Several professors also are funding and advising the company, in what may be the epitome of a Stanford-fueled startup.

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Imagine walking into one of Walmart’s stores today. You’ll see the familiar aisles, the usual customer service floor reps, the check-out stands. You’ll shop as you always have.

The Walmart of tomorrow, however, wants to be nothing like the Walmart you know today.

The multinational retail giant is in the midst of reshaping its entire e-commerce strategy, aiming to reclaim a waning customer base which in recent years has moved toward online shopping. Despite the company’s most intense efforts only coming to fruition over the past 18 months, Walmart hopes to use its massive brick-and-mortar footprint to leverage its wide range of digital initiatives.

That isn’t a farfetched notion; roughly two-thirds of the U.S. population live within five miles of a Walmart. “No one else has 4,000 points of distribution within a stone’s throw of every customer in America,” said Neil Ashe, President and CEO of Walmart Global eCommerce, at an event with reporters on Tuesday.

But, as the rise of e-commerce obviously shows, having a broad physical presence isn’t enough anymore. Companies like Amazon and eBay have captured large segments of retail market share that industry leaders like Walmart once securely held, while Walmart sees slower growth in its traditional outlets; same-store U.S. sales for the last 16 weeks ending in April are expected to be relatively flat compared to the year-ago quarter, Walmart U.S. CEO Bill Simon said on the company’s last earnings call in February.

Walmart Global eCommerce is the company’s answer to this, a 1,500-person wing of the retail giant headquartered in San Bruno, Calif. — right up the road from Silicon Valley (and across the street from Google’s YouTube offices).

Some of Walmart’s most interesting digital experiments in recent years have sprung from this location, due to what the company claims is a Valley-type atmosphere of product development and execution, allowing multiple small teams to plan and execute product ideas at a much faster pace than usual. The company hosts occasional “hack days” like other startups, dedicating days to working on whatever engineers want, and then putting those ideas into practice. Sri Subranamiam, VP of search and catalog, said the company runs A/B tests constantly, and introduces new features on a weekly basis.

“There’s a reason we call ourselves the world’s biggest startup,” said Jeremy King, Walmart eCommerce CTO. “We like to act like that.”

And you’ll probably notice that many of these experiments are mobile-focused. (Perhaps a good idea, considering that more than half of Walmart’s U.S. customer base owns smartphones.) Scan and Go, a feature that Walmart is slowly rolling out to more than 200 stores in an expanded testing phase, lets a customer scan the bar codes of the different items they choose while moving through the store aisles using their smartphone. As the customer approaches checkout, they need only show a bar code to a kiosk’s screen, which automatically loads all the item data into the machine and prompts you with the total you need to pay.

The company also plans to update its mobile app in the near future, with greater emphasis on creating shopping lists before arriving to the store, finding coupons within the app to apply at the point of sale, and continuing to track your monthly purchasing budget via e-receipts and account management using Walmart’s Web portal.

It’s a digital approach to a kind of vertical integration; if Walmart can own the entire shopping experience from purchase planning to comparison tracking to point-of-sale and ultimately to managing a customer’s budget and lead to revisiting the store, the company could do better to protect itself from losing customers to the Targets, eBays or Amazons of the world at some point through the purchasing process.

But Walmart isn’t putting all of its digital eggs into one basket. It’s hedging strongly by trying out myriad programs simultaneously, expanding the ones that seem to have traction, and killing the ones that don’t. On Tuesday, for example, SVP of Walmart Innovations Jeff McAllister announced that the company would soon begin testing an in-store product-locker pickup service, similar to the likes of programs being tested by Amazon, UPS and the Google-acquired BufferBox.

Another big potential area for revamping: Social. Right now, there’s little direct integration with Facebook and Twitter outside of “Liking” the Walmart Facebook pages or tweeting about products. But if the company were to allow users to sign in to a custom Walmart profile using their Facebook or Twitter account, it could lead to better item suggestions and data on what sorts of products shoppers are interested in buying. Walmart hasn’t said this is happening, but it hinted strongly at something like it.

“The future for us is personalization,” said Ben Galbraith, VP of global products. “Right now, there are ways to personalize for customers who aren’t signed in, but we’ll introduce more and more perzonalization over time.”

Of course, while Walmart talks a big game, the proof is ultimately in the pudding — or rather, the balance sheet. The company has had the better part of two years to work on its digital initiatives, but early attempts saw some executive turnover, and struggles with how far away from the company’s Bentonville headquarters the Silicon Valley office should be. It has a history of making large e-commerce pronouncements without delivering entirely solid returns.

“They’re saying all the right things, but the challenge is the numbers,” said Sucharita Mulpuru, a retail analyst at Forrester Research. “They really haven’t fully converted to being as strong in digital to compete with players like Amazon yet.”

Still, the company maintains that its digital strategy is in its early days, and any number of the many, many startup-like initiatives could expand and grow into a larger part of the business.

“There’s a method to the madness,” said Gibu Thomas, SVP of mobile and digital.

For Walmart’s sake, let’s hope so.

Such gaps in cash flow — or so-called “lumpy money” — can make it difficult for business owners to focus on expansion rather than, say, managing payrolls or paying other bills.

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The Palo Alto, Calif., company is officially announcing a $100 million fund today. It will target the financial services sector, which has seen a flood of startups over the past couple of years as companies try to create new ways for customers to pay using online and mobile services.

Several companies have sprouted up to challenge incumbent providers, such as Square, but many other large institutions, like PayPal and Google, are also interested in making transactions digital.

Ribbit is critical of the amount of innovation that has occurred to date. Fittingly, Ribbit’s motto is, “It takes money to change money.”

