Near-Field Communication Gains Momentum, While Ad Industry Support and Lack of Consumer Education Slow QR Code Adoption
NEW YORK, NY — Near Field Communication is gaining momentum as consumer support for QR Code technology has started to fade. While marketers have increased the use of QR codes to drive engagement, bridging traditional print campaigns with online content and making information more accessible and portable for consumers. The little square patterns have been showing up everywhere from outdoor billboards to magazine campaigns. While the use of QR codes is becoming more widespread, one should not assume that its increasing prevalence is a sign of the technology’s success.
QR code (Quick Response) technology was originally developed by Denso-Wave, a division of Toyota, as a method for tracking vehicle parts during the manufacturing process. The two-dimensional matrix are readable by dedicated QR barcode readers and software-enabled camera phones. The technology has gradually found its way into marketing promotion as a quick method for relaying information from traditional print-based advertising to mobile platforms.
QR codes have gained visibility as a marketing tool in the last year primarily because national advertisers have been incorporating the technology into their campaigns; however, before you jump on the QR code bandwagon, you need to consider several factors. For starters, there’s a significant knowledge gap among consumers on the use of barcode scanning technologies. This knowledge gap should not be underestimated.
What’s Holding Back QR Code Adoption?
Smartphone users tend to fall into the two categories of light and heavy users. Heavy users are more advanced and tend to quickly adopt new technologies, such as barcode scanning, but heavy users represent only a small fraction of total smartphone users. While smartphone sales within the United States have been increasing, they currently represent less than 50% of the overall cellphone market according to a recent report by Nielsen. Therefore, one could conclude that the total number of smartphone users actually engaging with QR code–based promotion is not very significant.
Chris Grayson, Director of Digital at Humble, a New York-based production company addressed this issue at the MediaPost’s Digital Out-of-Home Forum held recently in New York. “Regarding QR codes, there are some significant issues with adoption in the US market. Most of the burden is being placed on advertisers to educate the public to use QR codes and it takes a fair amount of effort on the part of consumers to download the components to make it work. If you look at markets like Japan, where QR codes are ubiquitous, the software comes pre-installed on smartphones. It’s part of the operating system,” said Mr. Grayson. “I think a big part of the problem with QR codes in the United States is that the advertising industry has not organized around it. Organizations such as the AAAA [American Association of Advertising Agencies] should be lobbying handset makers and carriers to get this software pre-installed.”
Part of the problem with QR code usage is that barcode-scanning software is not universally supported across every mobile platform and it’s cumbersome to use. Apple’s iPhone doesn’t support the technology natively, requiring users to download additional software that uses the phone’s camera to scan barcodes and load URLs into a web browser. Both Android and Blackberry platforms do provide native support for barcode scanning on some smartphone models. The lack of standardization across platforms creates a huge barrier for adoption. In addition, QR codes are fairly linear in terms of their functionality. In contrast, Near-Field Communication (NFC) has a much broader range of applications.
Near-Field Communications and Digital Out-of-Home Media
Near-Field Communication, or NFC, is a set of short-range wireless protocols, similar to Bluetooth, which enables devices to share information, provide wireless access such as electronic keyless entry, and enables transactions such as mobile payment. NFC technology is beginning to make inroads in the digital out-of-home industry.
RMG Networks, a leading provider of digital out-of-home networks, is testing NFC technologies on their networks in San Francisco, New York, Chicago, Los Angeles, and Boston. RMG will incorporate Blue Bite’s mTAG solution which combines NFC and QR code functionality at more than 75,000 digital-out-of-home locations. The system will prompt consumers to tap or scan an mTAG placard placed near each digital signage display. Once a user touches their mobile phone to a placard, location-specific content will automatically be displayed on their device that includes special offers and information.
Posterscope, an out-of-home marketing agency, launched an advertising campaign across the United Kingdom that uses NFC-enabled posters to promote the release of 20th Century Fox’s latest movie, X-Men First Class, starring James McEvoy. The campaign uses NFC chip affixed to the rear of each poster that enable consumers to instantly access the latest film trailer on their mobile device. The outdoor campaign was developed as part of a partnership with Nokia, O2, Proxama, and JCDecaux.
