Report: Google might share Wallet revenues with operators

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Google (NASDAQ:GOOG) is considering sharing revenues from its fledgling Wallet mobile payment service with mobile operators, including Verizon Wireless (NYSE:VZ) and AT&T (NYSE:T), as a way to make the sevice available to more consumers and in more Android smartphones. According to Bloomberg, the changes are being considered following slow adoption of the service and the exits of two key executives.

Google Wallet is currently available across just a handful of devices: Sprint Nextel (NYSE:S) supports the service on two phones, Samsung's Android-powered Nexus S and Galaxy Nexus, and will add the LG Viper this spring. At last month's Mobile World Congress 2012 event, Vice President of Google Wallet and Payments Osama Bedier said Sprint will introduce "at least 10 additional phones" with support for Google Wallet this year. 

But Verizon Wireless and AT&T--which are teaming with T-Mobile USA for Isis, a rival mobile payment service slated to begin consumer trials later this year--have been reluctant to embrace Google Wallet. AT&T subscribers with the Galaxy Nexus can now leverage Google Wallet following a device compatibility update issued earlier this year. Late last year, Verizon Wireless stated it would ship the Galaxy Nexus without preloading Google Wallet.

"We are continuing our commercial discussions with Google on this issue," a Verizon Wireless spokesperson told Bloomberg in an email. AT&T declined to comment on how Google Wallet fits into its future plans.

Another possibility under consideration, sources told Bloomberg: Google may sidestep operators altogether, relying more heavily on in-store point-of-sale systems to process Google Wallet transactions. The approach could involve hardware or software upgrades to existing POS terminals coupled with software running on Google servers. Google Wallet is currently tied to MasterCard's PayPass network, which spans more than 300,000 merchant terminals.

Sources also said that Google is reeling from the departure of Jonathan Wall, credited as one of the original creators of the Google Wallet software. Wall left Google earlier this month to launch his own m-commerce startup, Tappmo, taking Google Wallet lead product manager Marc Freed-Finnegan with him.

Google told Bloomberg that it is pleased with Wallet's progress, noting that this week, it added boutique frozen yogurt franchise Pinkberry to its retail partner ranks. "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," a Google spokesperson said in email.

But availability across multiple operator networks and handsets is imperative for services like Google Wallet and Isis to achieve critical mass. Six device manufacturers--HTC, LG, Motorola Mobility (NYSE:MMI), Research In Motion (NASDAQ:RIMM), Samsung and Sony Ericsson--have committed to introducing Near Field Communications-enabled devices that support Isis.

The success or failure of Isis will have an enormous impact on Google Wallet's future, according to ABI Research analyst Mark Beccue. "Google is going to get nowhere in terms of getting Google Wallet on AT&T, Verizon Wireless or T-Mobile until Isis has had a chance to prove itself somewhat, and Google knows that," Beccue writes on the ABI Blog. "Google does not need to set the world on fire in terms of user adoption of Google Wallet in 2012, but they do need enough consumers to adopt the Wallet so they can prove the case."

That means Google must deliver a superior m-commerce experience for both consumers and merchants, collect data on those experiences and then use that data as leverage in its negotiations with operators (both the Isis partners and wireless carriers in other markets), Beccue argues. "The key to Google Wallet success at this stage is not mass adoption, but a frictionless, mistake-free consumer experience," he says. "The dumbest thing Google can do for their Wallet project is not get the customer experience right. My own testing of Google Wallet has been a mixed bag--sometimes payments and offers have worked great, other times, not so much. Google Wallet will die a very quick death if that experience doesn't become 99 percent great."

For more:
- read this Bloomberg article

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