Transaction Wireless
What it does: The company employs about 15 people working on its mobile platform for providing gift cards to mobile phones. It also offers and Internet and mobile marketing service to clients, which include Bass Pro Shop and Applebee’s.
Background: Founded in 2006. The core innovation for Transaction Wireless came from Basil Abifaker, the company’s chief technology officer. He developed an e-mail application for rudimentary phones while at Tourmaline Networks, which was sold to Intellisync and then acquired by Nokia.
Financial backing: Transaction Wireless has raised $4.5 million in venture capital to date, and will likely seek more venture funding late this year or early next. Lead financial backers include Mission Ventures of San Diego and Okapi Ventures of Orange County.
Latest developments: In August, Transaction Wireless received a patent on key elements of its digital gift giving and marketing technology, including the purchasing, delivery, management, redemption and personalization of mobile gift cards. It’s also working with its retailer to get its mobile gift card system deployed on their Facebook pages. “It’s a new market,” said Chief Executive Bruce Springer. “It’s a big focus of the industry, and there are a lot of people attacking in different ways. We’re attacking it from the inside out. We are working with retailers to help them evolve their strategy.”
SWAGG
What is it: SWAGG is the consumer brand of Qualcomm-owned Firethorn Holdings, which provides mobile banking technology to financial institutions across the country.
What it does: SWAGG is a mobile gift card application aimed at smart phones. It lets users manage their gift cards, membership cards, rewards cards and other plastic all from the mobile phones. Users can personalize gift cards. The application is expected to be released for the holiday season.
About Firethorn: Founded in 2002, Firethorn was acquired by Qualcomm about three years ago for $210 million — giving the San Diego wireless giant a toehold in mobile commerce software. The company is based in Atlanta. Its mobile banking application is white label, meaning the Firethorn brand name is under wraps. The banks offer the mobile banking service under their own brand names. (That’s not the case with SWAGG. Qualcomm is trying to build a brand name that resonates with 18 to 34 year old consumers. And its spending money to do it.)
SWAGG clients: SWAGG has signed up clothing seller American Apparel and 1-800-Flowers.com so far as its gift card retailers. It also has an agreement with Discover Financial to be the processor of gift card transactions.
Fun stuff: When it unveiled SWAGG at the Consumer Electronics Show this past January, Qualcomm celebrated by hosting a concert at the Hard Rock Hotel featuring Kid Rock. SWAGG has continued the hip marketing by showing up at South By Southwest and other swank events.
The wireless industry has been talking about the mobile wallet for years, where consumers swipe their cell phones at a retailer’s check out to make a purchase — just like they do now with credit cards.
Industry experts say this full-blown mobile wallet vision is hard to pull off today. But several companies are pursuing specific types of mobile transactions. And one with a lot of momentum leading up to the holiday season is mobile gift cards.
Two companies with ties to San Diego — Transaction Wireless and Qualcomm-owned Firethorn — are among the numerous firms betting this year’s gift giving season will push mobile commerce — and particularly mobile gift cards — forward.
“There are some challenges to mobile commerce in general having to do with hardware,” said Mark Beccue, senior analyst with ABI Research in New York. “But gift cards are low-hanging fruit. It solves a problem for people. You have all these cards, and you’re not utilizing them very well. It’s just a lot easier” to have them delivered and stored on mobile phones.
Transaction Wireless, a San Diego startup, offers a mobile and e-mail gift card platform for retailers including Applebee’s, Bass Pro Shop and AMC Theaters.
Firethorn, a mobile banking firm in Atlanta, which Qualcomm bought three years ago for $210 million, expects to have its mobile gift card application called SWAGG ready for release before the holiday season.
The two companies are attacking the market from different angles. Transaction Wireless is providing behind-the-scenes technology that allows retailers to sell gift cards on their websites or their Facebook pages. The cards are delivered either to the mobile phones or a computer e-mail account.
