Who is making the money (and how) with barcodes? No easy answers there.

But the raft of recent announcements makes it clear that barcodes, like online/mobile search, cover the bases to become the interface to information everywhere. They allow us to access information (about products, places, people – the works!). Like search, barcodes also trigger the delivery of advertising in tune with the information we request.

With so much in common between these platforms (barcodes and search) it’s not surprising that search/OS giants Apple, Google and Microsoft have all unveiled ambitious barcode strategies. (Even Facebook has joined the party.) But even these giants will need to develop the IP and business ecosystems to make this work.

Will they “make” or “buy” the pieces they need (perhaps snapping up a provider of end-to-end barcode services that include the handset app and the overarching platform)? It’s a tough one to call. But one thing for certain: barcodes are in the bowling alley and making a solution from scratch (down to the clearing house or other barcode management scheme to help advertisers and brands achieve reach and interoperability among operators, agencies and enablers) may cost time even these giants don’t have.

MORE THAN MARKETING

While we wait to see how this could play out over the next months, barcode providers are signing deals that lay the groundwork for a myriad of applications beyond mobile marketing and couponing, bring the day closer when barcode scanning could well replace search as a means to access information about everything everywhere. (And without making us scroll through reams of results on our mobile devices, I might add.)

This exciting scenario is at the core of the recent tie-up between Renu Mobile – a company that provides marketing and advertising services including mobile Web (WAP), SMS, social media and now barcodes – and NeoMedia, a provider of barcode scanning, management and publishing solutions whose platform includes barcode reading software (NeoReader) and a barcode management system (NeoSphere).

Earlier this week the companies announced an agreement to include NeoMedia’s products as part of Renu Mobile’s end-to-end mobile campaign management services. This paves the way for Renu Mobile to build out its cross-media mobile marketing mix and deliver barcode capabilities to agencies and brands. I caught up with Carol Glennon, Renu Mobile CEO, to ask her about the tie-up with NeoMedia and her strategy to target a wide range of industry sectors including pharmaceuticals, enterprise and homeland security.

INTERVIEW HIGHLIGHTS

First, what does the tie-up mean?

According to Carol, it’s the only fit that allows her company to get reach without allying itself with a potential competitor. Put simply, NeoMedia NeoReader barcode reader software comes pre-installed on key devices and platforms. (NeoMedia recently announced its reader software was released for the iPhone 3G and 3GS. Its reader software also comes pre-installed on Sony Ericsson devices – and more handset deals are imminent, I’m told.)

More importantly, NeoMedia doesn’t compete with Renu in managing/executing mobile marketing campaigns. If anything, NeoMedia, through its involvement with Neustar, a company spearheading the creation of a barcode clearing house to drive adoption and enable interoperability, is doing its part to ensure mobile marketing delivers. To date barcode companies NeoMedia, 3GVision, Mobile Data Systems and Mobile Discovery are using the Neustar clearing house (more in this press release from Mobile World congress).

Connect the dots, and it’s about delivering barcode campaigns that are open, interoperable and global.

However, it’s also about powering enterprise apps everywhere.

Carol aims to be on top of the game with a slew of clients and services that focus sharply on public sector, security and pharmaceuticals. It’s easy to imagine how scanning a barcode on a bottle of medicine could allow people to access valuable information such as the proper dose, potential side-effects and/or a mobile website with advice or the location of nearby pharmacies and physicians.

Likewise barcodes could ensure that authorities (such as police and fire) resolve an emergency situation with fewer casualties. Among the scenarios high on Carol’s radar: barcodes built into the firefighter’s badge that allow doctors access to details about the individual (profile, health record, allergies etc) when that person is unconscious or injured. “It’s about enabling services – and rapid deployment – without authorities having to invest in new equipment or learn a new skillset.” Little wonder the next stop for Carol is MILCOM 2010, a military trade conference focused on the “Next Decade of Military Communications.”

