Yesterday, PayPal filed a lawsuit against Google and two of its executives for stealing trade secrets. The lawsuit came on the same day that Google announced its mobile wallet plans involving Android phones with NFC chips. The two executives, Osama Bedier and Stephanie Tilenius, previously worked at PayPal. In fact, Bedier was in charge of negotiating a deal with Google on behalf of PayPal for inclusion of PayPal as a payment mechanism in Android phones. The deal fell through and Google hired away Bedier instead, who then helped build Google’s own mobile wallet product.
At least that is PayPal’s side of the story. Last night, I asked Google for a comment. It took them a while, but a spokesperson just emailed me the following statement:
“Silicon Valley was built on the ability of individuals to use their knowledge and expertise to seek better employment opportunities, an idea recognized by both California law and public policy. We respect trade secrets, and will defend ourselves against these claims.”
Let’s parse this statement a bit. Google is saying that talented employees should be able to take their knowledge with them as they “seek better employment opportunities.” In other words, people can work wherever they want, and Google is a much better place to work than PayPal, so if Bedier wanted to switch jobs, who can blame him?
Sure, they can take their knowledge, but they can’t take trade secrets. Google says they “respect trade secrets,” so you can imagine they will be arguing that what Bedier brought along in his brain was just general industry knowledge and not any trade secrets specific to PayPal.
High-profile employment disputes are nothing new in Silicon Valley. When Apple poached IBM’s Mark Papermaster to head up its chip development, IBM sued. The two companies eventually settled out of court. In many ways, this is a PR move on PayPal’s part more than anything else. It is not like they are going to get an injunction to stop Google from going into mobile payments. But it’s a bad PR move because it shows exactly how scared they are that Google is going to succeed.
For some more background on what’s at stake, watch the video below from earlier this week at Disrupt when Stephanie Tilenius was on a panel at Disrupt that I moderated about the future of online-to-offline commerce.
Photo credit: Flickr/Henk-Jan Winkeldermaat
in New York City with a
focus on this area.
Thank you so much for coming
and being with us today.
So the reason I put
this panel together, and Alex
helped me, is
there seems to be a
lot of experiments with, especially
with mobile, turning mobile ads
essentially into something that
is more, something you can
track better, and one
way to track the loop from
impression to action is,
what better action than a payment, right?
And I just wanted to talk
a little bit about, you know,
what are the different ways that companies
are thinking about linking
those two things: the ad
or the offer, and the
payment, and how does mobile change that?
So maybe we
can start with you Stephanie.
Google has a lot of experiments in this area.
you've got an offer
determined in Portland.
Right.
And then there is also an
offers product that is linked to Latitude.
Just give us a frame of what they're doing at Google.
So, we believe
that you're going to
see a real transformation in the
mobile local space and how
consumers interact with merchants, with service providers.
You know, I think that we call
it the age of molo - mobile local.
And, we envision that
consumers will be able to
walk around and get
offers nearby, and so we have several different offers products.
We have check-in offers that you can get.
We have lots of big brands doing
that today like McDonalds, quick-serve kind of restaurants.
We also have a trial
we're doing for prepaid offers similar
to what Groupon and LivingSocial do today.
We're testing that in Portland and
other cities and ramping a
sales team to go out and
apply our SMB deals, large
merchandisedeals and at the end
of the day, you know, we
believe that consumers are going
to have a platter choice
around them, and they're going to
want to be entertained, helped.
There's a push-pull aspect to it,
some things we push to
them, some things we pull and
it will be very easy for
them to find things in their way local area.
Do you mix the inventory or
will you mix inventory of
prepaid offers like the
Groupon-style offers with the mobile offers which.
You're already seeing, you know,
with some a lot of
mobile applications are taking advantage
of, but there is Groupon or Livingsocial
you check in and then
it tells you things nearby.
We have lots of different properties.
So you are going to see
us embed offers throughout our
experience and consumers do
not distinguish between different types of offers.
Right, so Louis, even
for speaking about this recently
in the batsman team of yours right.
How do you see this
whole space, what do
you think is a big opportunity?
Yes we look at it from a venture perspective.
We look at Online ads are
projected to go from 26 to 50 billion.
That's about the same course that
Amazon was on from the
commerce, and it takes
all of e-commerce at $180 billion.
It's about half of what Wal-Mart
does, one company that's on predominantly offline with some online.
And you look at the size
of now what may
be influenced by online activity to offline.
Forester and others are estimating
up to 50 percent, 1.2
Trillion of consumer spending is
happening by influence of online to offline.
So when we talk about connecting the
two with or without mobile.,there are
a lot of different
subsegments, and we
are taking a venture perspective, as
opposed to be one of
the big leaders in the industry like Google.
The startup companies are looking at ways to enable that activity.
It could be retargeting a
consumer who went in a
retail store, leveraging LBS.
Retargeting them on their mobile
device to get them back into that offline store.
It could be driving somebody from
a pure online experience to go
pick something up offline, like Groupon.
A lot of different ways
to do it, the the trick,
I think, from the venture perspective of
the start-ups that are here today
is you want to,
it's definitely go to where the puck is going to be.
It has been for about a year.
The problem is are you
going to be facing an empty
matter or are you going to
be facing a 6'7" Russian who's
going to clean your clock, right?
Is that - are you calling Stephanie a 6 foot Russian?
It could be.
Alex, in your
mind is sort of figuring
this out the Holy Grail of,
you know, not only mobile
advertising, but sort of, advertising in general?
Yeah, I mean, if you look at
the local advertising, I mean, Google is a tremendous company.
And local advertising; it's very
hard to make that work in
an online context, because the
local bar doesn't want to pay per click.
