Are 2D barcodes worth the hype?

In Poland, Aztec codes are used in conjunction with car registration documents. In Japan, QR codes are used to share additional information about grave stones. And in the U.S. these and other types of mobile barcodes are suddenly popping up in video games and magazines and on movie posters and billboards. But what exactly are they, and what do they mean for the wireless industry?

A range of industry watchers believe mobile barcodes are key to connecting marketers with mobile users. And it seems the space is quickly gaining traction: A recent Compete survey showed 28 percent of smartphone owners have scanned a barcode with their phone. Indeed, the market opportunity is such that two former CEOs of the Mobile Marketing Association have both moved into the space and now compete against each other.

But a number of questions remain: What type of barcodes should marketers use? How can the industry address users' privacy concerns? And if individuals and businesses can create their own barcodes for free, what role can barcode vendors play in the space?

The market is nascent and the profits scarce, but those looking closely see opportunity everywhere.

Unlocking the codes

Before getting into the details, it's worth understanding what exactly 2D barcodes are. The first widely cited mobile or 2D barcode was the Code 49, introduced in 1987 by inventory tracking company Intermec Technologies. 

The 2D barcode is structured like its 1D counterpart found on most basic goods--but unlike the 1D barcode, which is linearly structured (the computer only reads the widths of various lines), the information in a 2D code is spread out across an entire box. Thus, a 2D barcode can hold much more information than a simple 1D code.

Contemporary 2D barcodes can be scanned using almost any mobile phone with a camera and MMS capabilities. Some smartphones, depending on the model, already come with the capability to read certain types of 2D barcodes, but others may require the installation of a reader app. Most app stores offer a variety of free barcode readers, like those from NeoMedia and ScanBuy.

SnapTag, the picture-based barcode from SpyderLynk, does not require an outside program at all. Rather, users snap pictures of the tags in question and email them to the website, which replies with information about the product. Microsoft Tag, on the other hand, uses a specialized type of mobile barcode that requires the user to have its Tag Reader, a free app, installed to decode its tags.

Scanning a 2D barcode with your mobile phone can automatically add a contact to your address book, place a phone call, add an event to your calendar, load a webpage, or display a message such as a coupon code or menu special. Not every type of mobile barcode is capable of doing each of these commands. In fact, a user may encounter up to seven different types of 2D barcodes:

Type	Description	Image
Aztec Code	Encodes a series of letters and numbers. Aztec Codes are used mainly by the transportation industry, especially in Europe, as electronic boarding passes.
Data Matrix	Can encode up to two kilobytes of text or raw data. DataMatrix barcodes are used by the Department of Defense to keep track of small, expensive pieces of equipment.
EZ Code	Simpler type of matrix barcode that can be used with lower grade camera phones, provided users have data plans. ScanBuy can read EZCodes.
MaxiCode       & ShotCode	Polar coordinate barcodes that store number sequences rather than data and are used in delivering goods. MaxiCodes follow the traditional rectangular pattern, while ShotCodes are circularly shaped.
QR Code	Redirects the user to a website. Marketers use these to direct users to a mobile-friendly version of their site. Smartphones running Android or Symbian are automatically capable of reading these codes.
High Color Capacity Barcode (HCCB)	Composed of a series of colorful triangles. HCCBs were created and named by Microsoft Tag. Users need to install the Tag Reader application to read these codes.
SnapTag	Composed of a seller's logo and a circular border. SnapTags are used by SpyderLynk to encourage actions such as entering users in contests or signing them up for mailings or coupons.

HCCBs and SnapTags are both designed in color, while QR codes, EZ Codes, Data Matrices, Azetec Codes and polar coordinate barcodes are black and white. Microsoft Tag and SpyderLynk, the company that produces SnapTags, emphasize the importance of having a tag blend in with an ad, so as not to detract from the ad's aesthetic quality. However, ScanBuy CEO Mike Wehrs explained that these types of tags are dangerous.

"You may think it is cool to make it camouflaged, but that is counterproductive to what you want to do. You want them [users] to scan the code,"Wehrs said.

SpyderLynk CMO Jane McPherson disagreed. She said both standard codes and SnapTags as distinct enough to stand out to the user. "We go about it differently," she said.

Should businesses pay for customized codes?

While there are a range of applications for mobile barcodes, they are not difficult to create. A number of outlets, including Google, generate free mobile barcodes. This brings up the obvious question: If businesses can easily make free versions of mobile barcodes, why should they bother paying vendors like ScanBuy and NeoMedia, which charge customers for the creation of codes?

