Why mobile commerce is set to cash in big in 2012

Mobile commerce is now a big business for PayPal. The eBay-owned digital payments provider reports it handled $4 billion in mobile transactions in 2011, surpassing previous estimates of $3.5 billion and blowing away 2010's total of $750 million. And, 2012 is shaping up to make m-commerce an even bigger component of PayPal's business: The company is currently trialing new mobile wallet services at select Home Depot stores, enabling consumers to pay for items at checkout via mobile device or a special PayPal card. PayPal had previously indicated it will roll out brick-and-mortar commerce solutions optimized across all devices, not just mobile phones, and encompassing funding options including cash, credit and installments.

"We believe a full Home Depot rollout would increase PayPal's addressable market by more than 35 percent overnight," wrote Wedbush analyst Gil Luria in a note to investors on Friday. "Although penetration would start at zero, we believe that by adding value to consumers and merchants, PayPal may eventually approach penetration rates comparable to its online presence."

PayPal may have bigger mobile commerce aspirations than most, but 2012 is shaping up as another transformative year for all players in the space. Consumer fervor for m-commerce solutions continues to mount: This week, IBM reported 11 percent of all online retail sales in December 2011 originated from mobile devices, doubling from 5.5 percent a year earlier. Mobile shoppers also generated 14.6 percent of all online sessions on retailer websites, up from 5.6 percent in December 2010. Apple's (NASDAQ:AAPL) iPhone and iPad collectively accounted for 9.5 percent of all mobile device retail traffic last month, IBM adds--in addition, shoppers using the iPad continued to drive more purchases than consumers across other devices, with retail conversion rates reaching 6.3 percent compared to 3.1 percent on rival smartphones and tablets.

Seven in 10 smartphone owners have now shopped and/or browsed for products via the mobile web and will use their smartphone for most any type of purchase provided it's convenient, according to a new survey conducted by research consultancy Market Strategies International. Seventy-seven percent of smartphone shoppers have purchased physical items, and 74 percent have bought digital goods--men are more likely to make purchases and when they do, they buy services, while women are more likely to buy physical products. As PayPal and its rivals continue expanding mobile commerce solutions to the brick-and-mortar realm, those kinds of metrics and distinctions will become irrelevant--soon everyone will use their phones to buy real-world stuff and virtual-world stuff alike, whether they're at home, at Home Depot or anywhere in between.--Jason