Punchd, a smartphone-based loyalty card business, has been acquired by Google for an amount believed to be more than $10 million. It is widely speculated that Google will use the service as part of its Google Wallet mobile payment system.
According to the Punchd page announcing the acquisition, Punchd was conceived in 2010 as a “better solution for loyalty cards,” to solve the problem of connecting customers to their favorite shops, restaurants, and venues. The “buy 10, get 1 free” phone app was originally created in an Android application development class at Cal Poly San Luis Obispo because Google donated Android phones to Cal Poly’s computer science department.
With Punchd, smartphones scan a QR code to virtually redeem a “punch.” While it’s good for customers who don’t have to carry around paper cards, it also gives local business some useful information about their customers, including how many times the code has been scanned and keeps track of repeat customer business. Customers are also alerted via email when a loyalty reward becomes available.
The six-person Punchd team will begin work at Google's Mountain View offices. TechCrunch reported that “the Punchd team isn’t simply being absorbed by Google to work on other projects — it’s going to continue working on Punchd full time, and that the service isn’t going anywhere.”
How does this fit in to Google's plans for Google Wallet? Writing on VentureBeat, Jitendra Gupta, founder and CEO of Punchh, notes that:
“Executives … are slowly coming to the realization that to have customers use mobile payments, they need to provide real incentives to customers and merchants. With the Punchd acquisition, Google is looking to solve the customer adoption problem. … when merchants provide a digital punch card with real rewards to their customers, customers use the service in large numbers. In fact, at some of our client locations, we have seen 4x the usage of a traditional paper or plastic loyalty card. … The big idea here is that once customers and merchants start getting real value from these mobile-based digital and virtual programs, getting them to switch to a mobile payment card from their digital wallet is a whole lot easier than asking them to switch to mobile payments directly.”
This is Google’s 14th acquisition of 2011.