Today’s announcement by Ribbit is its formal launch, but since getting off the ground last year, it has made four early-stage investments. They are:

• Borro: The U.K.-based startup provides financing to high-net-worth individuals who want cash for their fine arts, antiques, vintage cars and jewelry.
• Fuze Network: A U.S.-based payments company that provides merchants with new ways for their customers to make payments at banks and retail locations nationwide.
• ContaAzul: The company provides accounting and invoicing solutions to small and medium-sized businesses in Brazil.
• Capital Access Networks: A non-bank lender to small businesses.

The fund was founded by Meyer Malka, who goes by the name Micky. He has been an active entrepreneur in the space — he co-founded Lemon, a mobile wallet company, and Bling Nation, a mobile payments company — and currently serves on the board of Wonga, an alternative lender for consumers and businesses.

Malka has a global perspective, having lived all around the world, including stints in Venezuela and Brazil, where he witnessed more than half of the banks fail.

Ribbit’s investors include Spanish banking group Banco Bilbao Vizcaya Argentaria, Silicon Valley Bank, and various institutional investors and high-net-worth individuals.

Visa’s endorsement of RIM’s SEM system is a big win for the company, and one that could make it a player in the mobile payments space. RIM has a great reputation for security, which will no doubt lend some appeal to its NFC platform. With the BlackBerry maker managing the back end and Visa vetting the payments itself, SEM could do much to bolster confidence in NFC payments, particularly in places like the U.S. that have been slow to embrace the technology.

That said, RIM’s NFC solution isn’t the only one on the market. There’s Google Wallet, which the search giant has been rolling out with the help of Mastercard Paypass. And soon Isis, the NFC platform conceived by AT&T, Verizon and T-Mobile USA, should be more widely available as well, assuming the first two trial deployments in Austin and Salt Lake City go well.

So RIM will have a battle to fight in the mobile payments space, just as it does in the smartphone space. But SEM is another selling point for its new BlackBerry 10 platform, and with carriers adding more and more NFC devices to their portfolios this year, it could prove a good one.

The three new vice presidents being announced today are tasked with helping the payments company change the way consumers pay for things online, on their phones and at the register.

“In years past, we’ve grown too conservatively,” said PayPal’s CTO James Barrese. “We are reinventing ourselves with a cadre of new talent. I’m completely reinventing the organization, so that the top technologists can have a huge impact on where we are going.”

The three hires are:

Arnold Goldberg, VP of Customer Experience Engineering. Goldberg most recently came from Box, where, as VP of Engineering, he helped establish the cloud-based sharing platform. At PayPal, he will work on coming up with new technology for PayPal’s small businesses and merchants.

Koby Avital, VP of Architecture and Infrastructure. Avital comes from Microsoft, where he led the company’s service-oriented architecture strategy and platform development. At PayPal, he will lead strategic architecture, infrastructure and innovative research.

Ryan Granard, VP of Platform Engineering. Ryan comes most recently from DreamWorks Animation, where he built an internal platform that was able to scale globally. He was also an early employee of Webvan, the online grocery service. At PayPal, he will be in charge of building internal cloud services.

Other recent hires include Douglas Crockford, who was appointed senior JavaScript Architect, and Bill Scott, senior director of User Interface Engineering.

In October, PayPal eliminated the jobs as part of a restructuring that reduced the number of product groups it had from nine to one. The eBay-owned company said it wasn’t about cost reductions, but about streamlining product development.

The most notable change was that mobile was no longer a standalone group, but was moved directly into all of the product lines. Similarly, its parent company conducted the same restructuring just last month.

“We set up ourselves to be focused on new strategic areas, so I’ve been going out and aggressively looking for the type of talent we need,” Barrese said.

PayPal will need all the talent it can get to achieve its lofty ambitions.

Not only does it want to be a consumer’s preferred form of payment online and on mobile phones, it is also entering the offline world by enabling payments for small merchants or large retailers like Home Depot. Its big push into retail will happen this year, but a lot of finesse will have to occur behind the scenes in order to get it all to work together seamlessly.

At the same time, it will be competing against other crafty companies in the space, including Square and Groupon, to name just two of the entrants interested in payments over the past few years.

PayPal’s emphasis on building up a strong technology team kicked off in earnest last March, after PayPal named David Marcus as president. Marcus, who had joined the company previously through the acquisition of Zong, filled the vacancy left when Scott Thompson suddenly left to become CEO of Yahoo.

Since Marcus’s appointment, he has been vocal about the changes he wants to make at the company, saying, “There’s a massive culture change happening at PayPal right now.”

The hires today are just more evidence that he’s willing to back those words up.

On Wednesday, the San Jose-based company will report fourth-quarter and year-end earnings, and eBay is expecting the holidays to have treated it well.

For the fourth quarter, it is projecting earnings per share of up to 58 cents on revenue of up to $4 billion. For the full year, profits are expected to be as high as $1.99 a share on up to $14.1 billion in revenue.

Analysts are a little more cautious.

The consensus is calling for eBay to earn a profit of 61 cents in the fourth quarter and $2.05 a share for the full year. Those numbers are best compared to eBay’s non-GAAP projections, which exclude some items. On a non-GAAP basis, eBay is projecting to earn up to 69 cents a share for the quarter, and up to $2.35 a share for the year.

One analyst, however, recently revised his target, saying he expects eBay to now hit the projected 69 cents a share.

The rise in the stock price over the past year stems from the work eBay has done to overhaul its marketplace business.

The turnaround has included fixing back-end technology, like search algorithms, and revamping the design, including a new logo and homepage. Innovation is also occurring in delivery with programs testing same-day delivery and pickup services. As the transformation has started to take hold, eBay has started to attract new users to the site via TV commercials.

