PayPal Mobile is an important indicator of the broader changes now occurring
in the mobile content/payments space," says Ed Kountz, senior financial services
analyst with Jupiter Research.
Sophisticated mobile phones can already be used to buy digital products, including
music downloads, ringtones, pictures and videos. But the ability to use a phone
as a digital wallet for buying physical goods is a new phenomenon in the United
States.
PayPal's technology figures to be just one of a number of mobile payment applications.
Motorola is said to be targeting the market, as are startups Obopay and TextPayMe.
And credit card companies, including Visa, are testing a contactless payment
technology in phones called near field communication (NFC), which uses radio
waves to transmit transaction data. In the NFC trials, participants use their
phones to make purchases at a coffee shop, download a movie trailer in a DVD
store, shop from their home TV and buy concert tickets from a smart poster.
"You're going to start to see retailers embrace (mobile) as another payment
option," Universal Music Mobile vice president and general manager Rio Caraeff
says.
Analysts say mobile payment technology creates new sales opportunities for
the music business, including CD pre-orders, ticketing and concert merchandise.
New mobile payment services are expected to expand the number of merchants
selling digital products for use on phones. In a move unrelated to PayPal Mobile,
UMG in May is expected to launch a new premium short-message service that will
allow consumers to use text-message codes to buy ringtones, wallpapers and videos
for their phones. Billing will be handled by participating carriers including
Cingular, Sprint and T-Mobile.
Analysts are divided over what the music business should expect from these
new mobile payment options.
"To the extent that digital money doesn't feel like real money, it may increase
spontaneous purchasing," says Aram Sinnreich, an analyst with Los Angeles-based
research firm Radar Research. Sinnreich argues that "carriers have a very simple
and transparent billing relationship with consumers, and adding a second billing
platform only confuses things."
Kountz cautions that it will take 12 to 18 months to see how much traction
services like PayPal Mobile can gain in North America. "User habits and awareness
don't shift overnight."
