QR CODES

A POINT OF VIEW

PREPARED BY EDWIN PHILOGENE FOR

EXECUTIVE
SUMMARY
QR codes, otherwise known as quick response codes, are the preeminent open standard
for a growing category of graphical 2D (two-dimensional) codes that are increasingly being
utilized by marketers across various industries to inform and engage with digitally savvy consumer
audiences around the globe.

QR codes can be quickly read with camera-equipped mobile phones (usually smartphones)
loaded with the proper code-reading software. Once read, data embedded in the QR codes can
instruct the phone to automatically execute a number of tasks, such as download data from the code
itself, retrieve a mobile Web page or make the request from a remote server to download a video. As
a result, QR and 2D codes are generally used for a variety of applications, from advertising
and lead generation to ticketing and couponing.

First appearing in Japan in the mid-1990’s, QR codes have since been widely adopted in the
historically advanced mobile market for a variety of commercial uses. Although QR code adoption
has traditionally not been as robust outside of Japan and Asia, due to recent advances in mobile
infrastructure and handsets in the American market, a new wave of commercial interest in 2D codes
has taken hold in the U.S. In line with this, a growing number of marketers ranging from Calvin
Klein and Chevy to Starbucks and Unilever have been experimenting with QR and 2D code
campaigns within the past year.

While QR codes are the most widely adopted open standard for 2D codes globally, in the
U.S., several proprietary 2D code standards are being introduced and promoted by their parent
corporations, including Microsoft Tag from Microsoft and EZcode from Scanbuy. Compared to QR
codes, proprietary codes hold both distinct advantages and disadvantages.

In our view, the positive alignment of four key factors – consumer value perception,
technological readiness, widespread publisher support and a unified 2D code standard –
is needed for successful deep adoption of QR/2D codes in the American market. While we
assess the current environment for consumer value perception and widespread publisher support
as positive in the U.S., we see further progress is needed on the tech readiness and unified 2D code
standard fronts, which we see as neutral and negative, respectively.

QR codes, and the overall category of 2D codes, have proven their value in Japan but are still a
nascent and promising technology in America that, if adopted in earnest, would provide marketers with
a novel channel for bridging online and offline behavior for consumer engagement. As the technology’s
story continues to unfold in the U.S., we recommend in-market experimentation through a
limited “test and learn” approach that leverages other technologies, such as SMS and
mobile Web, and favors the open QR code standard over proprietary ones.

2
 USE YOUR QR
CODE READER-
EQUIPPED
SMARTPHONE
TO SCAN THIS
CODE NOW!

WHAT ARE
QR CODES?
QR CODES HAVE GROWN TO TAKE ON
A BROAD VARIETY OF APPLICATIONS.

QR codes, or quick response codes, are two-dimensional barcodes that

can be created to hold small bits of data such as URL strings, phone
numbers, e-mail addresses or service commands that are activated on
mobile phones. First created and introduced by Japanese corporation
OUT OF HOME
Denso-Wave in 1994, the QR code was originally used to track vehicle
Out of home
parts in vehicle manufacturing (Denso-Wave is a member of the Toyota
group of companies and is also the original patent holder).

QR codes can be read by cameraphones (typically smartphones) with

QR code readers that capture the image of the codes and synthesize
Out of home
the data instruction embedded in the code. Over the past several years, PRINT

they have gained traction globally (especially in Asia) asOut

a means
of home
for Print
brand marketers and publishers to engage with and provide information Business cards
to consumers. A QR code can be produced on any surface with
sufficient contrast.

Out of home Print

On a geographical basis, Japan is the largest user of QR codes, as it BUSINESS CARDS
Business cards
has long been in use in the market for a number of applications, both
commercial and consumer in nature, on a widespread basis. QR codes
Business cards Apparel
are also utilized in parts of Europe and have been adapted for use in
a number of applications, including everything from advertising and
business cards to ticketing and apparel.
APPAREL
Technically, the term “QR code” refers to the de facto open
Businessstandard
cards for Apparel
the broad high-level category of codes known as 2D codes (standing
for two dimension codes). In addition to QR codes, there are other
proprietary code standards, with various levels of adoption, currently
found in the marketplace.

IN–STORE
With the recent surge in growth in smartphone adoption in the U.S., QR In-store

and 2D codes are increasingly being adopted and experimented with by QR codes have grown to take on a broad v

marketers for consumer engagement campaigns in the American market. HOW DO QR CODES WORK?

