Analysis: Twitter’s investment in SWIRL

April 24, 2015, 9:18 a.m.
ABI Research

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Twitter’s investment in Swirl is that has really grabbed the headlines, so I have given a quick analysis of the company and the area in general. There have been bigger investments (SK Telecom Acquiring Shopkick), while Companies like Facebook and Groupon are already testing their own iBeacons, but this is an early and important verifier of the potential in iBeacons for advertising/marketing networks, for those outside the industry.

So what has Twitter invested in? Swirl is currently in 100s of locations as of the start of 2015, but hoping to be in the 1000s to 10,000s by the end of the year. Current clients are focused on apparel and include Lord & Taylor, Hudson Bay, Urban Outfitters, Kenneth Coles, Timberland, Marriott and Alex & Omi, as well as number of undisclosed trials. ABI Research believes there is a lot of opportunity for expansion into grocery, big box, gas/convenience, and department stores for 2015. It has interest outside of the US but it is not actively expanding regionally in 2015.

The company develops its own beacons but is OEM agnostic, It also has a partnership with Zebra Technologies to promote each other’s technologies in winning deployments. Typical deployments are less than 5 beacons per store, with costs publically stated at $100 per store per month. It offers an enterprise beacon management platform, which enables the retailer to have full control over beacon status, messaging updates as well as having control over set a messaging parameter such as demographic, dwell time, time of day, etc. Analytics are included as standard, and it also offers its SWX Ad exchange which enables retails to reuse its beacon bandwidth to sell advertising to trusted partners. This operates in a traditional transactional media buy model with SWIRL taking a fee per transaction. SWIRL also believes it is better positioned than most to achieve enterprise scale to support large chains and advertising campaigns

A huge issue for start-ups like this is reach, when iBeacons require the user to have downloaded an app. To solve this, SWIRL is working with leading third parties like Snipsnap, to broaden the reach with a target of 100m smartphones in the US by the end of 2Q15. Potential access to Twitter users would of course solve this problem immediately, although ABI Research believes an investment by Twitter does not mean it plans to integrate the technology in the short term. Currently 60% of shoppers that have an app supporting Swirl’s SDK, with active location and BLE will open and engage with a message. Of that, 30% will redeem offers at the point of sale, using a trackable coupon.

Who are Swirl’s competitors?

Swirl is probably the first and best known of these companies, but there are a host of other players such as InMarket (huge network/app reach-watch this space), Mobiquity (240 malls US), Appflare (targeting 10,000+ stores UK), ECODS (7,000 stores Italy and growing internationally), Blesh (4,000 stores Turkey alone), Perples (8,000 South Korea). More recently, SK Telecom, ShopX and Freckle have announced plans for networks of the 50,000+ scale.

More established players in this space are also starting to expand globally. Notably, Shopkick has now deployed successfully in Germany across over 3000  stores (according to recent presentation) and 1 million downloads. It has also partnered with Shoppertrak, creating a symbiotic relationship that enhances both parties offering, with huge potential for upselling.  SK Telecom’s acquisition can only help in its expansion into Asian, given its huge presence in loyalty programs and payments.

The business models can vary but in general, these companies are working in partnership with advertising agencies, OOH ad companies, etc., to deploy the network. The company typically agrees to manage and maintain the network and in a lot of cases attract major global brands. In exchange, they create a platform on which large chains can advertise/ establish a rewards program and alternatively, they agree a revenue share model with the retailers where the beacons are deployed.

There has been significant scepticism around this approach due to the potential for spamming. Initial trials such as that implemented in on Chinese New Year through WeChat across 237 stores in China with coupon redemption at 59% across 34,633 vouchers, generating RMB16 million in additional sales. While this is clearly an exception it does illustrate the current novelty offered by ibeacons, much like the huge surge in growth when O2O services like Groupon emerged. To maintain this longer term will require careful targeting not only based on proximity but a much clearer understanding of the customer, as well as better greater utility.  

How much is this area worth?

 

Well, our latest analysis (due out next week) has the overall indoor location market breaking $10 Billion by 2020. From 2017 onwards this revenue will be increasingly dominated by advertising, as technologies like BLE beacons, ultrasound and Wi-Fi (amongst others) proliferate into all retail verticals and create a whole new opportunity, where start-ups really have an opportunity to fill a gap and emerge as leading players, with huge potential for acquisition along the way.