Wehrs explained that using a free code provided by these websites is one of the worst things a business can do. One business, whose name he wouldn't disclose, paid to advertise a QR code on the back of a highly circulated magazine, but used a free coding service. The code pointed to an incorrectly labeled link, leading users who scanned the magazine cover to an error message.

The entire ad was thus useless.

"The biggest mistakes that businesses make are that this is not just about making a code and making it point to your homepage. That is not engaged with customer behavior. That's mistake No. 1," he told FierceMobileContent. 

Mistake No. 2, he added, is that "they use a free service that links to a website that can't be watched or monitored" for analytics--which he said is one of the key advantages of using a paid service to manage one's mobile barcodes.

NeoMedia's CEO, Laura Marriott agreed. "There is definitely some confusion in the market. Brands can definitely create a free campaign using a QR code. That is a direct barcode." Instead, she recommends that businesses use a partial indirect.

"Using the NeoMedia system, we use what is called an index. ... It gives ultimate flexibility for whatever you are putting your code on," Marriott said in an interview with FierceMobileContent, explaining that the company's system allows customers to keep the same standard code. Thus, a company can use the same advertisement for various campaigns, each time linking to a different, specialized webpage.

A simple QR code embedded onto a business card, for example, would not benefit from the extensive analytics that companies like these would provide. A larger business, however, may find the ability to engage directly with its consumers more enticing.

McPherson explained: "Previously, it has been, 'What is my message to the masses?' Now it is, 'What is my message for types of individuals at a given time?'"

Microsoft Tag allows business to test free barcodes

Despite the concerns voiced by companies specialized in implementing and running mobile barcode campaigns for businesses, some larger corporations still choose to use the free resources available to market their products. Movie studios including Paramount, Universal Pictures and Summit Entertainment, as well as automobile companies like Ford, Chrysler, and Jaguar, have all used Microsoft's free alternative to mobile barcodes.

"Every aspect of Microsoft Tag is free today," said Brian Fleisher, senior director of product management and business development for Microsoft Tag. "Over time we will launch innovative services for brands and advertisers that we will charge for."

"You can imagine advanced analytics ... services around delivery of coupons ... gag[ing] where the opportunity is in the market," Fleisher said, though he declined to outline the specific services Microsoft plans to charge for.

For now, though, the analytics and options provided by Tag are free. This has been especially popular with the publishing industry. Microsoft reported that Allure magazine received 450,000 scans last August during a free giveaway campaign.

"We see rapid adoption and success breeds success. We are seeing publishing brands like Sports Illustrated and USA Today adopt the technology. We have been in publishing for quite some time and that has been a great proving ground for a number of things," Fleisher said.            

Still, even though major brands are on board with mobile barcodes, their usefulness depends entirely on the consumer. If users do not scan these codes with their phones, then advertisers will stop using them.

The future of mobile barcodes 

Marriott and Wehrs see a bright future for mobile barcodes. Both are former CEOs of the Mobile Marketing Association and chose to branch off into mobile barcodes. Similarly, Current Analysis analyst Deepa Karthikeyan sees opportunity in the mobile barcode industry.

"I think mobile barcode companies will start to partner with retail outlets (a la ScanBuy's recent partnership with Home Depot) to extend their presence in the physical sense. Mobile barcodes will also become a staple in the social networking scene, especially those relating to m-commerce such as Foursquare and Groupon," Karthikeyan said.

Those in the industry look to Japan for inspiration, where mobile barcodes have become commonplace. However, McPherson noted that the Japanese market has a number of unique elements. She said the country's mobile carriers teamed up to distribute the apps necessary for phones to read the various types of codes. McPherson also reminded that "Japanese consumers use Japanese characters. Websites are in English characters and have numbers on them." The advent of QR codes allowed Japanese consumers to connect to websites on their phones without having to type in the associated URLs.

One more important factor hangs over the mobile barcode industry: Users' privacy concerns. All mobile barcode interactions are opt-in--consumers choose what information they wish to share with marketers.

However, ScanBuy's Wehrs recommends selecting a reputable scanning application and turning off a cell phone's GPS if a user is concerned about their location information being shared.

SpyderLynk's McPherson is confident that mobile companies will not take advantage of consumer's private data. "Carriers are pretty great about making sure [marketing guidelines] are consistently enforced," she said. "All of us in mobile marketing are protective of consumer's rights to make decisions. We want to make sure consumers continue loving mobile marketing."

But Jeff Chester, the executive director of the Center for Digital Democracy, isn't convinced. He said he is "particularly concerned with mobile barcodes in delivering financial and health and applications targeted to youth." His organization is currently attempting to have the FTC investigate the habits of mobile marketers.

"The question is, what are the limits here?" Chester said.