Overall, however, awareness of QR code technology and ownership of To read a QR code, a person utilizing a
equipped computer with the correct re
QR-code-reader-equipped phones in the U.S. remains low. takes a picture of it or “scans” the cod
phone and/or user permissions enabled
and activates an automated action, su
In-store ON AIR
On air
phone’s browser, downloading content
and storing data (e.g., business card in
QR codes have grown to take on a broad variety of applications.
3
MARKETING
APPLICATIONS
Long popular in Japan, a global leader in handset innovation, QR and 2D codes have realized very little
adoption in the U.S. over the past several years. However, within the past one to two years, more and
more QR code-based marketing campaigns are being experimented with in the U.S. by marketers who
are seeking to capitalize on the growing level of handset sophistication and consumer smartphone
application adoption in the market.

QR codes and 2D codes have been utilized by companies as varied as Best Buy, Ford, McDonald’s,
Nike, Starbucks, Time Warner, Heineken, The Weather Channel, Ralph Lauren and Calvin Klein, among
a growing number of other brands as buzz and visibility increase in the space.

SPECIFICALLY, FROM A PROGRAM DESIGN STANDPOINT, QR CODES HAVE BEEN LEVERAGED BY BRANDS
FOR A VARIETY OF APPLICATIONS, INCLUDING:
• Transporting users from printed materials to mobile sites for a specific call to action,
involving information capture, promotional opt-in, etc.

• Quickly delivering consideration- and loyalty-building information and multimedia on

products and services directly to consumers’ phones for ongoing consumption.

• Providing e-coupons to consumers to drive conversion, loyalty and/or repeat

purchase.

• Conveying a sense of exclusivity to selected target users as can be accomplished

via direct mail campaigns, with QR codes leading to personalized URLs.

• Facilitating e-commerce by directing consumers to specific m-commerce sites for

on-the-move impulse transactions.

• Enabling ticketing and time-efficient ticket processing.

• Providing turnkey contest and promotion entry.

4
In Japan, where QR code use is widespread, there are a variety of ways they are found and used by
consumers, as reflected in results below from a recent consumer survey taken there (based on research
by IMC2):

71.3% 90%
MAGAZINE ADS: 71.3% CONNECT TO WEBSITE: 90.0%
MAPS: 14.5% REGISTER BOOKMARK: 13.2%
FOOD ITEMS: 12.9% SEND EMAIL: 10.6%
POSTERS, LEAFLETS IN
BUS/SUBWAY STATIONS: DISPLAY TEXT: 4.5%
12.3% SAVE TO CONTACTS: 4.3%
BUSINESS CARDS: 4.5% PLAYBACK OR SAVE MUSIC;
DISPLAY OR SAVE GRAPHIC:
3.9%
28.7% PASS TO APPLICATION: 2.4%
MAKE TELEPHONE CALL: 2.4%
COPY TO EMAIL: 1.9%
14.5%
12.9% 12.3%
13.2%
10.6%
4.5% 4.5% 4.3% 3.9% 2.4% 2.4%
1.9% 3.8%

WHERE USERS FIND QR CODES HOW CONSUMERS USE SCANNED QR CODE

(MULTIPLE RESPONSES ALLOWED) DATA

A major reason for broad QR code adoption in

Japan is ready availability of the necessary software In contrast, the U.S. is a laggard when it comes to
and consumer awareness, as reflected below: QR code reader software installations.

70%
65%
HAVE CAMERAS ON
61% THEIR PHONES (BUT
PHONES HAVE
BARCODE SOFTWARE CONSUMERS HAVE NO SOFTWARE)
SCANNED QR CODES
WITH THEIR MOBILE
PHONE (LESS THAN
5% DO SO OFTEN)

ESTIMATES FOR 2D
CODE SOFTWARE
DOWNLOADS VARY
GREATLY FROM 1% -
10%

ADOPTION RATES IN JAPAN U.S. 2D CODE DATA

Source: IMC2

5
RECENT QR/2D CODE
MARKETING CASES
More and more U.S. marketers are deploying QR and 2D code based programs. The following
provides samples of such efforts (as well as some international efforts).

CALVIN KLEIN
In July 2010, Calvin Klein Jeans launched a QR
code billboard on the corner of Lafayette and
E. Houston in New York City. The code directed
users to a provocative 30-second branded video.

