How the Mobile App Economy Will Be Won

“We’re not in a shift to mobile. Mobile is already here. We’ve shifted,” according to Kelly Graziadei, Director of Global Marketing Solutions at Facebook.

Graziadei sat onstage this week at TAP Conference 2015, flanked by representatives from Groupon and SeatGeek on one side, and Foursquare and Google on the other. Assembled to discuss where the mobile app economy is today and what the future holds for online shopping and beyond, the session’s panelists—and the event’s other speakers, from start-up founders and venture capitalists to speakers from Fortune 500 companies, mobile commerce platforms, and even a U.S. senator—echoed the clear message of Gary Vaynerchuk, an entrepreneur and investor and the morning’s keynote speaker: Commerce in mobile is a foregone conclusion because commerce happens wherever the user’s attention is.

“There is no other ecosystem that’s going to matter more in the business world,” explained Vaynerchuk.

“This is where the money’s going to be, where the action is,” he continued. “It’s the first, second, third, fourth, fifth, and sixth screens. As everyone is trying to figure out the ROI [return on investment], the commerce experience on mobile is phenomenal.”

Users are spending a disproportionate amount of their time and attention living in mobile apps, which is one reason Vaynerchuk said Facebook (which, along with Instagram, is among the top four apps) and Snapchat are better positioned for mobile by monopolizing that time and attention. The challenge for businesses and marketers is in taking the ubiquity of mobile devices and the wealth of data they provide about users and crafting an ad or a business transaction that’s contextual. As the mobile app economy panelists discussed, converting mobile users into customers is about creating a seamless and engaging app experience that doesn’t feel like you’re pushing a product on the consumer.

Brian Fields, Head of Strategic Partnerships at Groupon, said that 50 percent of the company’s transactions take place on mobile, but that a big part of capitalizing on that mobile commerce traffic is employing notifications in a careful and relevant way. They do this by using beacon and geolocation data to drive people into the app at the right time, without turning users off.

As Facebook’s Graziadei explained, the other half of that is the fundamental change in user behavior. Consumers are logging into mobile apps looking to discover content but “we’re in a place now where consumers understand and accept that brands know information about them, and they expect the brands to use that information to make their experience better, more personalized, more entertaining,” Graziadei said.

It’s a part of what Steven Rosenblatt, Chief Revenue Officer at Foursquare, described as “facilitating commerce.” He said companies that are trying to shoehorn legacy desktop infrastructure for a mobile world are clinging to a model that’s broken on mobile. For a location and check-in-based app such as Foursquare, that contextualization is defined by partnership-driven recommendations based upon where a user is and where they and their friends have been.

“For the first 20 years of the Web, we spent most of our time ‘cookie-ing’ users and no one paid attention to the physical world,” said Rosenblatt. “For the next 20 years, it will be about understanding that same behavior. Did I spend money on a contextually targeted recommendation? Did it actually lead to a purchase? Location is the new cookie.”

Buy Buttons and Monetizing Native Context

Commerce is moving away from a primarily search-based mentality on desktop to a mobile medium in which typing and search aren’t the first actions a user takes. Touch is now a user’s entry point to app-based, not search-based, discovery. At TAP, a conference solely dedicated to the app economy and mobile commerce, the undercurrent highlighted the value of partnerships in creating the smoothest inter-app and intra-app transactions possible for conversion.

Button, the growing contextual commerce start-up behind the TAP Conference, kicked off the event with an opening address from co-founder and CEO Michael Jaconi in which he announced the Button Marketplace with new featured partners Airbnb, OpenTable, and Ticketmaster (in addition to the company’s existing partnerships with Foursquare, Uber, and a selection of other apps). Essentially, Button offers a simple plug-and-play way for mobile-focused businesses and app developers to add “buttons” from one app to another—such as adding a button for the user to hail an Uber after making an OpenTable reservation or adding an Airbnb button for the user to find lodging after buying event tickets in another city on Ticketmaster.

The Button Marketplace consolidates the company’s new and existing partnerships into a single ecosystem, tying the app economy together in a mutual amalgamation of cross-app acquisition and retention, bundled for increased discoverability. “Button is pioneering the ability to make connective tissue that feels a connective experience,” Jaconi told PCMag before the event.

“In a lot of cases, that commerce should happen in the app where it was designed to happen. App developers have to build their services as wrappers around single-use cases. The Button Marketplace is the first marketplace of app connections, a framework for any developer or brand to give consumers the distributed experience they want.”

In a later panel, Button co-founder Chris Maddern joined representatives from Pinterest, Ticketmaster, and mobile payments platform Stripe to talk about contextual commerce. “We’ve seen a smattering of Buy buttons and connections between the places where people spend time and spend money,” said Maddern. “I want to see more of these actionable buttons popping up at a faster rate.”

Cristina Cordova, Business Development Team Lead at Stripe, said the contextual experience is rooted in getting people to buy products in the native apps they’re already using. In apps such as Twitter, she explained, that could mean a user sees a product (that is endorsed by a celebrity or an influencer who they follow) and makes an impulse buy in the moment because the connection to the payment app is embedded right into their mobile feed. She said businesses must view a tweet or a Facebook post as an ad unit, bringing contextual transactions directly to where users spend their time.

This concept of “buy buttons” turns the intuitive functionality into a utility for conversion. Dan Armstrong, Vice President and General Manager of Distributed Commerce at Ticketmaster, said this forces businesses to think about the other so-called “touch points” it creates with users—to which Button’s Maddern parlayed into the question of how contextual commerce reflects on a company’s brand.

“What’s the customer’s level of comfort with a brand?” Maddern asked. “How do we figure out what users want and how to build these dynamic relationships to the trust around commerce to be able to buy the things you want?”

Government Regulations in Contextual Mobile Commerce

No current representative from Uber attended the TAP Conference, but the ride-hailing juggernaut’s presence was palpable throughout the event. In an afternoon panel on how government regulations can impact the app economy, panelists debated Uber’s legal dilemma overfull-time employees versus freelance contractors. They also debated the company’s fight with New York City’s government over a proposed cap on the number of Uber driver licenses, as well as how these two issues reflect some of the challenges facing successful app-based businesses as they scale.

Several panelists suggested that the government needs a new classification of work for these types of businesses—one marrying the freedom of independent contracting with some of the employee benefits of full-time employment rather than forcing start-ups into an employment model their businesses can’t sustain. It’s a topic Senator Mark Warner addressed in a conference keynote via an afternoon Skype session from Washington, D.C.

Senator Warner, who was an early investor in the company that became Nextel before he began in public service, talked about the government’s responsibility to proactively invest in the future of commerce rather than holding back the pace of innovation. “The major congressional discussions in this sector are bogged down in twentieth-century concepts about the nature of work,” Warner said.

“Neither one of the existing two classifications will work in the 21st century. Can we look at making more portable benefits? Can we allow enterprises to try social insurance models with the blessing of the government? I’m working with getting various tech players to share some of their raw workforce data to get a sense of growing characteristics and needs. If we’re going to get it right, we have to make the federal government more willing to consider the economic benefits wrought by this transformation.”