“What’s so exciting about this layer of interactivity is its simplicity and the size of the opportunity for generating scale,” said James Davies, Director at Hyperspace, Posterscope’s innovation and digital division. “There are 130,000 commercially available poster sites in the UK that can be instantly enabled. For the client the cost of each NFC chip is extremely low and the consumer receives instant fulfillment. The potential application of NFC technology is immense.”
NFC Gaining Momentum
An estimated 1 in 5 smartphones will have NFC functionality by 2014, according to a recent report from Juniper Research. That’s almost 300 million handsets and more than half of those will be in North America. Mobile carriers are working to incorporate NFC capabilities into their networks, as there are major revenue opportunities from mobile commerce, banking, and ticketing transactions.
The NFC Forum, a non-profit industry association formed in 2004 by NXP Semiconductors, Sony, and Nokia is working to drive awareness of NFC technology. The Forum, and its 135 member companies, promotes implementation and standardization to ensure interoperability between devices and services. Some of their initiatives include the development of an “N-Mark” that’s designed to help consumers identify NFC-enabled media and objects. The mark consists of a stylized “N” and indicates a spot where an NFC-enabled smartphone can read an NFC tag and establish the connection.
The NFC Forum has also published a series of White Papers, including using NFC to develop “Smart Posters” that place tags in traditional print-based posters, billboards, magazine pages, digital signage displays, and three-dimensional objects. As an example, an NFC-enabled digital signage display can recognize someone approaching the sign with an NFC-enabled smartphone, read the user’s preferences, and customize the message on the display for that user.
NXP Semiconductor is supplying the technology for Google Wallet, the newly announced mobile transaction application currently being tested in San Francisco and New York. Google Wallet is a partnership between Google, Citibank, MasterCard, First Data, and Sprint that enables consumers to use their NFC-enabled smartphone to replace their physical credit cards. Consumers can pay for goods and services by tapping their phones on a secure NFC terminal with a higher level of security than traditional credit cards. The technology may soon find its way into transit systems, electronic passports, healthcare, and driver’s licenses.
“This latest move by Google is truly unleashing the full potential of NFC,” said Ruediger Stroh, executive vice president and general manager, Identification Business, NXP Semiconductors. “NFC technology essentially converts smartphones into loyalty cards, single-tap location ‘check in’ devices, concert tickets, coupon carriers, contactless payment devices, transit tickets, and secure keys to access cars, hotel rooms, buildings, and computers—the possibilities are endless.”
With the announcement of Google Wallet, NFC technology will become standard on all Android-based handsets within the next 12 to 18 months. Samsung’s Galaxy S, Nokia’s C7, and Google’s Nexus S have NFC capability built in. There have been rumors that Apple will bring the technology to the iPhone as well. It’s likely that QR codes will be replaced for marketing and promotion by NFC technology within the next 3 years.
Free Trend Report: Why Location Is the New Currency of Marketing
Finding effective ways to deliver branded messages in today’s complex media environment is one of the biggest challenges facing advertisers. Traditional methods of advertising have become less effective as consumers spend less time in places where marketers have traditionally had an advantage in reaching them. In addition, consumer attention has fragmented across multiple channels as media options and device platforms increasingly diversify.
Active consumers spend money, and while they are going about their daily routine, they are also actively looking for information. According to Google, more than 50% of all mobile searches have local intent, and 17% of search happens while consumers are on the go.
Digital Out-of-Home (DOOH) advertising, also known as Digital Place-based (DPb) media, utilizes strategically placed, networked digital signage displays to reach on-the-go consumers while they are outside of their home with highly targeted messages. Location-based mobile and digital out-of-home media are part of a larger multiscreen ecosystem that effectively amplifies brand messages to create a deeper level of engagement with active consumers.
Why Location Is the New Currency of Marketing is aimed at CMOs, media buyers and strategists and provides insight into why marketers are increasingly shifting their advertising dollars to these rapidly emerging media platforms.
Highlights from Why Location Is the New Currency of Marketing include:
- The Connected Consumer
- Leveraging the Moment
- Multiscreen Campaign Planning
- Amplifying Reach With DOOH Media