Keeping with the security scenario, barcodes could also allow authorities to define and oversee a security area. Barcodes on vehicles, equipment, even people would potentially streamline security checks and wring more value out of limited manpower and resources.

WHAT’S NEXT?

Carol tells me Renu will expand its mobile marketing activities through the partnership with NeoMedia. But Renu will also move full-steam ahead on its first test of a pharmaceutical application later in the summer.

After I interviewed Carol I saw a tweet from my esteemed colleague and Forrester anaylst Thomas Husson about his latest blog post, a must-read treatise aptly titled Liberty, equality and mobility. Having studied barcode reports and white papers in preparation for the posts I was writing, I struck by some interesting possibilities and parallels.

Thomas’ post is an excellent examination of the societal impact of mobile phones and the pivotal role of governments in moving effective communications and media tools a giant step forward. He argued that governments should balance investments and “make the most of mature mobile ecosystems” such as NFC (near-field communications). Thomas provides some examples and reminds us that “innovative research and development clusters that focus on mobile innovation, optimized transport systems, and a tech-savvy image are key to appearing innovative and attractive to firms looking for new locations. This is why the French government and the city of Nice are heavily backing the large-scale live Near Field Communication (NFC) trials that will take place in Q2 2010 in the South of France.”

While NFC is quite different from barcodes – there is some exciting overlap because they are both interfaces to the digital world of information, content and utilities.

In fact, Neustar joined with Visa at Mobile World Congress to showcase the potential of barcodes. In this pilot it was about scanning the barcode on the back of the Visa card to check your balance. But it’s easy to imagine more applications involving financial institutions.

Likewise, it would also be possible to scan a barcode (as it is to swipe an NFC-enabled device over an NFC tag) to manage workflow. (I am reminded here of a white paper I wrote for Nokia years back that argued workers – in this case technicians – could swipe their phones over an NFC tag on a particular piece of equipment to access repair records and streamline trouble-shooting.)

Hmm – sounds like an application that would fit with barcodes – particularly since these technicians could do this now with ordinary mobile phones. (NFC success is somewhat stalled until we have a critical mass of NFC-enabled devices.)

And, if we need any help figuring out additional scenarios, I’m sure Carol could think of a few…

The takeaway: Barcode business models and use cases are falling into place – and companies that miss this wave (and the opportunity to add a barcode component to their service offer) risk falling behind.

UPDATE: Carol just informed me via Skype that Renu Mobile has signed its first hospital customer. Looks like barcodes with be everywhere this year. Look for more analysis of this exciting space on MSG.

To fully understand the significance of Scanbuy’s decision, it’s important to review the events and announcements that have effectively dealt companies up and down the mobile barcode business ecosystem (Scanbuy included) a new hand of cards.

First came the decision in February by the United States Patent and Trademark Office to re-examine the patent claims filed by NeoMedia Technologies, a provider of barcode scanning solutions. The move prompted NeoMedia to push forward in March on a patent licensing program and tie up with other vendors (3GVision, Mobile Discovery, Mobile Tag, and NeuStar) in a pilot program based on open standards in a bid to show interoperability between the technologies out there and – more importantly – position NeuStar, a short code registry, as a central clearinghouse in the middle. More about this model and Jonathan’s own take in the podcast.

I appreciate that the barcode space is a tough one to navigate, which is why I also recommend this simple primer from Tim Green over at Mobile Entertainment.  Unfortunately, he wrote it before this flurry of activity.

So, what moved Scanbuy to open up the specs to the code that Jonathan stresses has been “labelled” proprietary (thus repeating the discussion around semantics that we began in this earlier interview on MSG)? At one level, it is a giant step toward building a viable ecosystem. But we can also read it as reaction to the pilot program (supported by players 3GVision, Mobile Discovery, Mobile Tag, NeoMedia, and NeuStar).

