August 1, 2001 – Mobile commerce is still a work in progress rather than a viable source of revenues, according to Cahners In-Stat Group.

In fact, the high-tech market research firm estimates that, on a global basis, 9.2 million wireless subscribers were m-commerce users at the end of 2000, representing a total value of $264 million. Despite these disappointing figures, Cahners In-Stat figures m-commerce has come a long way in its brief existence as a value-added WAP service.

"The main reason for the slow uptake of m-commerce is that services launched before they were ready," said Becky Diercks, director of In-Stat's Wireless Service. "Carrier networks were inadequate to handle the e-commerce-like shopping experience that was promised to subscribers."

Through these mistakes, carriers, content providers, wireless application service providers should be better positioned to drive m-commerce transactions growth – although slowly – over the next five years. The m-commerce market exception: Japan, where Cahners predicts it will grow to $2.3 billion in transactions by 2005.

To improve the state of m-commerce, it will be necessary to avoid repeating the mistakes already made, noted Cahners In-Stat in a new report, "Mobile Commerce: A Work in Progress." To help smooth the way, packet switched services such as GPRS promise to make the m-commerce and mobile advertising both more viable and more profitable.

However, until user preference and privacy issues are addressed, advertising may not have a sizable impact. One bright spot: location-based services, which may be a windfall for m-commerce as soon as cost-effective, real-time platforms are deployed.

"As an m-commerce strategy, it will also be important for carriers to target services to members of the so-called Generation Y. They tend to be quicker adopters and faster learners of new technology than other non-business niches," said Diercks.

In the long-term, Diercks noted, carrier success will be determined by the capabilities of networks and handsets, the quantity and quality of content and applications, and the ancillary services required to enable users to make purchases.

Among other In-Stat findings:

• SMS (short message service) is frequently overlooked as a key enabler of m-commerce, both as a method to initiate transactions and as a trigger for wireless data use. SMS is widely used throughout the world (51 billion messages were sent in the first three months of this year alone), and carriers must leverage this usage to spur m-commerce adoption.

• M-commerce, like wireless data, does not operate in a vacuum. Every new network improvement or technology upgrade may provide some benefit. There are three significant technologies ahead for the short term: GPRS, voice recognition and Bluetooth.