Google reconsiders Wallet strategy due to slow adoption

Google aims to spur demand for its Wallet app, which is designed to boost its share of the multibillion-dollar market for mobile advertising by letting it target shoppers with coupons and promotions. The challenge: Few phones have the right technology installed, and rivals are readying their own systems, including one called ISIS that’s backed by carriers.

“They are in a bit of a re-evaluation pattern right now,” said Rick Oglesby, an analyst at Boston-based research firm Aite Group. “It’s going much slower than anticipated.”

One of the two original creators of the Google Wallet software, Jonathan Wall, left Google this month to start his own company focused on mobile shopping, Tappmo Inc. Marc Freed- Finnegan, lead product manager for Google Wallet, also departed to join Tappmo.

Making Progress

Google said it’s enthusiastic about Google Wallet’s progress so far. The company is enlisting retailers such as the Pinkberry frozen-yogurt chain, which announced this week that it is using the system. Google Wallet relies on a system called near field communications, a wireless standard that works from within a few inches.

“We continue to work hard to develop Google Wallet and build the partner ecosystem to make it possible for everyone to pay with their phones and get great deals while shopping,” Nate Tyler, a spokesman for Mountain View, California-based Google, said in an e-mailed statement.

The mobile-payment market has drawn scads of competitors, including startups and more established companies such as Visa Inc., all aiming to capitalize on the growth of smartphones. The idea is to free shoppers from having to carry credit cards or cash — they just need their handsets. Mobile-payment transactions will top $170 billion by 2015, up from about $60 billion last year, according to Juniper Research.

ISIS System

As the owner of both the world’s most popular search engine and smartphone operating system, Google has an inside track with consumers. Still, it lacks the support of the two biggest U.S. carriers, Verizon and ATT, which are backing the ISIS system. For now, Google Wallet’s NFC functions only work on two phones from Sprint Nextel Corp., the third-largest U.S. carrier. While 50,000 to 100,000 people have downloaded the software, only a small percentage use it, Oglesby estimates.

“The reception has been lukewarm,” said Chetan Sharma, an independent consultant focused on the wireless industry.

Gaining a bigger foothold in the wireless-payment market would help solidify Google’s role as the leading seller of ads on phones and other mobile devices. That industry is projected to reach almost $11 billion in 2016, up from $2.61 billion this year, according to research firm EMarketer Inc.

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