In response to my comment that NeuStar is clearly positioning itself to play the honest broker in a kind of hybrid model, Jonathan reminds me that Scanbuy can now also play the role of a trusted third party. “We don’t have a proprietary code or reader any more.” (Before Scanbuy’s wise decision to go open, other barcode companies could make a case that it was a closed shop with Scanbuy the only company that could both issue EZcode barcodes and decode them.) The argument from other vendors was that they didn’t have a choice because Scanbuy was the only company that could provide the technology, Jonathan explained. “But that now is off the table.”

NUTS & BOLTS: Scanbuy has committed to publishing the specifications for reading EZcodes, giving companies/developers the ability to create EZcodes. “So, a software company could create software for handsets which enables handsets to read those codes, and they could also create server side software which allows them to create the codes.” Plug-ins? They appear to be work in progress. “We’re looking at that; we made the announcement first. [As to] how we implement it, we’re looking at a lot of different tactics on how to release it and what the best way is.” De-coding? “Anybody who currently creates handset software to de-code barcodes could integrate these specifications into their current decoders.  So, 3GVision, for instance, who have software which de-codes QR and data matrix, could build in the functionality to also de-code EZcodes.

PROCEDURE & SUPPORT: For now, it’s all through Scanbuy. “Over the coming weeks they’ll be able to look at the specifications and create a platform which meets the specifications to create the codes on their own, if they want.” Meanwhile, Scanbuy is thinking through the details of offering support. “Support will probably not be free, however. So we’ll make the specifications free, support is probably going to cost.  What it’s going to cost, I’m not sure.”

OPEN STANDARD: Open is the direction the industry needs to go. While the pilot program, led by NeuStar, may be on the mark, Jonathan wonders whether it might not be too much, too soon. “Too many players, too early, can create too much competition and confusion in the market and it’s not necessarily a good thing.” As he puts it: “To have multiple players, you have to have multiple revenue opportunities for those players to be able to operate and compete, and it’s not clear right now what everybody’s revenue model is in that scenario.”

NEUSTAR: “We’ll see what happens over the next few months.  Obviously we are playing the most active role in the U.S. today as the only authorized code and the only authorized platform provider, so, we’re a major player in the space in the U.S. and we believe we’ll continue to be going forward.” (NeuStar has a strong focus on the U.S. market, thus Jonathan’s comments are limited to that geography.) Not satisfied, I put the question to him straight: What is Scanbuy’s position and will it participate in the pilot? “They [NeuStar] are positioning themselves as the clearing house which everything goes through. It’s not clear to us that they will play that role, so for us participating in the pilot at this point, we don’t know that it’s in our best interest to do that at this point [time].  We believe that if that is the final structure that the carriers decide is the best for the U.S. market, there will be a role for us to play. But it’s not clear. By no means is this the de facto structure for the U.S. market.”

DRIVERS: What is going to move barcode solutions out into mainstream mobile marketing and advertising campaigns? “This market will happen if readers are built into phones by the carriers, not by pushing downloads to consumers.” (By way of background, Scanbuy’s ScanLife handset application has already been pre-loaded on handsets from LG, Nokia, Samsung and Sony Ericsson, and been made compatible for mobile phones running on Google Android as well as BlackBerry, iPhone, Java, Symbian, and Windows Mobile.) “The carriers need to decide, OK, are we bundling readers on our phones or not? Sprint in the U.S. is about to start pre-loading our software on their phones, which is great news for the industry and for us.  But we need the others to get on board, and this has to become standard in every phone just as your Internet browser is that you use on your mobile device.”

EUROPE: Spain and Italy lead the pack – mainly because operators in these countries have chosen to pre-load readers on all their handsets. “What you’re starting to see [in Spain] is widespread code use. Marketers can go to several different campaign managers and get their codes, and they [the codes] will work across multiple operator platforms and handsets in the market.  If that’s the ecosystem that evolves, codes will be everywhere and they will be completely integrated into all marketing materials at all levels for marketers and media.”

