Augmented Reality (AR) is the next keyword wet dream for the online industry buzz word bingo enthusiasts. As social media becomes more ingrained in commercial planning and the excitement fades into practical solutions, it’s inevitable that the new kid on the block will start to make headlines.

I think AR is an exciting development. However, behind the pomp that surrounds another buzz word, is there a commercial model that could make AR a practical tool in the e-commerce armoury?

I’m going to stick my neck on the line and say yes….

What is Augmented Reality (AR)?

At a basic level, AR is the enrichment of your physical experience with virtual information and interaction. The best example to conceptualise this is the overlaying of maps on your mobile phone with local information such as directions to the nearest train station, which happens contextually as you navigate the map. For a more encompassing explanation, check out the Wikipedia entry for augmented reality.

What’s already out there?

The technology has been around for years, just think of televised Football games where the play markers are overlayed on the pitch for viewers at home. While the commercial application of AR may be relatively new, forward thinking brands have been busy experimenting.

Retail

1. Benetton used AR in a 2009 Colors magazine edition – pages with AR symbols could be held up to a webcam to display films of the person on the page. Whilst this is a basic application of what AR can achieve, Charles Arthur’s article on AR in the Guardian goes further and is worth reading.
2. Glasses Direct has a neat 3D tool that allows you to try glasses on using your webcam and what they call a virtual mirror. You can try the virtual mirror from their website.
3. Over in the US, Zugara offers the Augmented Reality and Motion Capture Shopping App. The app allows customers to render clothing onto their own bodies using a webcam. An intuitive interface lets you browse items and styles and get a feel for how the clothes will look on you. It also integrates neat community features like sharing pictures of your outfits with friends to get their opinion. You can then buy direct from the app.

Publishing

Grazia tested the waters with an enhanced 3D magazine that used AR codes that could be activated by webcam or iPhone. GQ has followed suit.

Automotive

GM is working with universities to develop a smart windscreen that overlays important information on the transparent windscreen display to enhance the driver’s ability to see objects in their physical space. I’m a bit unsure about this one and whether or not it could distract drivers and actually decrease safety but the concept is worth reading about.

What will drive the uptake of AR?

Quite simply, the increased usage of smart mobile devices like the iPhone, Blackberry, Kindle, iPad etc. There is a lot of discussion about the shift from desktop to mobile and the prediction that in several years time e-commerce will be dominated by mobile browsing.

The latest data from ComScore shows a 30% increase in social networking traffic among smartphone users in the past 12 months – so mobile is already driving social media usage. Research from Forrester shows that iPhone users are more affluent than users of other smartphones, therefore have a high propensity to respond to relevant retail offers direct to their phone. The average internet usage for an iPhone user is 100MB, x30 larger than on other phones. And we all know about the obsession with the iPhone App Store.

Where can it be applied for retail?

Attention spans will only decrease as technology breeds laziness and the expectation of rapid solution delivery. This means people will expect everything at their fingertips when they want it. The savvy marketers will deliver content and solutions that people didn’t even know they wanted but subconsciously always desired. I think retail can tap into this latent demand in several ways:

• High street retailers can develop a Store Finder mobile app that overlays local store information on interactive maps – perhaps an aggregation of all major brands would provide cost efficiency.
• Dynamic contextual advertising that displays offers and promotions based on the location and profile of the mobile user (e.g. iPhone user gets different message than Blackberry user) – next step on from voucher code sites.
• Serving customer reviews to mobile devices to facilitate decision making on the move.
• Dynamically generating cross and up-sell recommendations based on scanning a barcode in-store on your mobile phone.
• For the fashion industry, improving modelling of clothes from home to help make purchase decisions – increased accuracy should also help reduce returns.
• For the DIY industry, enabling customers to create 3D maps of their own rooms and then visually render colour schemes and furniture to help with DIY projects.
• Local tourist boards can create mobile maps of the region with key tourist hotspots, attractions and services – whilst free of charge they benefit the economy by encouraging spending.
• Museums could create virtual tours so that visitors are not reliant on a guided tour/headsets – for a download fee, you can launch the virtual tour which overlays commentary and content based on your location within the museum.
• In publishing, AR could be used to enrich the consumption of content to increase brand engagement, essential in such a competitive market.

So what do you think? Is AR powder puff or can it add real value to consumers and drive commercial value? I’m leaning to the latter because the increasing uptake of mobile devices gives me hope that AR solutions will catch the eye. I await the professional slaughter…

One trend I’ve noticed lately is that the few UK retailers that have launched mobile commerce services have opted to do this via mobile apps rather than a mobile website. Both Next and Net-A-Porter have the app, but not the mobile site.