Operating alongside eBay is its buddy, PayPal, which also had a strong year. In the third quarter, the payment division saw revenue jump 23 percent compared to the year earlier.

One particular subject the company will be eager to talk about this quarter is how much growth it is seeing from consumers shopping on their phones and tablet computers. In the third quarter, it forecasted that eBay and PayPal would each transact $10 billion in volume this year over mobile, or more than twice what they recorded in 2011.

It will not be a surprise if eBay blows past these numbers, given the number of times it has revised its figures upward. Other third-party reports confirm what eBay is already witnessing.

For instance, last week, eMarketer reported that U.S. sales over mobile devices increased 81 percent, to nearly $25 billion, in 2012. At that level, it said, mobile devices accounted for 11 percent of total U.S. e-commerce sales. In comparison, I’ve been reporting for the past few months that eBay’s mobile revenue is closer to 16 percent of its total sales (but those figures have been based only on estimates).

Amazon is reportedly generating half as much, or around 8 percent to 10 percent of its revenue from mobile.

Finally, analysts won’t just be looking for a recap of the company’s 2012 accomplishments on Wednesday, but will also be looking for hints about the future.

The big question on everyone’s mind is whether eBay can maintain its growth for another year.

On the marketplace side of the business, eBay anticipates growing revenue by helping brick-and-mortar stores like Toys “R” Us and Macy’s compete online. Meanwhile, PayPal has been slowly expanding into in-store payments, with the hope that 2013 will be the first year it brings in revenue from the business (or at least that’s what eBay hopes).

On Friday, eBay’s shares traded 1.3 percent higher to close at $53.70, which is just shy of its 52-week high of $54.20 a share.

Image copyright koya979

Most of us don’t use rotary phones, beepers, dial-up Internet or fax machines anymore. Yet we still use magnetic stripe credit cards and outdated point-of-sale systems. Payments technologies continue to lag far behind the technological adoption curve, and adopting new technologies as they become available has been a slow process, with hurdles that include legacy infrastructure and costs.

That said, 2012 saw some major leaps forward for the payments industry. Between Squarebucks, PayPal, Google Wallet, Isis, LevelUp and MCX, the mobile payment wars have just started to get exciting.

But despite the progress, the prediction that 2012 would be the “Year of Mobile Payments” didn’t come true. Now some people are arguing that, “someday we may look back and say [2012] was ‘The Year Before the Year of Mobile Payments. ‘”

Maybe so. Maybe 2013 will be the year we finally stop using insecure payment technologies from the 1980s and 90s. The year where paying with your phone will finally become mainstream. Here’s how 2013 could change everything:

Merchants Will Decide Who Wins the Payment Wars
People often wonder what it takes to win the so-called payment wars. Getting the most users? Forming an alliance with a big brand or a major credit card? Deploying salespeople everywhere? The answer is: none of the above. Merchants, often the so-called “Main Street” businesses, will be the ones who decide which apps will emerge victorious from the mobile payments battles (and there won’t be just one victor).

Here’s why: The mobile payment revolution isn’t just about giving customers a trendy new way to pay. It’s more about finding solutions that will deliver new value for the consumer (discounts or rewards for loyalty, for instance). In turn, mobile payment apps can drive new and repeat business for the merchant.

When it comes to emerging victorious, other factors — especially security — are important. But benefits to the consumer and the merchant are the number one determining factor. When both parties get something great out of mobile payments that they never had before, then the revolution will prevail; it will be win-win for everyone.

The Hyperlocal Sales Model Will Fail
Is it easier to knock on five million doors, or to play nicely with payment systems that already exist?

Well, that’s kind of a loaded question, but it underscores the biggest problem that mobile payments have faced so far: Scaling. In 2013, two things could replace the inefficient hyperlocal sales model and encourage wide-scale adoption of mobile payments.

First, merchant payment processing systems need to adapt — and quickly — to accept a wide variety of payment options (preferably, all of them.) Additionally, the checkout process with mobile payment apps needs to move just as quickly as (or, better yet, faster than) a credit or cash transaction.

Second, payment apps need to play nicely with existing systems. Incentivizing merchants to try your new app is nice, but not an effective way to scale. Instead, the name of the game is cooperation.

Paradigm Shift: The Mobile Wallet Is Your Smartphone
It’s much easier — and better — to create a mobile payment app than a mobile wallet. Eventually, the phone will become the mobile wallet, and consumers will have a variety of payment and loyalty apps to choose from, depending on which places they visit most. No single system will rule them all.

Don’t believe me? Think about your own physical wallet right now. You might have a Macy’s card, a Capital One Visa, an American Express Gold, a loyalty card from your grocery store, and a dozen others. None of those could replace or encompass all the others. Your wallet does the encompassing. And, eventually, the phone will be no different — a storage space for all your payment and loyalty apps.

Security Is Important (Really Important) — So Expect to Hear More About It
Security is one of the biggest hurdles that will have to be surmounted to enable the widespread adoption of mobile payments. That’s because plenty of consumers are (rightly) concerned about the security of new payment options.

The good news is that mobile payments are actually significantly more secure than legacy payment options like mag stripe cards. The average mobile payment app has far more data points at its disposal than a magnetic card. It can verify your identity and intent much quicker and more accurately than this type of card. Plus, since we’re glued to our personal tech for much of the day, people will notice and report a stolen or lost phone much quicker than a credit card used just once or twice a day.

Another important security feature is tied to the power of over-the-air updates to apps. These can both refresh apps with the latest security features and turn the app off in seconds in the event of a breach.

Once merchants and app developers can convince consumers that mobile payments are secure, they will quickly become the dominant solution.