In July 2010, Calvin Klein Jeans launched a QR code billboard on the corn

CHEVY
Houston in New York City. The code directs users to a provocative 30-sec

At the SXSW Interactive Festival in Austin, TX,

Chevy affixed QR codes on pre-production
models of the Volt and Cruze, two new car
models that the company hopes will drive
new growth for the brand. The codes, when
photographed with a camera phone, launched
a microsite highlighting key vehicle features.

Chevy

At the SXSW Interactive Festival in Austin, TX, Chevy affix

6
DICK’S SPORTING GOODS
In September 2009, Dick’s Sporting Goods
became the first marketer to use a QR Code
on a stadium JumboTron during a football
game when they ran a QR campaign on the
world’s largest HDTV screen at the new Dallas
Cowboys Stadium. Fans were instructed to
take a picture of the QR Code with their phone
and were then connected to Dick’s Sporting
Goods’ mobile website and given an exclusive
offer of $10 off a $50 purchase.

ALLURE MAGAZINE
Allure magazine gave away more than
$725,000 worth of beauty products to
smartphone users who scanned a Microsoft
Tag within its August 2010 issue. The
publication incorporated Microsoft’s 2D Tags in
a multichannel contest that used print, mobile
Web and SMS technology.

Allure magazine is giving away more than $725,000 worth of beauty

who scan a Microsoft Tag within its August 2010 issue. The publicati
2D Tags in a multichannel contest that uses print, mobile Web and SM

Allure magazine is giving away more than $725,000 worth of beauty pro

UNILEVER/AXE
who scan a Microsoft Tag within its August 2010 issue. The publication
2DUnilever/Axe
Tags in a multichannel contest that uses print, mobile Web and SMS

In June 2010, Unilever’s Axe brand and proprietary

2D bar code provider Jagtag collaborated on
what they claim is the largest multichannel Unilever/Axe
advertising program in the U.S. market using
mobile 2D bar codes. Jagtag delivers multimedia
to both smartphones and standard phones
without requiring the consumer to download an
application prior to use (the user takes a picture
of the code and sends it to a specified number
via SMS). Axe featured the codes across multiple
In June 2010, Unilever’s Axe brand and proprietary 2D bar code prov
media including print, handouts, sample packs, they claim is the largest multichannel advertising program in the U.S
movie theaters and theme parks. codes. Jagtag delivers multimedia to both smartphones and standard p
consumer to download an application prior to use (the user takes a pi
a specified number via SMS). Axe featured the codes across multiple m
7
In June 2010, Unilever’s Axe brand and proprietary 2D bar code provide
HSBC
In the summer of 2010, HSBC Bank USA N.A.,
the official banking partner of Wimbledon,
launched a campaign targeting tennis fans
in New York with print and out of home ads
featuring QR codes. When scanned, the codes
unlocked exclusive Wimbledon content as a
teaser to the event.

VERIZON WIRELESS
In May 2010, Verizon featured its Scanbuy’s
ScanLife code reader as part of its “Droid Does”
campaign, using 2D bar codes to link Android
users to applications in Android Market. And
more recently, Verizon Wireless placed mobile 2D
codes throughout a multichannel campaign to HSBC Bank USA N.A., the official banking partner of
promote its Droid devices and the Warner Bros. tennis fans in New York with print and out of home ad
film “Inception.” In just over three months, the unlocked exclusive Wimbledon content as a teaser to t
campaign drove more than 175,000 scans, which
Scanbuy claims is the most successful ScanLife
campaign in North America to date.

In May 2010, Verizon featured its Scanbuy’s ScanLife code reader a

campaign, using 2D bar codes to link Android users to applications
8recently, Verizon Wireless placed mobile 2D codes throughout a m
 Heineken
HEINEKEN
In activating its multichannel “Plug Into Summer”
campaign with a mobile sweepstakes in partnership
with Universal Music Group and Fender Musical
Instruments Corp, beer giant Heineken placed SMS
calls-to-action and Scanbuy’s ScanLife 2D bar codes
on all packaging for Heineken and Heineken Light
across the United States. Consumers who participated
in the sweepstakes by texting in or scanning a 2D bar
code could win a free application or music downloads,
t-shirts and Fender guitars.