Is there an argument for producing an app rather than a mobile site? Or should retailers be looking to reach as many customers as possible with a mobile site? Or should they have both?

I’ve listed some of the arguments for and against…

Why have a mobile commerce app?

Since smartphones, and the iPhone in particular, currently dominate the mobile internet, there is an argument that an app is more likely to appeal to them.

Smartphone users are more affluent. Therefore, apps will appeal to an audience with more disposable income.

Better functionality. Smartphone features like GPS and the compass on the 3GS means that retailers can offer a richer experience, with location based services, augmented reality, or the photo function on the Amazon iPhone app.

Greater visibility. The popularity of App Store as a model for distributing apps means that retailers can get some good exposure for their apps. For example, the recently released Next iPhone app currently sits at number two in the Top 25 free apps list, which should guarantee plenty of downloads.

Your customers have smartphones. If you have a significant proportion of mobile visitors using Android phones and iPhones, then an app may be the best way to appeal to them.

Why have an m-commerce website?

Greater reach. An app restricts the number of customers you can appeal to.

Appeal to mobile searchers. Apps need to be downloaded in advance. If customers don’t have your app, they can’t buy from you, but if you have a mobile-optimised site, they can search and find it on their browsers.

No third party approval required. If you want an app, you’ll need to wait for approval before release and before you make adjustments. Having a mobile site means you are unrestrained in your site design and can push out updates and changes whenever you want.

No need to design multiple apps. Eventually other phones will eat into iPhone market share more and more, meaning that you may have to develop apps for several handsets. You can avoid this with a mobile site.

The browser-based mobile market is the future. According to recent Taptu research, the browser-based mobile web market will grow much faster than the app market, so a mobile site will be necessary long term.

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For a retailer looking for the largest possible audience for its products and services, the best starting point may be a website optimised for all mobiles, as this allows you to reach the widest possible audience. You allow people to stumble upon your site via a mobile search engine.

If a healthy percentage of visitors to your mobile site are using iPhones, Android Handsets or others, then there is a case for developing a dedicated mobile app to improve the experience for these customers.

Or, to cover all bases, why not have a mobile site AND app? This is what eBay, Amazon, Best Buy and others all do, and it seems to be working for them.

How are leading banks applying social media and mobile devices in ways that drive revenue and customer value? Spain’s BBVA provides an excellent example of how this can be done.

Here’s a look at how they’re creating qualitative outcomes for customers and profits for themselves, and how you can too…

Tú cuentas

Spain’s BBVA, one of the world’s largest retail banks,  is offering its customers Tú cuentas (“you count”). It’s a web and mobile delivered personal finance tool with all the usual functionality. But it goes further by allowing customers to manage their personal finances better. Tú cuentas offers analysis tools so customers can better understand, set goals and qualitatively improve their own spending and savings habits.

The “Just for Me” feature uses collective intelligence to offer a selection of personalized suggestions. It helps customers qualitatively make better decisions. Full stop! Isn’t that what banks were always supposed to do?

The interface is, of course, personalized. But BBVA’s mobile application offers “Amazon-like” suggestions based on the customer’s preference settings, specific financial objectives and actual behavior (how customers interact with the application, their bank accounts and other financial institutions).

On the flip-side, the mobile application tool helps BBVA better understand its customers’ evolving needs and behavior. In return it offers customers personalized suggestions on financial and non-financial products.

BBVA is using mobile technology to offer relevant and useful information within the ever-changing, momentary context of its customers lives. It isn’t just “entering the conversation” or “buzzing” or building “social graphs.”

These relevant, useful pieces of information include:

1. Practical financial tips to inform customers before they make money choices.
2. A short list of most liked products matching each customer spending patterns.
3. Financial products and services that may better address the individual customers’ needs.
4. Relevant facts and aggregate stats that provide insights on BBVA’s entire customer community and that of the individual.

BBVA also allows customers to do what they’re accustomed to doing – bill payment, direct deposit, automatic transfers, etc. Being a bank, they’re in a strong position to leverage their inherent position of trust. They exploit the opportunity by providing customers with the ability to aggregate their financial and banking access at one location, theirs.

How BBVA did it

At the highest level, BBVA aligned its pre-existing value to customers with their love-affair with mobile devices, and then aimed to offer more value than ever before. How? By being more relevant and useful than ever before.