The local tennis instructor doesn't want to pay per click.
He wants to pay per customer and
the best way of closing the
loop is actually not sending a
click, but sending a check or sending a payment.
And I think eventually
advertising and payments really
become one and the same.
And it's kind of interesting, if you
look at any merchant they hate
paying Visa, Mastercard, American Express the two, three percent.
They love somebody thirty percent.
I mean programs have
been pull that off,
and it's not just about the deal of the day concept.
That worked very well.
It's more about you merge these
two so that you're not sending an offline merchant click.
We are actually sending them a customer and you can close the loop.
So, I think that there are two or three reasons to be a payment company.
One is to just markup
interchange and I think
that is going to go the way of
the Dinosaur, Two is data.
Look at what Amazon does; people that bought this also bought that.
American Express can do that
better than anybody because they have
all of your payment history the
third is vertical integration or closing the loop.
And I think that is where payments are headed.
That is also we are off on advertising side.
So just to give an example so people
would understand what you do,
you told me this backstage that you
know, some body
might have bought a movie
ticket on Pandanggo and then
the gap wants to target
certain subset of those
people to go to the gap.
So they give him an offer for the gap.
Right.
That was a real offer that you did was very successful.
Right.
Can you talk about that a little bit?
Yeah.
A lot of what we do is transaction level targeting.
So there are different ways of targeting an offer.
One is purely Push which
is what initially goggle office product
is giving it's also what Groupon
has done very successfully another way
is pull so I see what
near by me another way is
check in based so this is
force and others are giving
what we do is a little
bit of more trans cation base ;we
know you just brought two movie
tickets ;your email and the
movie theater that you are going is
right to next to a Gap; here's
forty percent off at The Gap.
And doing stuff like that its actually, its very relevant to the consumer.
But it's also sending somebody like
Gap A very high quality
customer because they know there's no adverse selection problem there.
This is a person that just spent a requisite amount of money somewhere else.
It's not somebody who is looking
for a deal is that best
people that you can find are
not ones that are motivated
by coupons or discounts.
Right.
And that generated a million dollar for sales one day?
Yeah.
That 's amazing.
So, and you can do
that, but it's a million dollars of sales from good customers.
And it's not to say
that very good customers, where you have some percentage.
Is any sale from a customer a good customer?
It depends on how you discount
your product, so I know
a guy who's a dentist and
did a group on i said
buy large, the vast
majority of groupon merchants are very happy.
Because I would say there is no such thing as a bad lead.
It is usually a badly priced lead.
Right.
You discount your product below your
cost and you do it
because you think the LTV is going to be very high.
The lifetime value is going to be very high.
And it does not pan out
because you have very promiscuous customers
that will go to this dentist
this time, the next dentist,
the next time no loyalty there.
It's not gonna work out for you.
So, different customers have different
lifetime values and different qualities,
the best type of customer is
one that isn't motivated
by a discount but where a discount can change their behavior.
Well, Stephen, what is
your thinking on this, I mean,
weren't you on the team that tried to buy Groupon?
I can't comment on any activity at Google.
I agree, I agree with Alex that it.
It's just in terms of,
there's a model here right,
the Groupon model which kind of
took of, right, and that
may or may not be the The only models we're discussing.
I agree, I think Groupon was,
is a great company and congratulations
to them for getting a foothold on
the local space and starting this
whole wave a long line
to offline, or lower, however you want to term it.
I definitely think that there's gonna be a ton of innovations in space.
But Groupon is tapped
into One alumina and it
ultimately is going to be
about customer management, so big
brands, small brands they
want to manage the lifetime value of the customer.
And they want to know who
that customer is when you walk
in the door, they have geolocation technology
and they can figure out who it is.
And I think it's very similar to
what Alex said in the sense that
if you know that customer is,
you can target the promotion at
them that actually gets them to
do a certain thing that valuable to them and the merchant.
So it's symbiotic.
And what you are seeing today is,
you know, retailers spend so
much money on promotions that they
have no way of targeting that, and
they don't actually know how to target the customer that comes in the door.
And, and What are the
different ways that you are
experimenting with targeting customers?
Especially, in a mobile context,
what do you You know,
what do you know about potential consumers
that you can offer
to merchants or brands?
Right.
I think if you look at the
statistics, Forrester basically
says that 50% of commerce is going to be affected by the mobile phone.
Everyone, you know 50% of the phones in the US are smart phones.
People carry them, they use them for shopping today.
You're going to see them look for inventory.
For example, today we have 70
of the top 100 retailers integrated in our Google shopper app.
We have over five million downloads
and people use it to actually find local inventory.
You're also going to see consumers going
to a store and if the
inventory's not there, they going to
be able to tap, you know, scan
a bar code or tap on
an SE tag and just
order the item online and have it shipped to them.
So you are going to see the integration of online and offline inventory.
And these merchants will actually
be able to target promotions and inventory to consumers.
Let's take it one step
further, Google is making a
big bet on NFC, NFC payments
right and android or just
NFC chips, which we use for lots of things like the payment.
sort of that's the
one of the biggest potential apps there.
Can you paint a picture for,
you know how an NFC-enabled
phone might work as
a payment vehicle as well
as how it might tie
into some of what we were talking about in terms of offers?
Yeah, there's a lot
of applications for NFC which
is why we believe it's
a really important opportunity for
Android and we are making a bet on it as a company.
You can tap on a poster in New York City and find information about a movie.
You could get an offer from an NFC tag.
You could walk into the Gap
and if they don't have your size
jeans, you could tap on an
NFC tag and have it shipped,
have those jeans shipped to you the next day.
So there's a lot of
potential and the ease of
use of tapping, and tapping
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