ENTERTAINMENT WEEKLY“Plug Into Summer” campaign with a mo

In activating its multichannel
with Universal Music Group and Fender Musical Instruments Corp, beer
In its annual summer preview issue
calls-to-action
in 2010, Entertainment Weekly and Scanbuy’s ScanLife 2D bar codes on all packaging fo
leveraged Light
Microsoft 2D Tagsthe
across to United States. Consumers who participated in the swee
allow users to view the official
scanning a 2D bar code could win a free application or music downloads
trailers of 16 films as well as other
content featured in the issue directly
Entertainment Weekly
on their smartphones.
In its annual summer preview issue this year, Entertainment Week
allow users to view the official trailers of 16 of the films as well as
directly on their smartphones.

In its annual summer preview issue this year, Entertainment Weekly leverage

THE WEATHER
  CHANNEL allow users to view the official trailers of 16 of the films as well as other con
The Weather
directly on their Channel
smartphones.

In February 2010, The Weather Channel began

promoting download of its Android application by
displaying the QR code for the application on-air.
Android-based smartphone users could The scanWeather
the codeChannel
directly from the TV screen to download the application.

In February 2010, The Weather Channel began promoting downlo

displaying the QR code for the application on-air. Android-based s
9 directly from the TV screen to download the application.
code
STARBUCKS
Starbucks is testing payment by iPhone in sixteen selected stores in
Silicon Valley and Seattle. The iPhone app displays a QR Code that
can be used just like a Starbucks Card to make purchases.

Starbucks is testing payment by iPhone in sixteen selected stores

iPhone app displays a QR Code that can be used just like a Starbu

NIKE Nike

Starbucks is testing payment by iPhone in

Nike’s True City iPhone App used QR codes to
iPhone app displays a QR Code that can be
provide unique insight into six European cities
from handpicked local “Nike Insiders” while also
delivering the latest premium content.

Nike

WARNER HOME VIDEO The Nike True City iPhone App used QR codes to provide unique
from handpicked local “Nike Insiders” while also delivering the la

In February 2010, Warner Home Warner Home Video

Video Canada placed EZcodes on
pizza boxes just in time for one of the
busiest pizza ordering days of the  
year – the Super Bowl – to promote The Nike True City iPhone App used QR c
new DVD and Blu-ray releases. from handpicked local “Nike Insiders” whi
Once scanned, the ScanLife codes
directed the consumer’s mobile Warner Home Video
browser to a URL to view video
clips of “Halo Legends” or “Justice
League: Crisis on Two Earths.”  

In February 2010, Warner Home Video Canada placed EZcodes on pizza boxes just in time for one
10 Super Bowl – to promote new DVD and Blu-ray
the busiest pizza ordering days of the year – the
NYC MEDIA NYC
NYCMedia
Media

On July 12 2010, NYC Media, in

partnership with Howcast, began
featuring QR codes on the sides of
2,200 sanitation trucks to educate
New Yorkers about city services
and initiatives. The codes link to
NYC Media informational videos on
recycling. NYC Media is the official
TV, radio and online network of the
City of New York.

Source: Mobile Marketer

SELECT JAPANESE QRto educate

CODE CASES
about city servicesOF NOTE
On July 12 2010, NYC Media in partnership with Howcast, began featuring QR codes on the sides of
2,200 sanitation trucks New Yorkers and initiatives. The codes link to
NYC Media informational videos on recycling. NYC Media is the official TV, radio and online
network of the City of New York.
In Japan, McDonald’s has Onbeen using
July 12 QRNYC
2010, Codes on in partnership with Howcast, began featuring QR codes on the
Media
Selectsanitation
2,200 Japanese QRtrucks
code cases
to of note New Yorkers about city services and initiatives. The codes
educate
its packaging since 2006 so consumers can access
NYC Media informational videos on recycling. NYC Media is the official TV, radio and onlin
nutritional information by network
scanning ofthe
the package
City of New withYork.
21
their mobile phones. The QR Codes allow customers
to view the amount of calories,
 
Select sodium, QR
Japanese fat,code
and cases of note
carbohydrates, as well as identify potential allergens
in their meal.
In Japan, McDonald’s has been using QR Codes on its packaging since 2006 so co
  nutritional information by scanning the package with their mobile phones. The Q
customers to view the amount of calories, sodium, fat, and carbohydrates, as well
allergens in their meal.

