Mobile commerce, or m-commerce, refers to the purchase of products or services from a mobile terminal. Most of the early hype surrounding wireless technology was related to m-commerce. Companies envisioned consumers everywhere using mobile devices to purchase products. With the success of e-commerce for many types of purchases, it just made sense that m-commerce would be at least as successful. At the time, new wireless Internet technology was just coming to market, bringing with it enormous expectations. How could m-commerce not succeed? It is essentially the same as e-commerce without the constraints of a wired connection.

To meet these wild expectations, wireless operators paid billions of dollars for wireless spectrum licenses so they could upgrade their networks to meet the upcoming demand. For example, in Britain, the auctions for wireless spectrum raised $35 billion (U.S.). This equates to several hundred dollars from each person in the country. Other countries followed suit, selling their wireless spectrum for billions of dollars as well. But there is one problem: The wireless operators cannot cover these costs based on current revenue, and voice and wireless Internet access do not even come close to compensating for the expenditures. The idea was that m-commerce would help grow revenue for wireless carriers as well as the service providers. Unfortunately, as of early 2003, this has not yet come to fruition, and many operators are in serious financial trouble. The idea of making purchases from a constrained device is not that attractive when there are so many other avenues available to make the same transaction. Making the purchase at a physical store location, or even on a desktop Web browser is much more productive and enjoyable than using a wireless device, especially when the device is a mobile phone.

m-Commerce is best suited where the consumer has a sense of urgency, when they are required to have their goods or services immediately for upcoming functions and events. For product purchases, the sense of urgency is overcome by the fact that the consumer will still have to wait for the product to be delivered. In the near future, this limits m-commerce to products and services that can be obtained instantly, such as movie tickets or information services. We are still far from the time when consumers will be using their mobile devices to purchase appliances or to apply for a mortgage. Thankfully, there are some m-commerce offerings that show potential. The following solutions should help to drive the m-commerce market in the coming years:

  • Digital purchases. The most suitable purchase for a mobile user is for a product that can be downloaded and used immediately. The two biggest markets for digital applications are ringtones and games. Many carriers allow users to download new ringtones for their devices for a nominal fee. This provides users with a way to personalize their device. Another surefire success is mobile and wireless games. The advances made in mobile devices make them great vehicles for game playing.

  • Mobile banking. There are two benefits to mobile banking that a wireless device can provide. The first is providing access to personal bank accounts to view account history and execute transactions. This is an extension to Internet banking that has been very successful. The second is using a mobile device for payments, essentially acting as digital cash. A great deal of interest has been expressed about this area, so expect it to become a reality in the near future.

  • Information services. Although mobility has many advantages, mobile users often feel out of touch with their daily routines. Information services help address this by providing information that the user is accustomed to having, such as stock quotes, weather information, and sport scores. With the mobile messaging technology growing in popularity, many forms of information can actually be pushed to the user in the form of an alert or notification.

  • Location-based services. The ability for merchants to capture and react to a user's current location and requirements can be a powerful tool for selling services. Location-based services allow consumers to find the precise information they need at the exact time they want to use it. This will be an important enabler for m-commerce solutions, although privacy concerns will have to be addressed before location services are widely utilized.

  • Mobile shopping. Most forms of shopping are not going to be popular from mobile devices anytime soon. It is impractical to surf for items using constrained devices, making other methods of shopping much more productive and enjoyable. At the same time, there are some forms of purchases that lend themselves well to m-commerce. For example, having the ability to purchase movie tickets for a show playing the same evening can quite valuable. Mobile devices can also be used for comparison-shopping. Before making a purchase, a shopper in a retail store may want to first see what the current price of a product is from an Internet vendor to ensure they are getting a good price.

  • Mobile advertising. As mobile users start to take advantage of m-commerce solutions, mobile advertising is sure to follow. The mobile operator has access to several types of information that is attractive to advertisers, such as where users are located and what they use their mobile phone for. With this type of information, advertisers can send out personalized messages. The biggest obstacle to mobile advertising is customer backlash. If users start to get unsolicited messages and advertisements on their devices, they are likely to switch service providers, or worse, stop using their device. For this reason, in the near future, we will most likely only see requested advertisements, such as the nearest gas station or restaurant.

The lack of m-commerce acceptance can be blamed on both technical and business issues. On the technical side, the devices and networks do not have compelling features for consumers to use them for purchases. The interface on most phones is inadequate for any real data entry, and the wireless networks only recently have the capacity for the content that is associated with making a purchase. Grayscale images do not do a great job of selling a product. There are also security concerns that need to be addressed. Consumers are not convinced that e-commerce is secure, so confidence in m-commerce security still has a long way to go. On the business side, there are two major issues. The first is the lack of compelling applications. There are no killer m-commerce applications that are driving adoption. The second revolves around billing. The wireless industry has to address billing and pricing policies between the consumer and the company providing the service. Most consumers are not looking to establish billing relationships with every service provider they do business with. All of the billing has to be managed through a central source (most likely the wireless carrier) for adoption of new services to increase.

m-Commerce will eventually succeed. It is just taking longer than most people expected. Devices are steadily improving in both performance and usability, and wireless networks now offer communication speeds surpassing traditional desktop modems. At the same time, wireless operators continue to offer new products and services that are suitable for mobile users. Finally, as mobile devices start to be used as digital wallets, a new form of m-commerce will emerge. Devices have the potential to replace credit cards as the primary means of making purchases. So rather than using the wireless Internet to purchase a product that will be delivered at some point in the future, it can be used to pay for a product at a physical store location, just as you would currently use cash or debit cards.