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Is it hip to be square again? Maybe according to Twitter co-founder Jack Dorsey. His new startup, called Square , is a mobile payments (credit card processing) system that appeals to small businesses. But is he targeting the right customers? I think we’ve all heard rumors of a credit card reader for the iPhone—and this is it. A small, white plastic cube plugs into the audio jack of an iPhone or laptop (with software planned for Blackberry and Android). It scans the card, geotags the transaction and emails a receipt to the buyer. And just to be clear, Square is an app for merchants , not a way for individuals to electronically zap their bucks into the nearest Starbucks to pay for their latte. And that may be the problem, too—because the product isn’t designed for big retailers like Starbucks. Its users will be smaller vendors, “who don’t qualify for accounts with traditional credit card processors because the would be deemed ‘high risk’ by these companies,” as Read Write Web puts it. According to the CEO of competitor Billing Revolution, Andy Kleitsch, that’s not going to be enough of a market, and bigger vendors just aren’t going to be interested in the product. RWW also notes the potential for fraud: Square will also have to deal with potential fraud. While we don’t know the exact details about how Square will operate, chances are that the company will have to keep a large reserve in an escrow account with the credit card processing companies that power Square’s back-end. Anybody who sits on a pile of stolen credit cards, Kleitsch pointed out, could use Square to run up charges on these accounts. Once the defrauded credit card owners dispute these charges, Square could be left with a large bill to pay. However, one would hope they’ve taken precautions against this. While Square’s website contends that processing card payments is “difficult, requiring long applications, expensive hardware, and an overly complex experience,” Kleitsch says that a payment terminal is typically free, with $20/month + 2% of all transactions as the monthly fee for the service. (While Square’s service is free, last time I checked, an iPhone runs $200, plus Square’s hardware investment, plus a monthly fee—AT&T’s$60 data fee. Ouch—unless you truly already need the iPhone for your business.) Although one of their examples is of a local coffeeshop (of which Dorsey is a part owner), Dorsey appears to be targeting vendors even smaller than coffeeshops as well—vendors that may or may not have brick-and-mortar establishments, like artists or flower carts (another of the examples on their site). What do you think? Does Square have the potential to take off—and if so, with small businesses or just micro ones?

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Twitter Founder Turns Square (with Mobile Payments)

Back in October, my wife’s Grandfather, Lou Roth, passed away at the age of 97. During funeral preparations, someone rather clueless and ignorant asked if I was going to tweet during the funeral. By the way, did I mention this was my wife’s grandfather ? I knew Lou for twenty years. He was a great guy and I loved him a lot. So, I looked the offender in the eye and said, “Of course, I’ll tweet; wouldn’t miss it for the world. Which one should I start with…?”

Ok, let’s get everything out on the table before we really get going here. Social media helps brand build a following of people who believe in the brand. It creates little armies of brand zealots that do all the promotion for you on a grassroots level. It is the next level of the evolution of the online commerce experience because Internet users are so savvy that they will understand that to experience a brand is to live the brand is to make the Earth safe for the rest of us mere mortals! Oooops. Sorry. I got a little caught up in the hype of social media. Now for the reality check? Social media users like deals. Sure they may ‘engage’ with a brand a little more but they are really just looking for a deal. A coupon. A discount. Not brand nirvana. At least that’s what a study from Razorfish as reported by MediaPost is telling us. Much has been made of the ability of social media to help brands connect with consumers in new and deeper ways — to establish a “dialogue” with users through various interactive tools that blend seamlessly into their online activities. But a new study suggests the key to engagement on social properties comes down to old-fashioned direct marketing techniques like offering discounts and special promotions. “Based on our research, it’s not so much about some type of ’shared passion’ for a brand’s values. Largely, it’s about deals — pure and simple,” states the 2009 FEED report from Razorfish examining consumers’ digital habits and attitudes. What the ……?! Are you trying to tell me that when I put my head down on my pillow at night I really am not smiling about how much Dell, Zappos and Rackspace care for me on a deeper than e-commerce level? You mean it’s because I am just using them for their discounts? I feel so cheap. Makes sense though. Maybe we need to take a step back on this whole social media deal and understand what is really going on. Sure there are levels of engagement that could not be experienced by brands or their users until the Facebook’s and Twitter’s of the world came along. What we need to be careful of is forgetting that human behavior doesn’t just change on a dime. In fact, I would posit that this is going to be how the VAST majority of people embrace social media for the foreseeable future. Not because they want to engage with a brand but because they want the brand they like for less cash. Some other quick findings included Of those who follow a brand on Twitter, for example, 44% said access to exclusive deals is the main reason. And on Facebook and MySpace, 37% cited special deals as the main reason they have “friended” a brand. The report points to companies such as Starbucks, which has amassed nearly 5 million fans and soared to the top of Facebook brand pages by offering coupons for free pastries and ice cream. Razorfish identified customer service as the other key driver of consumer interaction in social media, with 33% friending a brand on Facebook and MySpace for that purpose, and 24% on Twitter. Companies such as Comcast, Zappos and Virgin have all gotten high marks for using the latter as a customer relations management (CRM) tool. Now, this is where you create the brand zealots. When you solve their problems using social media then you are on to something. To think, though, that social media is selling more product because of the buying experience is a bit much when you are talking about the masses. So for all of you who are seething at my position that the ‘feel good’ side of branding with social media is over-hyped please make your case with your comments. Meanwhile I am off to Dunkin’ Donuts for a discounted dozen beauties followed up by a dollar off cup of something from somewhere.

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Are Social Media Users Just Technologically Advanced Coupon Clippers?