Mag Stripes Will Go the Way of the Dial-Up Modem (Adios!)
As I alluded to earlier, the technology in the magnetic stripe credit cards that most Americans use on a daily basis is more than 40 years old. It’s also highly vulnerable to fraud. And despite various protections against fraud, the U.S. loses about $8.6 billion dollars every year on credit card fraud, according to the Aite Group. Yikes.

EMV (short for Europay-Mastercard-Visa, its founders) is the way of the future. EMV uses a smart chip embedded in the card to store sensitive account data securely. In fact, it’s so much more secure than magnetic stripe credit cards that every major global region has already adopted the technology en masse … except the U.S.

Why is the most tech-savvy country on the planet lagging behind here? The reasons are complex, ranging from expense to legacy infrastructure to powerful lobbies. But while we’ve been able to procrastinate on upgrading our systems for decades, the economics of putting EMV into the field are now starting to make real sense.

The emphasis on EMV at a recent payments conference could be a bellwether, and the year 2013 should see some major strides in the EMV direction.

Mobile Will Level the Playing Field for Brick & Mortar in This E-commerce World
Brick and mortar businesses have some real competition in e-commerce, and (admit it) we’re all guilty of indulging in a little showrooming here and there.

Mobile has the power to level the playing field for brick and mortar again, and 2013 is the year we’ll start to see this happen for real. For example, advances in mobile payment technology will soon make it possible for people to find the exact product they’re looking for, when and where they need it.

Let’s say it’s February 12. You’ve procrastinated on buying a Valentine’s Day gift for your sweetie. You know what you want to buy, and you could order it online, but you’re worried it won’t show up on time (and don’t want to pay an extra $20 for overnight shipping.) With new mobile technologies, merchants can track inventory down to the individual product and connect shoppers directly with that data. This will give consumers a strong incentive to buy from a local merchant rather than take their chances with e-commerce. Plus, they’ll get the benefit of checking the item out with their own hands and eyes before they buy.

This, along with new customer loyalty and promotional opportunities, will make it possible for brick and mortar stores to get really competitive vis-a-vis e-commerce this year. Watch out, Amazon!

So, are you planning on making any big changes to the way you pay (or accept payment) in 2013?

Henry Helgeson is the CEO and co-founder of Merchant Warehouse, a recognized leader in payment and commerce technologies.

The service allows merchants to accept credit cards and debit cards by swiping them through a card reader attached to a mobile device, like an iPhone or iPod touch or Android device.

While payments has become a very hot space over the past year, with many companies providing card readers for mobile devices, what Groupon hopes will stand out about its service is the price.

Participating Groupon merchants will be charged as little as 1.8 percent, plus 15 cents per transaction, compared to Square, which charges 2.75 percent per transaction, or a flat rate of $275 a month. As with the iPhone offering, Groupon is also guaranteeing Android users the lowest overall rates.

Aside from price, Groupon also benefits from having a sales team, which is already calling on thousands of small- to medium-sized merchants across the U.S.

The payments service is complementary to a point-of-sale solution Groupon is selling, called Breadcrumb, which is being aimed at cafes, bars and restaurants.

Groupon’s goal for both Breadcrumb and Groupon Payments is to cut costs for merchants who are used to paying high prices for low-tech, antiquated systems. In return, Groupon hopes to create a closer bond with merchants that will encourage them — or potentially require them — to run coupons in the future.

But it’s a long-term bet that could mean not generating a lot of additional revenue on a standalone basis. As CEO Andrew Mason has said before, he believes these services will sell more Groupons — but may not be wildly profitable.

This morning, Groupon’s stock was trading at $5.16 a share, down three cents. The stock has rebounded some since it was trading at its all-time low of $2.60 a share in November.

A year and a half ago, VeriFone unveiled a product that would give small-to-mid-sized retailers the ability to use an phone or tablet to accept payments. But during a quarterly conference call this week, Verifone chief executive Doug Bergeron explained that the company would be discontinuing the service, called Sail, because it is unprofitable.

“Customer acquisition costs, either through search engines or TV advertising cannot and will never justify the razor thin margins produced by merchants with infrequent volumes and extremely high attrition.”

Square must be feeling a little bit vindicated that VeriFone couldn’t hack it in the space, given the two companies’ ongoing rivalry. The two first started bickering more than a year ago after VeriFone wrote an open letter about Square, calling out a potential security flaw in its mobile-phone card reader.

When Square promised to add encryption to its devices as part of an investment by Visa, VeriFone felt like it won that battle. Shortly after, it unveiled Sail, which was targeting smaller merchants, such as food trucks or taxicab drivers — much like Square.

VeriFone said that, going forward, it will focus exclusively on providing mobile payments to small merchants through an indirect channel. The company plans to sell off its assets, although it didn’t expect a deal to be financially meaningful to the company. Reuters first reported the company’s moves on Thursday.

As part of the call with investors, Bergeron didn’t stop at explaining VeriFone’s reasons for exiting the business. He also took the time to question whether the model was flawed for all companies, and not just VeriFone.

“I think you can see evidence of other competitors’ similar experience as they shift their own business models to wallets. My belief is that the only possible survivors in this fundamentally challenging business model will be companies who might have an opportunity to provide other services to these micro-merchants.”

Bergeron’s statement does bring up a good question: If charging a flat rate of about 2.75 percent per transaction doesn’t pay off for the mobile payments industry, then what other features will they have to build in order to bring in revenue?

Square, which is now processing $10 billion annually in transactions, isn’t the only company in the space. Other players include PayPal, Intuit, Pay Anywhere and, more recently, Groupon. For them, it’s not all about the transaction fee. For instance, PayPal is focused on providing a digital wallet, while Groupon’s main business is offers.