Time-stretched BBVA customers already demonstrated a willingness to use their Web browsers to bank online. But when creating their Tu Cuentas mobile finance tool the bank decided to reach further, beyond offering one-directional, one-dimensional utility to customers.

BBVA decided to publish an uber-useful, ultra-relevant tool that customers wouldn’t just love. They’d NEED it in ways they’ve never needed before. Every day.

BBVA is a bank and that assumes a base level of utility, like online banking, bill payment, free checking accounts, etc. But BBVA is going further.

Today, they’re using a combination of the trust they’ve already built with customers and pairing it with customers’ implicit behavior. BBVA asked customers to behave in ways that assume trust and go further — leveraging customer interactions with BBVA and other financial institutions.

In other words, BBVA customers are conducting online banking with mobile devices. But BBVA is asking them to connect a wide array of other financial data sources ranging from charge cards to auto loans and mortgages. By allowing BBVA to access these data points AND monitor behavior of customers across BBVA and all other financial institutions BBVA promises to offer personalized financial advice. Again, isn’t that what banks are supposed to do?

Arkadi Kuhlmann, Chairman, President & CEO of ING Direct USA puts it this way:

“Mainstream America is looking for people to validate their beliefs and for authenticity… Every bank has ads with kids running through wheat fields and saying ‘we love our customers’, but everyone realizes that that is BS. Stop advertising ‘we’re there for you’, and focus on delivering on the things that customers really care about.”

Well stated. But are banks listening? They should be. Can you think of a more embattled profession these days — one in need of finding ways to engender trust and invent new levels of customer value? Social media and mobile apps can help. But only when planned as BBVA does.

Results

The result for BBVA: meaningful customer outcomes and profits using social media and mobile applications. BBVA is one of today’s best examples of social media and mobile device use in banking.

Yes, BBVA is going head-to-head with 2.0 struggling newcomers like Mint.com and Wesabe, the latter of which has switched from courting (only) consumers serving banks and credit unions as a software service provider. But aren’t they, as a bank, in a better position to leverage trust and, ultimately, fulfill on customers’ financial services information (decision-making) needs?

So how can you do it?

Good question. I’ve taken time to break down the elements here but will be back in days ahead to give more details on how service organizations can move forward and realize tangible, meaningful returns (profits, increased customer value that leads to loyalty/retention).

What happens when brand marketers think of a mobile application the same way an ad? Solid revenue with exponential value-adds.

Think of an application as an item of inventory that’s exceptional because it is also can be a utility that enhances productivity and engages consumers with cool features.

The item of inventory can be sponsored, and the application can be sponsored, covering a white-label or co-branding. There is no need for the brand marketer to invest in building an application and invest in marketing to support activation and engagement. Rather, the brand marketer has a multitude of options that will yield a greater return on investment.

1. Sponsor a pre-built application that is tested, optimized, and already enjoy a following on the market.
2. Sponsor a custom app built by professional developers with tremendous app design and execution as well as market strategy abilities.
3. Co-sponsor or be one of several sponsors for an app particularly suited to multiple sponsors.

What are the hottest advanced technologies in 2010 that are mobile market ready and waiting for sponsorship? One such technology is augmented reality for mobile local search.

Additionally, brand marketers can take advantage of virtual billboards that are dropped into a real-time view. The virtual billboards can be general or location-based such as the location-based billboards by Bionic Eye.

Augmented reality used in mobile advertising should reach beyond the cool factor and provide utility to enhance productivity in user’s lives. Mobile local search is one productivity tool that is proving to be a market success.

One of the most important user experience concerns for brand marketers should be quality. The length of engagement with the brand and repeat exposure to the brand through repeat use will only occur if the user found the experience pleasant. Yes, the term is “Pleasant.” There are many half-baked augmented reality apps that are cool and drive buzz, yet they are not pleasant and will not attract a loyal passionate following: a primary goal of a mobile application that is used for marketing.

While augmented reality for local mobile search is the hot new productivity application, smart phones have the technology to enable video overlays of reality to bring pre-recorded actors and objects into camera frame of the real environment. This new creative for mobile TV commercials will open up new revenue possibilities with a new generation of consumers that expect this high-level of visual immersion.

Augmented reality is one of the keys to unlocking a profitable application marketplace in mobile.

Online telephone company Skype has been making headlines today for its impressive growth over the last year. According to new research from TeleGeography, Skype now accounts for 12% of all long distance calls.

But is the company eating its competitors’ lunches or growing the telephony market? Signs point to the latter. But that doesn’t mean long distance carriers have less to worry about.