DIRECT/INDIRECT MODELS: Which models are popular where? Japan has embraced a direct model (routing the user who scans the barcode directly to a site/destination). The trend in Western Europe, Latin America, and the U.S. is toward an indirect model, where scanning the barcode takes the user to a third-party server (where the site/action linked to a specific advertising campaign can be stored but also changed on the fly to freshen the sales pitch or simply point the user to a different site). “What you’re seeing in countries like Australia …is this hybrid approach where the campaign managers create a direct code that has a URL embedded in it, but that URL goes to their platform and the platform then tells it what URL to link to. So it’s a direct code but it goes through a campaign manager’s platform, not to the person who is putting the code out.” Could the U.S. adopt a similar model to make barcodes work? It could, provided that “code readers are ubiquitous on all phones; they read direct codes but the codes go to authorized campaign manager platforms.”

OUTLOOK: Is huge (!), but not all countries are moving at the same pace. “The markets where carriers and handset manufacturers are embracing it and getting phones into the market with software on them will take off the fastest.” In 2-3 years “codes will be everywhere in Spain and Italy.” In the U.S., the timeframe is “probably 3 to 4 years, and Latin America is probably 3 years.” Are we heading for a shake-in or shake-out? “From a competitive standpoint, I think you’re going to have major players in different geographies and the players in each geography will get stronger; there won’t be a lot of competition in each geography.” There may be a couple of players, but there are not going to be ten, for example. And this goes double for clearinghouses. “There aren’t going to be ten clearing houses in Spain or Italy or the U.S.

HOT TOPICS: In the U.S., it’s about “patent-related questions” and figuring out the right structure and ecosystem to take barcodes to the next level. In Europe it’s about growth – because the market is growing – and identifying the catalysts for even stronger growth. What’s next for Scanbuy? The excitement builds as the company nears the launch of two carriers in Spain, laying the groundwork for the first cross-carrier launch in Europe. “Spain will be the first country to actually launch and be operational with an interoperable system, and therefore our other markets around the globe, Latin America, US, Denmark, will be interoperable with those platforms so we’ll have a multi-country, 5 to 7 country interoperable system up and running in the next six weeks.”

My take: As I wrote earlier, the focus on open standards changes all the rules. The Scanbuy announcement signals a new chapter in the barcode industry (and a long overdue rethink on the part of Scanbuy). It also jumpstarts an equally overdue discussion around openness. But – as we know from similar discussions elsewhere in the telecoms and IT industries – there are different degrees and definitions of openness. How open is open and which open is best? The jury is out on that one.

In the meantime, there’s no overlooking the overlap between Scanbuy’s new push toward open standards and the progress of a pilot program (in which Scanbuy currently has little interest) aimed (likewise) at establishing open standards and a viable ecosystem. From my vantage point, the laundry list of fragmentation and intellectual property issues has yet to be satisfactorily resolved. But that’s not an excuse for not moving the market forward. Scanbuy’s decision marks real progress toward openness – and there is no turning back for anyone. Now all parties will have to walk the talk (and abandon the rhetoric we read across the blogosphere) if they want mobile advertisers to embed barcodes in their marketing strategies and not just dabble with one-off experiments.

Speaking of walk the talk, today Scanbuy’s EZ codes features on the cover BrandDigital: Simple Ways Top Brands Succeed in the Digital World, a business book by branding expert Allen Adamson. The 2D barcode on the back cover connects directly to the title’s page on Amazon’s mobile website, making this the first book to be sold in North America that includes an EZcode to sell the title via the mobile device. As Jonathan put in a statement: “This is a perfect example of how a 2D code placed on any physical media can send an interested shopper directly to a purchase opportunity. The mobile commerce experience has improved substantially over the past twelve to eighteen months, and we expect to see more of these applications in the future being initiated through our technology.”

This scenario also figures prominently in the Netsize Guide 2009, a 250-page mobile industry overview I wrote and offer for free download via a link on the homepage (sidebar).

Barcodes or visual search? Which technology approach will best link our virtual and physical worlds to support commerce? What do YOU think?

