Mobile Fuels M&A Activity
Navigator Edition: Mobile Commerce & Alternative Payments: SPECIAL EDITION
By: Dara Khan and Mike Hutton
First Annapolis has been tracking deal activity in the mobile commerce and alternative payments spaces over the last two years. In that period of time, over 60 transactions, totaling over $25 billion in disclosed mergers, acquisitions, and investments, were completed. Specifically, mobile payments, banking, and commerce deals totaled over $1.5 billion, not including Google’s $12.5 billion acquisition of Motorola Mobility. These deals span virtually every payments category, from market-leading e/m-commerce platforms to small mobile payments startups, and are driven by factors such as:
- Companies’ desire to build competency in mobile by acquiring the right talent, technology, and experience;
- The vertical and horizontal integration of mobile capabilities to gain control over the broad mobile value chain or offer a broader product suite; and,
- Established players investing in potential leading technologies, value propositions, and new segments of growth within payments and commerce.
Figure 1: Example Mobile Commerce Mergers, Acquisitions, and Strategic Investments
Note: Dates on horizontal axis not to scale.
Source: Company reports, and First Annapolis research and analysis.
Several of these transactions were focused on acquiring talent, technology, or other assets, and often involve mobile startups with fewer than 20 employees. For instance, Boku, a provider of carrier billing solutions and startup itself, purchased Paymo and MobilCash, two smaller rivals that had success forming partnerships with carriers in several countries in which Boku wished to expand. Google has purchased several small companies that specialize in offers, loyalty, and mobile acquiring, including Daily Deal, Punch’d, and Corduro, respectively. All three companies were mainly comprised of founders that launched unique mobile commerce offerings. Google also acquired Zetawire, a small technology company that holds patents for identity management and mobile payments processing. PayPal bought a small provider of alternative POS enablement technology, FigCard, as part of its strategy to enable its 100 million accountholders to pay at the face-to-face point of sale. PayPal (via eBay) also acquired Milo, a local inventory search service, for $75 million and RedLaser, a barcode-based price comparison tool. These companies were acquired before they made a significant impact in the market and they will likely help PayPal with its overall strategy to expand beyond SMEs and e-commerce.
Many mobile payments acquisitions have enabled the buyer to integrate for better market positioning. These transactions often involve one of two rationales: vertical integration to control more aspects of the mobile value chain, or horizontal integration to offer multiple m-commerce products. In either case, the payments players making these acquisitions seek to move mobile commerce adoption forward by creating a broader product set and having more influence over its delivery to the market. The potential logic behind these transactions is summarized below:
- Google and Motorola Mobility: provides Google some control over the hardware components that are key to mobile payments, including NFC and the secure element necessary to store credentials, as well as a robust patent portfolio.
- Fiserv and M-Com: enables cross-sell mobile banking services to banks that utilize Fiserv for processing and servicing functions.
- PayPal and WHERE: integrates offers with PayPal’s initiatives at the POS, providing a mobile commerce strategy within the wallet.
Some deals can be characterized by a buyer’s or investor’s desire to align with leaders in mobile commerce technologies, value propositions, or those with access to new or high-growth segments of the market within payments. Groupon has realized the importance of recommendations in purchase decisions and has acquired two local location-based suggestion services for restaurants and activities in cities: Mob.ly and Whrrl. The daily deal site also purchased Zappedy, which helps businesses track the activity of their customers. Along the same vein, AT&T subsidiary YP.com acquired Livedeal, an offers platform, to compliment its merchant search and suggestion capabilities. Amazon recently invested $175 million in LivingSocial, Groupon’s largest daily deals competitor. Verizon recently invested in Geodelic, a location-based targeting platform. Perhaps most interesting in this series of investments are those being made in virtual goods, which are summarized below:
- Visa and PlaySpan: micropayments platform that helps publishers monetize games by offering a range of payment methods, including carrier billing, a mobile wallet, or a proprietary PlaySpan prepaid card.
- Google and Jambool (SocialGold): enables game publishers to create and manage their own virtual currencies; Jambool’s tech also underpins Google’s new in-app billing API.
- American Express and Sometrics: enables game publishers to access a proprietary virtual currency that can be used in multiple games for digital goods purchases; may be integrated with Serve, which has a carrier billing and remote payments component.
There are various reasons for the increase in deal activity, but one thing is clear: mobile acquisitions are likely to continue through 2012. We expect both established and new constituents to make acquisitions and investments, particularly payment networks and processors that are seeking to expand their portfolio of mobile capabilities. Other potential buyers in 2012 may include wireless carriers, social networks, and handset and terminal manufacturers who all seek to further establish themselves in the mobile payments value chain. 2011 was characterized by deals in the remote mobile commerce space, as well as mobile banking and offers or deal platforms. In 2012 NFC technology players may become targets for acquisition, as national mobile payments initiatives at the point of sale ramp up. Offers platforms, as well as mobile data targeting and analytics services, will garner more interest as leading players recognize that an important portion of the overall mobile payments value proposition is the integration of m-commerce services. Of course, the ongoing challenge with making investments in a fast moving environment like mobile will be picking the targets that can both take advantage of near-term mobile use cases and provide platform flexibility to address the inevitable shifts in mobile opportunities.
For more information, please contact Dara Khan, Associate specializing in tthe Mobile Commerce & Alternative Payments Practice Area, firstname.lastname@example.org, or Mike Hutton, Analyst,email@example.com
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