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QR Codes Still Looking For The Right Business Model And Problem To Solve

Originally Published: JANUARY 24, 2010

Using QR codes at the point of sale sound like a great idea, but many obstacles remain for the concept to thoroughly make it to the mass market.

Scan this image with a camera-phone equipped with a QR code reader to launch this site.

Scan this image with a camera-phone equipped with a QR code reader to launch this site.

Proponents of QR codes proclaim they offer advertisers and retailers unique opportunities to interact with customers. From virtual coupons, or the rapid launch of a video stream, to the initiation of a payment transaction, QR codes eliminate the need for typing and put barcode scanning squarely in the hands of consumers.

Barcodes were first used to label railroad cars, but they were not commercially successful until they were used to automate supermarket checkout systems, a task in which they have become almost universal. The use of one-dimensional barcodes has spread to other roles as well, tasks that are generically referred to as Auto ID Data Capture (AIDC).

While one-dimensional barcodes only contain eight to seventeen digits, QR codes are a flavor of two-dimensional barcodes that can contain up-to 7,089 numeric characters, 4,296 alphanumeric characters or 2,953 binary bytes. But perhaps most significant to their widespread use in Japan and Korea is that QR codes can hold 1,817 Japanese kana syllabaries and kanji characters.

Developed in 1994 by Toyota subsidiary Denso-Wave, QR codes were invented to track vehicle parts during manufacturing. They caught the interest of Japanese mobile carriers who originally considered the QR codes as a concept to deliver business card information.  A scannable QR symbol containing address information would be printed on the business allowing for very easy transfer into an electronic address book both on the phone and the PC.  While that application never took off, operators in Japan and Korea insisted that QR code reading software should be a standard feature on camera-equipped mobile handsets.  As a result marketers regularly feature QR codes in advertisements to trigger interactions with consumers via image, music, URL, email and virtual coupons.

Two-dimensional QR codes cannot be read by a laser as there is typically no sweep pattern that can encompass the entire symbol.  An image-based scanner or other digital camera sensor technology such as a smartphone must scan them.  But unlike Japan and Korea, consumer’s must download a QR code reader to their camera-equipped mobile phone.

There are a variety of QR code readers/software applications available to download in App Stores and from the Internet for free. But from a consumer’s perspective are there enough compelling applications available to warrant the effort?

Poster of “Indiana Jones and the Kingdom Of The Crystal Skull” featuring a QR code inside a movie theater in Australia

Poster of “Indiana Jones and the Kingdom Of The Crystal Skull” featuring a QR code inside a movie theater in Australia

QR codes are getting some traction outside of Japan and Korea. In some markets the “Indiana Jones and the Kingdom Of The Crystal Skull” movie poster campaign which had a QR code on the bottom right which allowed 3 minute Movie Trailer to be directly played on your mobile handset while in the theatre foyer.  But would consumers have been better served if the QR code were featured in advertisements outside the theatre, triggered the launch of Fandango, featured the clip inside the site, and actually allowed the consumer to purchase a movie ticket in one fell swoop?

Probably one of the biggest criticisms leveled at QR codes is that by the very nature of the technology, the 2D barcode works best on a smartphone. Inherently is does not offer the ubiquity possible with feature phone-based SMS couponing.  Another problem is the complication at the point of sale.  Big box stores may not want any mobile coupon coming to the point of sale, as the last thing a major retailer wants is someone fumbling around in line with their phone trying to find a coupon in their e-mail or other messages.  The current generation of scanning equipment has problems reading barcodes off the reflective touch screen of a smartphone.  And the investment to retool a retail chain the size of Walmart or Best Buy with optical scanners is staggering.

But recently Google announced their Google Favorite Places program, a new program that really defines window-shopping. Stickers bearing Googles logo and a QR code have been distributed to 100,000 of the most popular businesses in Googles Local Business Center database.  The QR codes are tied to Google Local Search feature and allow the retailer to include coupons and special offers that smartphone owners can redeem from the screen of their device, rather than having to clip them out of a newspaper circular.  Considering that this announcement came a month before the launch of Google’s Android-based Nexus One, it is a bit peculiar that Google did not include a QR code reader on its handset.

Some operators have started to experiment with both proprietary two-dimensional barcodes and QR codes.  The potential business model business model will likely be a value added services model. For example MNOs could offer the ability to customize experiences based on the gender, age, and interests of the consumer scanning the barcode. Potentially, they could also charge advertisers for the analytics behind the barcode such as how many users snapped an image of a specific barcode.

Regardless of all the challenges inherent in fostering a new technology like QR barcodes, the potential is undoubtedly there. For users to be able to point their devices at a little barcode, which can be placed virtually anywhere, and be served up whatever it is an advertiser wants them to see is truly a groundbreaking concept.  But for now, QR codes looks like a solution looking for a problem to solve.