(I should mention at this juncture that the MSG global mobile industry research project and publication will feature a section on barcode companies and showcase successful mobile advertising campaigns. If you are a company in this space, or would like MSG to consider a mobile advertising campaign case study for inclusion in this work, then please contact me directly (peggy@msearchgroove.com).

Is convergence the end-game? Will mobile advertising foot the bill for mobile content and apps? What is the real value of location? How can companies remain relevant to their customers? Are mobile operators -well- outdated? These are just a few of the questions I have the freedom to explore in the guide with the full support of George Yaryura, Netsize Strategic Marketing Manager. Our goal: To co-create a highly accessible and valuable publication for mobile professionals and practitioners. I must keep the keep the details of these interviews confidential until the Netsize Guide is formally released at Mobile World Congress. But I can share my take of the megatrends that matter and the industry developments that merit a closer look.

Top of my list is mobile barcodes. A surprising number of companies up and down the value chain – from agencies to operators – have told me they plan to sharpen their focus on 2D barcode schemes that are built from the ground up to enable new forms of commerce and link the virtual and physical worlds.

Today’s announcement by Publicis Groupe – which sealed a partnership with Mobile Discovery, a platform provider focussed on joining up offline, online and mobile campaigns with the help of barcodes, mobile search and image recognition technologies – is a welcome confirmation of the pivotal importance of barcodes. (Kudos to both MobiAdNews and Mobile Marketer, sites that have consistently and expertly documented this nascent market. If you follow this trend, then I recommend you read their coverage.)

From in-store displays to outdoor billboards, the end-game is about creating a digital return path that consumers can act on using their mobile phones. Whether the goal is to encourage the all-important impulse buy or simply boost brand interaction, expect to see a flurry of activity as more companies step up to embrace these technologies.

This is good news for companies (including Scanbuy, NeoMedia, NextCode, Mobile Data Systems (MDS), Mobile Discovery, JagTag, i-Nigma, UpCode, ShotCode and 3GVision – not in any particular order) that provide the readers, symbologies and the back-end infrastructure to make this happen – as well as the brands, agencies and visual search companies (such as SnapNow) that got on the bandwagon early.

But with the excitement about the business objectives we can achieve using barcodes comes the concern that we may have inadvertently taken steps that will stunt market growth and shrink the pie for all the players involved.

I’m thinking here of the recent white paper on the topic of cameraphone based barcode scanning produced by the CTIA Wireless Code Scan Action Team. The white paper was created to accelerate the widespread usage of barcode scanning (using camerphone capabilities) in the U.S. and set a foundation that “encourages innovation and continual evolution of interoperable solutions through a wide range of participants.”

To this end the CTIA white paper endorses two formats: the open ISO standard Data Matrix (DM) and EZ Code, a proprietary code created by Scanbuy, a leading provider of mobile marketing solutions based around barcodes whose carrier clients include Sonofon, TDC and Sprint.

However, if the key is interoperability and defining a balanced ecosystem that will allow barcodes to (finally!) flourish in the U.S., then why has the CTIA white paper effectively tipped the scales in favor of a proprietary symbology by mandating that a code reader application (the application that scans the 2D barcode and actually decodes the alphanumeric data string that is encoded into a 2D barcode) include support for EZ Code?

EZ Code, though used by carriers and advertisers in a number of campaigns which I outline in this column, is nonetheless a proprietary format, with no clear licensing path for developers. In fact, it’s not entirely clear what the business model is. Purposely calling a proprietary solution a winner before the race is run – as this white paper effectively has – is hardly the way to jumpstart a robust, balanced and all-inclusive business ecosystem. What’s more, it flies in the face of the OMA (Open Mobile Alliance), which clearly states that proprietary codes can not be mandated.

So, the CTIA white paper declares all member carriers will support, at a minimum, DM and EZ Code. Is there a level playing field? Not a chance.