Square gets a disproportionate amount of attention in the space because the start-up is led by Twitter’s Jack Dorsey, and because it has made a lot of progress quickly.

As Bergeron suggests, Square has started to shift its focus toward providing other services. For instance, it would like consumers to visit its mobile app to discover new local restaurants and find offers and discounts. A recent partnership with Starbucks, in fact, is designed to help lift consumer adoption of its mobile app. Rather than use the standalone Starbucks application, consumers will be encouraged to pay for their lattes with the Square Wallet. In theory, the partnership could naturally lead to consumers using the app more.

To be clear, there’s no indication that Square has ever shifted its strategy. Logically, it would make sense for it to build up its base of merchants before trying to get consumers to start using a wallet that wasn’t accepted at a lot of shops.

So far, it’s just VeriFone getting out of the race. Will others follow?

Shrauger will be the head of global commercialization, responsible for developing and implementing the company’s strategy for bringing new Visa products to market, according to his bio. Shrauger’s deep level of knowledge in the digital payments space will be especially valuable to Visa, which continues investing in new products and services, like its PayPal-esque digital wallet called V.me.

A Visa spokeswoman did not reply to emails seeking comment.

During Shrauger’s eight-year stint at PayPal, he helped launch the company’s merchant business to expand the online payment capabilities of eBay. He also helped with the integration of PayPal’s acquisition of Bill Me Later.

Beyond his resume, Shrauger may be better known for getting caught up in the troubles at Yahoo. Schrauger was one of the first hires Thompson made after Thompson left PayPal to become CEO of Yahoo late last year. And he was also one of the first to leave after Thompson was forced to step down following the controversy over a fake computer science degree he had on his resume.

Prior to PayPal, Shrauger also held roles in product management and consulting with Agency.com, VerticalNet, Deloitte Consulting and Quantum Consulting.

Wall Street is certainly enthusiastic for such an outcome — even grabbing onto a specious rumor that perhaps Google was sniffing around the troubled Chicago-based social discount deals company, which is currently valued at just over $3 billion. On Friday, Groupon’s stock jumped 23 percent on takeover speculation after Tom Forte of Telsey Advisory Group was quoted as saying: “Where the stock is currently trading, it’s a takeout candidate.”

Actually, the stock has been trading at these levels for a very long time, so the sudden attention is decidedly overwrought. More to the point, sources close to Google — which had offered $6 billion for the company before it went public — said that Google has not been contemplating a second foray into acquiring Groupon.

The same is true for eBay, said sources, and Amazon is an unlikely buyer because it already owns a stake in LivingSocial, the second-largest daily deals provider. Additionally, there are lots of other problems that any purchaser would face in buying the company, which sells everything from bikini waxes to GPS devices at a discount.

In an onstage appearance this morning, CEO Andrew Mason declined to address the thinly sourced rumors of a takeover. “What I have said about Groupon is everything I will say about it,” he said. “I am focused on looking forward.”

Given the non-answer, it’s still prudent to ask, is there actually a buyer for Groupon?

First, let’s address the price. Two years ago, Google offered to purchase Groupon for $6 billion. A year later, it went public at $10 billion, and today, it is trading for $2.9 billion. The company has $1.2 billion in cash, and owes merchants about half of that, or around $573 million.

That said, it is still a relatively low price for a company that includes a customer base of 40 million people who bought something in the past year, a hodgepodge of local retailers and merchants that consider Groupon their online marketing channel, and — perhaps most importantly — a better-than-expected mobile business that now represents a third of its transactions.

But, while it costs much less than it once did, that doesn’t necessarily make Groupon a steal.

That’s because over the past year, the Chicago company has stumbled operationally. Europe is underperforming, the company’s main coupon business is slowing as the novelty of the business is wearing off and it has started investing heavily in selling products, a low-margin business that requires tons of logistics to package and ship items to people’s front doors. On top of that, the board recently discussed replacing Mason, who some directors fear may not be the right choice to continue leading the company. While they ultimately decided to keep him, it was a perceptual blow.

At least one big investor is betting something will happen: Tiger Global Management, which recently bought up close to 10 percent of Groupon. The well-regarded hedge fund and private equity firm may be betting it can’t get worse, and perhaps would even push for a sale.

In any case, here’s a look at some of the scenarios:

Google

When Google made the offer two years ago, the search engine was interested in entering the daily deals business as a way to gain a foothold into all things local, including commerce. Since Groupon rejected that $6 billion acquisition, Google has spent the past two years building Google Offers.

While Google Offers still has a very small piece of the market, it has been pivoting toward an integrated ads model, which is less complementary to Groupon’s approach. Google believes that merchants will pay Google only after a purchase has been made, and the sum will be determined by the consumer. The cost per acquisition model is very different from Groupon, which has the consumer paying up front for a heavily discounted coupon.

As one source with knowledge of the situation said: “The timing would be a bit wacky.”

That said, Nikesh Arora, Google’s SVP and chief business officer, had been a very strong advocate of the original deal and might still want more heft in Google’s corner in the competitive local scene. One major plus is that Groupon could also help build a local salesforce to push Google+ Local, which includes Zagat, the online reviews site that competes against Yelp. Groupon might also support its Google Wallet business, which has largely failed to gain traction among consumers.

Another source familiar with the two companies said running a daily deals business is “operationally intensive, and it’s a muscle that Google doesn’t have, so from a synergy standpoint it would be complementary.” But, “if they are still serious about local, is that the business model for local that they want to pursue?”

eBay

For the past two years, the e-commerce company has aggressively been going after the local commerce market by helping transactions occur online or at a nearby store. Additionally, its PayPal division is moving fast into the physical payments space. Strong merchant relationships, like the ones Groupon has, could go a long way toward making those things happen faster.

