• by Laurie Sullivan  @lauriesullivan, September 26, 2011

Google has begun to extend its advertising business offline. Wallet sits at the cornerstone of this long-term strategy to close the loop between offline and online advertising, as well as help media buyers make more strategic decisions through attribution modeling.

The company plans to achieve this by having the ability to analyze offline sales similar to online, says Marc Freed-Finnegan, Google's senior business product manager for Google Wallet.

"We already know online ads impact in-store behavior," Freed-Finnegan said. "We would, however, like to help merchants have a better understanding of the real impact."

Merchants have begun to put a heavy focus on the "loyal" consumers, finding those who continually return to the Web sites or physical stores to purchase products and services. Freed-Finnegan said merchants will provide the point-of-sale data, and Google will work to analyze the number of impressions, clicks, and coupons saved to Wallets generated. Combining the two manually at first will provide a starting point.

Google offers options to drive Web site and in-store traffic, but the key remains finding the most valuable consumers through loyalty and rewards programs. "You can run a promotion and find it's only generating one-time customers," Freed-Finnegan said.

Privacy Concerns

There are specifications for transmitting payment information over near field communication (NFC), a shortwave radio frequency technology. About 150,000 merchants in the United States accept payments.

Freed-Finnegan believes that doing electronic transactions through Wallet "is much safer than a plastic card." He said there is no chance of skimming because the smartphone gets turned off when not in use. "When the screen of the phone is off, the NFC antenna is off, and you can't send or receive any information."

The hardware chip that holds encrypted information prevents other applications on the phone from accessing the information. A one-way flow of information also aims to keep data safe.

Adoption Challenges

While NFC mostly supports consumer applications today, VDC research analyst John Shuster said there are plenty of possibilities for the technology in the enterprise space. It's not clear whether Google will extend support into the enterprise applications market, which could mean analytics connecting offline PoS systems with ad platforms.

Isis, the NFC network spearheaded by Verizon Wireless  and T-Mobile USA, will support Google's Android mobile operating system when services go live in 2012. Last week, Google Wallet rival Isis confirmed support for Android when service goes live next year. Apple also has thrown in support for Isis.

How It Works

Google Wallet, the application, supports an ecommerce platform, which turns a smartphone into a wallet. It recently rolled out to Sprint users, but Google designed it to run on an open platform and work on any mobile device and major credit card.

The application relies on NFC, in part by NXP Semiconductors, to make the transaction. It stores payment cards and Google Offers, coupons and loyalty cards. The platform will automatically apply the saved coupons when paying for goods or services, and loyalty.

Today, rather than run a traditional ad campaign, Google now offers Offers, an ad extension campaign. Think of a Google ad on google.com that clicks through to an Offers details page, where consumers can either print a coupon or save it to Wallet.

At present, there are a handful of companies supporting Google Wallet. Vivotech provides the technology to enable payments and conduct transactions, and NXP Semiconductors, a Philips Semiconductors spinoff, supports Google Wallet through its chips. The project, designed as an open platform, will encourage other manufacturers -- such as Broadcom, also a member of the NFC Forum -- to build out applications for the platform.