“We trying to help the retailers sell more cards and build business for them,” said Bruce Springer, chief executive of Transaction Wireless.
In contrast, Qualcomm’s Firethorn is striving to build its own consumer brand with SWAGG — a play on the phrase “Stuff We All Get” that refers to free gifts handed out at corporate conferences. SWAGG is an application that lets users buy, receive and organize gift cards on a cell phone.
“What consumers told us was, “Look, I really like my retailers and I’m loyal to them, but when it comes to managing more than an handful, it’s impossible,” said Ben Ackerman, vice president of business development for Firethorn. “I need something to help me manage all the promotions and the membership cards and the loyalty cards and the gift cards.”
While the technology exists for mobile gift cards, there is a question of whether consumers really want it. Security and privacy top the list of reasons why U.S. consumer might balk, said Tina Teng, senior wireless analyst with iSuppli, an industry research firm.
In the U.S., consumers are not accustomed to buying things using wireless devices, she said. In Japan and South Korea, where public transit ticket purchases via cell phones are common, mobile commerce is more accepted.
But consumer reluctance is beginning to ease, particularly as Web-capable smart phones become more powerful. Mobile banking is now mainstream. Some airlines allow customers to send boarding passes to their smart phones, with the bar code scanned at airport security.
ABI Research forecasts the total mobile purchases this year will reach $2.1 billion in the U.S. That’s up from $390 million in 2008 and $1.2 billion in 2009.
Founded four years ago, Transaction Wireless has been touting its mobile gift card platform as a way for retailers to tap into booming social networking sites. Bass Pro Shop and Applebee’s, for example, now sell mobile and virtual gift cards on Facebook using Transaction Wireless’s technology.
Springer said the company is in the process of setting up a Facebook featuring all of its retailers in one spot, including SpaFinder, Midwest department store chain Gordman’s, convenience store Thortons and Hallmark’s business services division, among others.
“Transaction Wireless is one of the pioneers,” said Beccue, the ABI Research analyst. “They have been working on this for quite a while, and I like the idea of a virtual mall on Facebook. It makes sense for retailers because it’s viral.”
For those receiving mobile gifts cards based on Transaction Wireless’s technology, there is no need to own a smart phone or download an application. “That’s part of the secret sauce in our patent,” said Springer, “We’re able to look at a mobile number, figure out what device type you have and send the right experience to the handset — be it a smart phone or a non-smart phone.”
Firethorn’s approach with SWAGG is designed for smart phones, although the gift card can be delivered via computer e-mail as well. It has signed up Los Angeles clothing manufacturer American Apparel and 1-800-Flowers.com as initial retail partners. And it is collaborating with Discover Financial Services to process payments when a SWAGG customer uses or buys a gift card.
SWAGG is aiming for young, affluent, technology savvy consumers who are comfortable with mobile commerce.
“As we say, it allows consumers to give, get and go,” said Ackerman. “We allow consumers to give gift cards. We allow them to get hooked up with offers from retailers they care about, and we allow them to take their plastic mobile.”
Beccue said a hurdle for SWAGG is getting enough retailers to partner with the company.
“Their relationships have been with banks (Firethorn) and wireless carriers (Qualcomm), and not with retailers, where the Transaction Wireless people come from the retail space,” he said.
He thinks that the direction mobile commerce is still being sorted out. Initially, the wireless industry had the idea of putting a chip in the phone that would allow it to function like a credit card.
“But that got complicated because the carriers are involved and the handset makers have to put the chip in, and they don’t see a business return,” he said.
Now, companies are using software to try of bring mobile commerce alive. An iPhone application for Starbucks gift cards was very popular, he said.
“When it comes to consumers using something, there are two drivers. It’s either cheaper or easier,” he said. “Consumers would find this more convenient, and retailers are looking for ways to move gift cards into a more electronic space. It’s cheaper. They don’t have to deal with the plastic.”