EBay recently raised $3 billion in debt financing and has $7.3 billion cash on its balance street. Its stock price also has gone up more than 65 percent in the past year, giving it plenty of fire power to make a big move.

It also has the stomach for acquisitions. However, many of its purchases over the past two years have been about buying technology and talent. It bought RedLaser, the barcode scanning technology for $10 million; Milo.com, a local inventory company, for $75 million; and Zong, a mobile payments company, for $240 million. Over the years, it has also made substantial purchases, including GSI last year for $2.4 billion, Bill Me Later for $1.2 billion and Skype for $2.6 billion.

A few months back, the company entered the daily deals business with the launch of eBay Lifestyle Deals, which runs daily deals in a number of markets, including San Francisco, Seattle, Los Angeles and Washington, D.C. To do so, eBay teamed up with Signpost, which arranges the deals with local merchants. Interestingly, Signpost is backed by Google Ventures, and already provides deals for Google Offers.

The company is also experimenting with eBay Now, a service that allows consumers to buy something on their phone and have it delivered within an hour. “They continue to be interested in local, and they have this experiment going on right now with eBay Now, but they are still iterating and figuring out the local angle,” one source said.

Likewise, PayPal’s local strategy is under development. It is trying to roll out physical payments to big-box retailers like Home Depot while also offering a credit card reader for smaller retailers called PayPal Here.

The biggest argument against this deal is that eBay may not need Groupon, and that it already has the infrastructure to roll out deals through partnerships — which would cost a whole lot less and be a lot less painful.

Amazon

Simply put, Amazon already has its own troubles with its significant stake in LivingSocial, which just slashed 400 jobs. In the third quarter, Amazon took an impairment charge of $169 million, or 37 cents a share, related to its stake in LivingSocial, resulting in the company reporting an overall third-quarter net loss of $274 million, or 60 cents a share.

Any potential Amazon-Groupon tie-up would then be a merger between LivingSocial and Groupon, creating perhaps an even bigger black hole that would also result in a lot of ongoing integration problems. While together LivingSocial and Groupon would easily make Amazon the largest daily deals company and up its local commerce efforts, it’s still not clear if the online retail giant wants to double down here.

Separately, Amazon has entered the daily deals business on its own with a service called Amazon Local that competes directly with LivingSocial and Groupon. The offers became particularly interesting to the company after it started using them to discount the price of its Kindle e-readers and tablets. If owners don’t want to see the offers, the tablets can cost up to $40 more.

The company has said that it essentially doesn’t need help building the business – it thinks it can get to scale fast in the space because it already has 164 million active customer accounts worldwide (which are defined as people who have made a purchase in the past year).

Perhaps most importantly, though, Amazon has a history of building, not buying.

Visa, MasterCard, American Express

These three payment companies have huge market values, and should not be discounted as players in the local commerce space. In addition, a year ago, all of them started looking for new revenue streams after the Durbin Amendment capped the amount that banks and card networks charge merchants on debit card transactions.

Already, many banks are sending targeted ads or deals to consumers based on their spending habits. However, it’s unclear whether they need to be the actual deal makers, or just act as a distribution system for advertisements and coupons. For example, MasterCard recently partnered with Gilt City, the daily deals division of Gilt Groupe. Through the partnership, MasterCard will be able to offer its users deals for restaurants, concert tickets and travel, and at the same time, help Gilt City get in front of some of the card issuer’s millions of users.

MasterCard may be the frontrunner of the three as a potential suitor. Not only has it shown direct interest in the space, American Express is still absorbing its acquisition of Revolution Money, for which it paid $300 million cash in 2010, and Visa has been active with its purchase of CyberSource for $2 billion in 2010. More recently, it made an investment in Square, the hot mobile payments company.

Other Suspects

A number of other companies could be put on a Groupon acquisition list, such as Yahoo, Microsoft and Facebook.

Microsoft and Yahoo both have the money, but have not done much in the space so far. An acquisition would allow them to catch up quickly, but would be expensive and largely not complementary with what they are doing already — which is almost nothing. Facebook, in particular, tried once to enter the space and failed and might be focused on other lower-hanging revenue sources.

Groupon could also look to private equity firms for a buyout, which would allow it to have some space while it fixed some of its issues.

Internationally, there is Japan’s Rakuten, which owns Buy.com in the U.S., and China’s e-commerce giant Alibaba, which has been looking at ways to enter the U.S. market.

Of course, Groupon might simply keep stumbling forward and hope it can turn itself around. But, at some point, without improved revenue and cohesion at the top levels, something is sure to bring pressure to its options. 

In fact, in afternoon trading today, the rumors continued to keep the stock elevated. Shares closed 3.76 percent higher today at $4.41 a share.

Of the two dozen Cardfree employees, the company has veterans on staff from Starbucks, mFoundry (the company behind the Starbucks app) and InComm (a gift card technology company). “It was one of those things where we said if we ever get the money, we’d get the team together,” said Squire, who comes from CorFire, the company behind the Dunkin’ Donuts mobile app.

Cardfree is a little vague on what its approach will be to the market. Squire says everything is on the table, including near field communication, barcodes, one-time authorization or PayPal’s approach involving entering a mobile number and PIN. For now, the company sounds a lot like a consultancy, with many of the brands requiring a lot of hand-holding to figure out what they need or want.

In the company’s month-long existence, it has already managed to sign up three undisclosed customers.