It’s an unfortunate outcome that Colin Gibbs, a sharp reporter at RCR Wireless whose work I highly respect, hints at in his recent post. Scanbuy has suddenly become the 800-pound gorilla and every body else (all the vendors that didn’t receive CTIA approval) are at a clear disadvantage. Ironically, the real issue in my view is the confusion this white paper creates in the marketplace. More fragmentation could very well create more opportunities for the real 800-pound gorilla: Google. (As we know, Google is working on an open source solution dubbed ZXing.)

In view of the controversy brewing about this white paper and the mixed message it sends to the marketplace, I caught up with several vendors in this space for their take. Scanbuy respectfully declined, but I am fortunate to have interviewed Jonathan Bulkeley, Scanbuy CEO, before the CTIA white paper was released. I will circle back next week with an exclusive podcast that gives us some important insight into Scanbuy’s strategy and roadmap.

Two companies that contacted me with written responses to the white paper were Mobile Data Systems (MDS) and Nextcode. Thanks to Liz Erk, who handles PR for MDS, for arranging a conf call/briefing with Rob DeStefano, MDS VP of Marketing, and Jim Levinger, Nextcode CEO. I was so impressed by her professionalism (and speed!) that I have since asked her to coordinate marketing at MSG.

To avoid any vendor spin we firmly focused on the larger issues of usability and flexibility – and the need to stress both in the next white paper. (This first white paper – though a step in the right direction, not only prematurely calls a winner in the barcode battle; it fails to detail the contribution of each company/player in the ecosystem and merely skims over the technical requirements for mobile device manufacturers. Clearly, the white paper must be viewed as a Volume 1.)

Points we (myself, Rob and Jim) agreed on:

1) The white paper has helped validate the camera scanning barcode market in the U.S., but there are serious shortcomings.

2) The market requires an open, universal and backwards compatible barcode solution. Supporting a proprietary route at this juncture sends a confusing message to the marketplace.

3) Key stakeholders such as advertisers have not been consulted at this stage. Their involvement in shaping the future of this industry is critical.

A word about advertising and the importance of open standards. In an ideal scenario, one the white paper calls a Direct Access Model, the call to action (a URL or other destination address associated with the campaign) can be decoded by the code reader software and executed upon without further assistance from the network. No middlemen, no control and no outside insights into clicks, conversions or customer analytics.

In contrast, an Indirect Access Model sends the data that has been encoded into the 2D barcode to a kind of clearing house for authentication and routing to a party there that makes the connection between the data and the campaign destination. (By way of background, Scanbuy’s approach is build around this model, a business strategy that allows it sit at the center of advertising campaigns and monitor their results.)

We know other vendors have issues with a proprietary solution. Now imagine the potential competitive disadvantage if these same vendors and their brand clients are must route their campaigns through a rival system (based on an Indirect Access Model) that exposes their campaign objectives and reveals their results. As Rob pointed out: “Every code is going to have to go back to Scanbuy, as if every company would want to be part of a closed, monolithic system. Individual companies will want to control their campaigns and who has access to the results.”

As in most cases, a middle course is usually the best path to take. Rob suggests a hybrid model paired with a more independent clearing house.

In this model the hybrid code would read and route codes to their proper campaign management portal. In the example he offered the a Clic2C code is read using the NeoReader client. The client would decode part of the code that identifies it as a Clic2C code and then query the Clic2C campaign portal at that URL to access the content. “Once it routes back to our Clic2C campaign portal, we reference the balance of the decoded data (the campaign reference information) that links back to the client with the brand’s designated content. This level of interoperability would allow users to be less concerned about the question: “Whose client do I need to have?” — and improve the user experience by enabling universal access content across campaign managers and clients.”

Read between the lines and it’s all about who owns the data. Brands want unique campaigns and will likely push back if they are presented with centralized control of their advertising message. Rob’s hybrid approach goes a long way toward restoring a balance. The bottom line: To move the market forward, we need open standards and open models that give brands – and all companies that want to participate in this emerging ecosystem – more control of their business destiny.

Disclaimer: MDS has provided MSG with a barcode free of charge for use in future mobile campaigns.