Skype’s business model seems easy enough. The company offers free phone calls (and video) over the internet between its users. If a Skype user calls a landline, he or she is charged for that call, but even that cost is much lower than traditional phone company billing.

It seems like a pretty easy way to undercut the competition. But Skype’s exponential growth over the last year hasn’t really come at the expense of other companies. The company has grew its phone calling rates over 60% last year.

Paul Brodsky, an analyst for TeleGeography, tells The Wall Street Journal that Skype grew its rates cutting into the business of traditional phone companies:

“Skype is taking away would-be market share of international traffic from conventional phone companies.”

But that does not account for the fact that international voice traffic is still expected to grow around 7 to 8% annually between 2009 and 2011 according to TeleGeography.

How is that possible? Because Skype has actually created business for itself. Consumers who have sworn off international calling because of high fees are more than willing to try out a service that allows them to videoconference for free. And the 2009 numbers from Skype show that they liked what they saw.

Skype’s registered user number is impressive — the company had over 500 million registered users towards the end of 2009, versus 405 million registered users at the end of 2008. But because it is a free service, that number has less to do with the company’s health than how often people use its services.

And those numbers are more than healthy. In addition to its more than 50% growth in Skype-to-Skype traffic last year, Skype users are expected to generate 54 billion minutes in international traffic in 2009 compared to only 33 billion minutes in 2008. Meanwhile, Skype is now the largest long distance phone company in the world.

Meanwhile, Skype charges for its SkypeOut service, which lets users to make calls to standard telephones. Those calls generated about 12 billion minutes of traffic in 2009. Skype relies on traditional wholesale carriers to connect these calls to the telephone network.

If Skype was really cutting into traditional telephony business, that business would not have grown 8% from 2008 to 2009.

That’s not to say that the company won’t also steal business from more expensive competitors. But so far, Skype is not integrated into the telephone habits of most consumers the way that traditional phone carriers are.

Most Skypers are still using their computers to make calls and they are not using the service as an alternative to more expensive options, but to make calls where previously they would have chosen another mode of communication.

While telephone carriers should be afraid of Skype, it’s not because the online company has underpriced them. It’s because the company has gotten people excited about something that they had made difficult and avoidable.

Now that gives Skype room to go after the rest of their business in 2010. Especially when the service starts getting onto mobile phones.

One of the biggest problems facing mobile internet surfing is Flash based content. However, this is soon to change. Flash CS5 (code name “viper”) is now under development with features that will enable it to create applications for mobile devices using action script 3. According to Adobe Labs, new features will include:

* Applications for iPhone — Publish ActionScript 3® projects in Adobe Flash Professional to run as applications for iPhone. Learn more.
* New text capabilities via the Text Layout Framework (TLF) — Get unprecedented text control and creativity with projects created in Flash. Advanced styling and layout, including right to left text, columns, and threaded text blocks, let you work with text in Flash like never before.
* XML based FLA files — Manage and modify project assets using source control systems and enable teams to easily collaborate on files.
* Code Snippets panel — Choose prebuilt code that can be injected into
* projects to increase interactivity and also reduce the ActionScript 3 learning curve.
* Flash Builder™ integration — Use Adobe Flash Builder software as your ActionScript editor within projects in Flash.
* Improved ActionScript editor — Improve productivity with custom class code hinting and completion.

Android Developers Blog annouced today the availability of Android 1.5 SDK. Although this version seems to be complete and finish, Google warns it might change few APIs.

The Android 1.5 platform will include many improvements and new features for users and developers. Additionally, the SDK itself introduces several new capabilities that enable you to develop applications more efficiently for multiple platform versions and locales. Following are list of features Google has added to new Android 1.5.

* – On-screen keyboard support, with support for auto-correct, text prediction, user dictionaries, and third-party keyboard layouts
* – Live folders (Auto-updating folder shortcuts for things such as YouTube favorites, Starred Contacts, and, with the API now available, whatever else developers conjure up)
* – Video Recording
* – MPEG4 and 3GP Video Playback
* – Stereo Bluetooth
* – Browser enhancements: New ultrafast “Squirrelfish” javascript engine, search within a page, copy and paste, UI changes
* – New Linux Kernel
* – Google Application enhancements: View Google Talk friend statuses in contacts, SMS, MMS, Gmail, and Email
* – New frameworks for developers to build upon: Widget creation, Live Folder creation, Raw audio recording/playback, Video recording, Speech recognition
* – Faster GPS, Faster camera startup, faster Gmail scrolling, and smoother browser scrolling

For full feature list, check Android’s Developers page .