Cardfree will be competing against a ton of start-ups and tech behemoths targeting every aspect of the food chain, from loyalty programs to payments. A short list includes Belly, Lemon, Pirq, Square, PayPal and Google. “I think there’s a lot of noise with companies saying you have to replace the point of sales equipment, or use my tablet, or upload this software. It’s always about ‘let me leverage your customer to build my brand,’” Squire said. “My belief is, we can do more on behalf of their own brand and building a direct one-on-one relationship.”

To get started, the company has raised $10 million in capital from Jeffrey Katz, who founded Mercury Payments Systems, a payments processor.

The latest to enter the space is Bank of America’s Merchant Services, which today is unveiling Mobile Pay on Demand, a service that allows small business owners to accept customer payments over a cellphone.

“I hate to come out with a commodity product, but every bank should have one,” said Trevor Rubel, EVP of Strategy and Emerging Products for Bank of America Merchant Services.

Square is perhaps the most high-profile company in the market and is already processing $8 billion in payments annually. But its head start hasn’t deterred others from entering into the space, including eBay’s PayPal, Groupon, Intuit, Pay Anywhere and many others.

Bank of America’s nearly identical service will be available starting Dec. 3 and will be priced very competitively. The card reader (which is slightly more bulky than Square’s, and is more rectangular) will be free and payments will cost 2.7 percent per swiped transaction. The mobile application, available across both iOS and Android, is also free.

The rate is priced slightly below Square’s offering of 2.75 percent, but is slightly above Groupon’s 1.8 percent plus 15 cents fee (although Groupon also requires merchants to be active daily deal providers). Bank of America charges no monthly or annual fees.

Rubel says he believes that Bank of America has an advantage over the others because it has a very strong, trusted brand. Plus, it already has substantial relationships with retailers, including roughly two million small- to mid-sized businesses that don’t currently use its payment terminals because they don’t process enough transactions to justify it or because they work on the go. He imagines the new service appealing to the usual crowd of taxi cab drivers, participants at farmer’s markets and contractors.

Some of the perks provided by the service include next-day access to funds and customer service representatives available by phone. Additionally, retailers will be the merchant of record, meaning that the name of the business will appear on a consumer’s credit card statement instead of Bank of America’s or some other provider.

For those merchants that sign up by the end of the year, they will also receive a one-year subscription to Bank of America’s deals marketing platform, which normally costs $200. The platform allows business owners to create a Web site, and to distribute Groupon-like offers, coupons or loyalty programs. The offers are syndicated across several sites, including Facebook, Twitter or 8coupons.com. When offers are redeemed, Bank of America will charge merchants small fees, depending on the type of offer.

The rollout is right on schedule, coming just three months after the partnership was announced in August. Now Starbucks customers will have two options for paying without ever having to pull their wallet out of their purse or pants pocket.

Starbucks customers already tend to be early adopters of mobile payments, using the Seattle coffee merchant’s apps more than two million times each week across both iOS and Android.

There are a few differences between the two experiences. The Starbucks-branded app card requires users to load a prepaid card that is stored on the phone. In contrast, the Square app allows users to pay using a debit or credit card. The Starbucks app also allows consumers to earn reward, but the Square app will not. Either way, a barcode is displayed on the smartphone screen and is scanned by a reader at the register. The Square Wallet is more multipurpose, given that it can be used to pay at other participating restaurants or merchants.

The addition of a marquee name like Starbucks is a big deal for San Francisco-based Square, which was founded by Twitter’s Jack Dorsey. Square obviously needs to raise its profile among consumers and sign up more merchants if it wants to become the dominant mobile payments system. However, the arrangement doesn’t end at the register. Starbucks also invested $25 million in Square’s last funding, totaling $200 million, and its CEO, Howard Schultz, joined the private company’s board. Starbucks is also slowly switching over its back-end payment systems to Square, which will eventually be processing all of Starbucks’ U.S. credit and debit card transactions.

Customers can download the Square wallet from the respective markets on iOS or Android. If they have already downloaded the wallet, the Starbucks locations will appear automatically.

And while the coupon provider will no doubt feel an impact from the storm as restaurants and other services struggle to regain power, its latest drop has more to do with the upcoming anniversary of becoming a public company.

On Sunday, it will be exactly a year since the Chicago company raised $700 million to make it the largest IPO by a U.S.-based Internet company since 2004. On Nov. 4, 2011, shares sold at $20 a pop, and pushed higher during the day to close at $26.11 a share. Today, a year later, the company’s stock is down in midday trading by 4 percent, or 16 cents a share, to sell at $3.89 a share — its lowest price yet.

In Groupon’s relatively young life as a public company, it has seen its share of troubles, the worst of which was having to revise its fourth-quarter results at the end of March, making investors wonder if the high-flying young company was ready to be public. Since then, it has added numerous upper-level executives to the team to beef up its operational and accounting strengths, including two new directors on the board.

GRPN data by YCharts

In May, Groupon CEO Andrew Mason said the bumps in the road were merely a side effect of its growth, which included hiring 11,000 employees in 48 countries in just three years.

“Although there are risks in moving too fast, companies often don’t survive long enough to apologize for moving too slow,” Mason wrote in a letter to shareholders. “Perhaps more importantly, by moving quickly, we reached a scale that has helped us solidify our market leadership, and accumulated data that is enabling our future and helping us continuously improve the experience of our customers.”

More recently, Groupon has also tried to distance itself from being a provider of coupons or daily deals, instead stressing that it is building an “operating system” for local business, including mobile payment capabilities, scheduling software, and other tools. The goal of these services is not necessarily to make money, but to save small businesses money, so they can continue running Groupon’s higher-margin daily deals. The pivot, however, doesn’t come cheap. It necessitated construction of a major tech hub in Palo Alto, Calif., and has required buying several companies over the past year, albeit mostly for talent.

