How to monetise a watch?

By Eric D. Fescenmeyer

Let’s talk about these new digital watches that have been threatening to come out. Samsung seems to have one. We’re pretty sure Apple has one and we are almost guaranteed Google has one at this point. With all that in mind, we know someone somewhere is going to drop one on the market soon enough…well, aside from the Pebble.

Pebble-Smartphone-Watch

The Pebble is one of the first ‘smart-watches’ available on the market.

People have been asking a lot of questions about what these new watches are going to be able to do. Are they to be a thin client for your mobile device? Will they be an independent mobile device? Could they be some sort of  RFID-like system that just identifies you to other machines and just happens to tell time, as well? Of course there are more questions than this but the number one question should be how will Google make money at this? Or for that matter, how will any make money?

For Samsung, and to a great extent, Apple, this question can be answered rather quickly and conclusively as these could just be hardware plays – another accessory to watch margins turn to revenue. But Google is a different beast all-together. Their model classically makes money through serving ads.

In fact, if we look at the history of their product launches, we can easily see that nearly all products are ad revenue supported or carry some sort of data mining potential that invariably leads to ad-revenue. So, will the new Google Watch support itself and the company by serving us ads somehow or deliver value by mining our habits for income-bearing social clues or maybe something else, entirely?

By all rendered/guesstimated accounts, the screens for all these offerings seem to be about Nano-sized  Google has made ads work at that size, to be sure, but what does click-through look like? There is the opportunity for an increasing bit of location-aware advertising capability. Perhaps ads would pop up when you get close to a McDonalds or H&M. That’s certainly one option. Google has been boosting up the Maps offerings.

Will Google use advertisements on a smartwatch in order to undercut its opponents?
Will Google use advertisements on a smart-watch in order to increase profits and undercut its competitors?

There would also be a tie-in with the display of whatever else the unit shows. There’s the obvious time function: Hey, it’s noon! How about a Stella? Your heart rate: buy some Nikes? Of course this sort of thing falls into the great question of ad value, especially when you can’t directly tie in a sale, or for that matter, guarantee eyes on the ad.

More lucratively, this may be a veiled play to bring NFC payments to everyone’s wrist? Think of it: no more wallets, no more pulling the phone out and clumsily looking for the app…and your wrist is so close to the cash register scanner already…

In terms of monetization, if this is Google’s plan all along, a digital watch might be the slickest way to make a buck (or a fraction of a cent off of every transaction.) Not to mention selling back all that sweet market data to the very vendors who have Google Watch payment apps.

The only way we’ll be sure is when one actually drops: If the price is low, Google has known all along how to make money on it. If it’s high, maybe Sergey just likes Sci-Fi.

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