A Silent Tweet From American Express
Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
While Americans are typically bombarded with more advertising information than most can digest – welcome to the post-modern world – news of American Express’s (NYSE: AXP) partnership with Twitter has been mostly silent until recently. While the deal was announced last March, it has only been within the last few days that a national advertising campaign began to really deliver the message to the public. The development allows cardholders to receive e-coupons from a variety of retailers by tweeting customized #hashtags from their accounts. The news, which was communicated to cardholders, has not been well-publicized as a point of differentiation that could be used to attract new customers. The rollout of its new advertising campaign should serve to change this oversight at a time when new technology trends are beginning to define the industry.
The Logistics
Under the arrangement between the two companies, cardholders can link their eligible American Express card to their Twitter account by logging into the credit card company’s website. Once the sync has been completed, the individual needs only to tweet the custom #hashtags of the retailers with which they are looking for a coupon. The discount is loaded to the customer’s AmEx account and held there electronically. Then, when the customer uses the card toward the uploaded coupon or discount, the discount is automatically applied to their account in the form of a statement credit within a few days of the purchase. Overall, the process is fairly seamless, so the lack of advertising is a bit difficult to understand.
Industry Trends
The biggest industry players, like Visa Inc. (NYSE: V), have relied on incentives and reward programs to attract and keep business. Specialized cards that offer frequent flier miles, automotive discounts and rewards programs are all designed to give consumers additional reasons to use and rely on their major credit cards. Other market participants have looked for more innovative ways to attract business. The recently announced partnership between Discover Financial Services (NYSE: DFS) and eBay’s (NASDAQ: EBAY) PayPal will give users of the online payment system the ability to use their accounts at the seven million locations that currently accept Discover. The unified solution can be seen as a major step forward for Discover. It will allow the classic credit card model to adapt and compete more directly with the digital wallet solutions that are being developed by various top contenders.
Many industry observers have expressed skepticism that consumers will ever give up the rewards programs that many have come to rely on. While the conversion process may be slow, younger consumers are apt to embrace new technologies and become early adopters. Those companies that begin preparing for the eventual shifts that are likely in the industry are most likely to avoid falling by the wayside over time.
The Importance of AmEx & Twitter
While the partnership between AmEx and Twitter is not a new payment solution, it does represent a significant advance in the interaction between social networking and classic credit cards. The #hashtag discount methodology is more reminiscent of offerings from Groupon Inc. (NASDAQ: GRPN) with a more automated way to receive the savings. AmEx should hope that its venture is better received than Groupon has been by the investment community. Since its IPO, Groupon’s stock has traded to successively lower lows, currently trading just above its 52-week low. The company recently announced that it will be rolling out an updated version that will provide increased functionality.
The AmEx/ Twitter union has the advantage that each piece has significant functionality independent of the other – AmEx has its cardholders and Twitter has its social networkers. It is the combination of these two products from which the additional value should be derived. Now that the credit card company has begun to advertise on this aspect of its functionality, it may drive more business to its card options.
Overview
While the added cross-functionality that is now available between Twitter and American Express has been in place for nearly two quarters, it has not been well publicized. The union is not likely to be a game changer for AmEx on its face, but it demonstrates that times are beginning to change and advance in the realm of digital payments. Like Discover, AmEx is recognizing the need to innovative and to begin to rely on developing technologies to maintain and attract customers. As new options are unveiled, the savvy investor will remain vigilant to understand the options available and how new trends will affect the stocks in their portfolios.
Mr. Ehrman has no positions in the stocks mentioned above.The Motley Fool has the following options: short OCT 2012 $55.00 puts on American Express Company, short OCT 2012 $60.00 calls on American Express Company, and long OCT 2012 $65.00 calls on American Express Company. Motley Fool newsletter services recommend American Express Company, eBay, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