On Thursday, the company will report its third-quarter results, providing an update on how the business is doing on all fronts. Last quarter, analysts fretted that the company’s growth was coming from lower-margin businesses, like products, rather than its core daily deals offers. Groupon is forecasting Q3 revenue to come in between $580 million and $620 million, and for its operating income to total between $15 million and $35 million. In the second quarter, it reported revenue of $568 million and an operating income of $46 million.

While Sandy certainly had an impact on Groupon, it’s not enough to justify today’s dip in its stock. Groupon has very much become a global company, and even a densely populated area like New York represents a relatively small portion of its overall business. Today’s drop has more to do with the company’s overall business, and is a reflection of the past year.

Many believe the future of tracking purchases and making payments lies with near field communication technology or smartphone applications, but this Kirkland, Wash.-based company is betting on something much lower tech: Text messaging.

“It’s not only because not everyone has a smartphone, but in a high-volume restaurant, or coffee shop, they don’t want someone fumbling around or holding up the line,” said James Sun, CEO of Pirq. “Text messaging is very fast, and it’s supported by all phones, including feature phones.”

Pirq became well-known this summer after announcing a partnership with Apple to bring an exclusive set of restaurant deals to all of its employees in Silicon Valley. But that was just a side deal to get the start-up some buzz. The company’s core business is in running loyalty programs for any small business. Many others are competing in the space, including Groupon, Belly and FiveStars.

Pirq takes a slightly different approach. For $50 a month, it gives each merchant an Android tablet to place on their counter. From there, consumers can scan a bar code using the Pirq application on their iOS or Android phone, or they can choose to send a text message to the short code displayed on the screen. Because they have a choice, consumers don’t have to take the time to download a new application, or even register — two big hurdles for adoption.

Merchants also have a choice on what to offer loyal customers. They can either reward consumers who hit a certain spending threshold, or they can send consumers a text message to promote a deal during off-peak hours, when business is slow. “There’s a big trend right now,” Sun said. “[Merchants] don’t want to discount the brand to the public. They are private deals for existing customers.”

Merchants pay $50 a month for the service, and from 50 cents to $6 for each reward redeemed. Costs vary depending on the service, ranging from cups of coffee on the low end to spa services on the high end.

The second round of funding was led by Rally Capital, and brings the company’s fundraising total to $3.2 million. The funding will go toward rolling out the company’s new text messaging program. Sun said that the service will be live in 70 stores in Seattle and San Francisco by the end of next week. The company plans to raise a larger round next year to hire sales people to expand nationwide.

Isis will allow consumers to make purchases by tapping smartphones equipped with a special computer chip against a merchant payment terminal. The service will be available on as many as 20 types of handsets by year-end, Jaymee Johnson, head of marketing for the service, said in a statement Wednesday.

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The online reservations company is hoping to solve that problem by giving restaurants the tools they need to optimize their sites for the smaller screen. “It may be a cost issue, or they don’t know who to call or how to maintain it, but for whatever reason, there’s a lot of things that have created a barrier that has prevented restaurants for doing it before,” said Matthew Roberts, OpenTable’s CEO.

Starting today, OpenTable will be reaching out to thousands of restaurants regarding the free service, which will be powered by its partner, DudaMobile. But if restaurants don’t act fast, OpenTable will start charging around $100 for the service after Jan. 31. The three-month window reveals a sense of urgency by OpenTable to get restaurants’ sites optimized for the phone.

In the second quarter, 28 percent of the 28 million reservations made through OpenTable in North America were created on mobile devices, including phones and tablets, which is up from 25 percent in the first quarter. But it could be higher if it weren’t for the fact that only about 10 percent of the company’s restaurants have a mobile-friendly version of their site.

Roberts said other Internet businesses must come up with new revenue streams for mobile, but not OpenTable. When a diner goes to the restaurant’s Web site, OpenTable charges 25 cents per seat for a reservation, and when a diner comes to OpenTable, it charges a $1 per seat — regardless of whether the transaction happened on a desktop computer or a mobile phone. “We don’t have to rethink how to make revenue on a mobile phone,” he said.

With millions of Americans carrying mobile phones, and looking for reservations up until the last minute, he said it makes sense to provide the ability to book from a phone. OpenTable has already optimized its site for mobile and has applications across the major operating systems.

OpenTable, as well as other companies like Groupon and Square, are constantly developing tools to make it easier for small- to medium-sized businesses to operate. Over the past year, Groupon has rolled out a number of services, including online calendar tools, rewards and mobile payments. Next up, Roberts said, they will be personalizing OpenTable’s Web site, so that when diners visit, they’ll see recommendations based on their past reservations, but he declined to say whether OpenTable was interested in offering other services, like mobile payments. “All things are in bounds. … I wouldn’t rule out any element, but nothing specific to share with you at this moment,” he said.

Today, the directory has about 200,000 restaurants, cafes and bars out of the more than two million individuals and businesses that are registered to accept credit and debit card payments using Square.

When looking at a map, that visually translates into a couple dozen shops in cities like downtown Seattle or Boise, Idaho. In San Francisco, where the company is based, there are even more.

Consumers will be able to use the directory to view menus, find deals and specials at restaurants and pay using the Square Wallet app, which consumers download to the mobile phone and where they store their payment card information. While the site doesn’t have Yelp-like reviews, some merchants do make recommendations on what to order and offer rewards, like 50 percent off your first purchase or 10 percent off every sixth visit.

If you think the number of locations where Square is accepted is sparse, keep these two things in mind: Square is already processing more than $8 billion in payments on an annualized basis, and soon it will be uploading every Starbucks into its directory based on a recent partnership it signed with the mega coffee conglomerate.