I’ve been talking to some friends in the CPG and beauty verticals recently about coupons and the adoption of mobile as a viable distribution channel for them.  The short story is that we’re nowhere near  replacing traditional coupons with digital ones, but it’s going to happen very quickly when someone solves a few problems that dont seem particularly complicated to me.  I think the opportunity is going to be exploited by a strong, simple application that’s available on multiple mobile platforms, and a website site that will drive a critical adoption rate from  the right consumer base.  The business model, in my opinion, hasn’t been clearly defined yet.

I found these statistics on gorumors.com , which project future growth of mobile coupon spending.  While I think some of these statistics won’t scale (like redemption rates),  it paints a pretty clear picture of what could potentially happen to the mobile coupon business. Here’s some info from gorumors:

According to a recent study by Borrel Associates, Mobile coupons have a much higher redemption rates than those from newspapers or mail – as much as 10x times.  Here is the projected total spending from mobile coupons as studied by Borrell Associates:

2006 : $3.3 million
2007 : $7.2 million
2008 : $7.15 million
2009 : $86.4 million
2010 : $373.7 million
2011 : $1055.3 million
2012 : $2242.4 million
2013 : $4101.6 million
2014 : $6598.5 million

The biggest hurdle that this industry faces is the adoption of smartphones by the core coupon-using crowd.  Right now in the United States, there are about 50 million smartphone users.  My guess is that the number of smartphone users who download applications is significantly smaller, because Blackberry users don’t really download apps and they control over 40% of the smartphone market.  So let’s put the market at 25 million U.S. users; that’s about 9% of the country’s population. When this number gets closer to 25%-30%, I think you’ll start to see major traction.

In terms of a coupon application design,  it needs to stay incredibly simple so that the normal, everyday user can find what they need and easily redeem the coupon.   Another consideration is the branded app versus general consumer app solution.  I believe that publishers should try to get a piece of this market and there’s room for a technology to help them do it.

Regardless,the growth is there and the demand would be there for the right experience.  Someone just needs to figure it out and wait.