In Japan, McDonald’s has been using Q

N Building is a commercial structure nutritional information by scanning th
located near Tachikawa station in customers to view the amount of calo
Tokyo, Japan with a QR code covered allergens in their meal.
facade. The project is a collaboration
between Qosmo and Teradadesign.
Any mobile device that can read QR
codes can access shop information,
but more in-depth content like tweets
(located by GPS tagging), coupons,
and reservations can be seen through
a dedicated iPhone app that is
available only by request.

11
HOW DO
QR CODES WORK?
To read a QR code, a person utilizing a camera-equipped smartphone or webcam-equipped computer
with the correct reader software installed points at the code and takes a picture of it or “scans” the
code. This action, depending on the QR code reader, phone and/or user permissions enabled, typically
triggers an interpretation of the code and activates an automated action, such as calling up a specific
mobile website on the phone’s browser, downloading content to the phone (e.g., mobile coupon) or
reading and storing data (e.g., business card info).

ANATOMY OF A QR CODE
In contrast to traditional EAN/UPC barcodes,
which are one-dimensional in nature (barcode
scanners only scan the horizontal white
space between the vertical stripes to extract
embedded data, usually representing a unique
European Article Number used for inventory QR
tracking), QR codes contain information in both
the horizontal and vertical axis. Compared to
one dimensional barcodes, this allows for much QR codes are scanned o
larger amounts of raw data to be embedded. only scanned on the hor

Additionally, QR codes are 360-degree-reader

capable and can be read in any direction. This
is made possible by position-detection patterns
located at the three corners of the symbol, BAR CODE
which help guarantee stable high-speed QR codes are scanned on both the horizontal axis and vertical axis
only scanned onQR
reading. QR codes also employ data correction CODES
the ARE SCANNED
horizontal axis. ON BOTH THE HORIZONTAL
capability, which allows data to be restored AXIS AND VERTICAL AXIS VS. STANDARD BARCODES
even if the symbol is partially dirty or damaged. THAT ARE ONLY SCANNED ON THE HORIZONTAL AXIS.

12
 QR
QR CODE
code PDF 417
PDF417 DATA MATRIX MAXI CODE
QR code
QR
QR code
code PDF417 PDF417DataMatrix
PDF417 DataMatrix Maxi
DataMatrix Code
Maxi
DataMatrix Code
Maxi
Maxi Code
Code

Developer
Developer (country)Developer Denso-Wave
Developer
Developer Denso-Wave
Denso-Wave Symbol
Denso-Wave
Denso-Wave
(Japan) Symbol Symbol (USA)RVSI
Symbol
Symbol
Technologies Acuity
RVSI
RVSI Acuity
RVSI
RVSI
Acuity UPS
Acuity
Acuity
CiMatrix UPS
(USA UPS
UPS
UPS (USA)
(country)
(country)(country)(Japan)
(Japan)
(country)Matrix (Japan) Technologies
Technologies
(Japan) Stacked Barcode CiMatrix
Technologies
Technologies CiMatrix CiMatrix
CiMatrix (USA)
(USA) (USA)
(USA)
Type Matrix Matrix
(USA)
(USA) (USA)(USA) (USA)(USA) (USA)
(USA)
Data capacity: Numberic 7,089 2,710 3,116 138
TypeType Type Type Matrix Matrix Stacked
Matrix Matrix Stacked StackedMatrix
Stacked Matrix Matrix
Matrix Matrix Matrix Matrix
Matrix
Data capacity: Alphanumeric 4,296 1,850Barcode
Barcode
Barcode Barcode 2,355 93
Data
Data capacity: Binary capacity:
Data capacity:
Data 7,089
Data capacity: 7,089 2,710
7,089 7,089
capacity:
2,953 2,710 2,710 3,116
1,018 2,710 3,116 3,116 1,556 138138 138
3,116 138
Numeric
Numeric
Data capacity: Kanji Numeric
Numeric 1,817 554 778
Data capacity:
Data capacity:
Data 4,296
Data capacity: 4,296 1,850
4,296 4,296
capacity: 1,850 1,8501,850 2,3552,355 2,3552,355 93 93 93
93
Comparison of different code formats. Source: Denso-Wave
Alphanumeric
Alphanumeric
The data embedded in a Alphanumeric
Alphanumeric
QR code can be numeric, alphanumeric or binary in nature.
Data capacity:
Data capacity:
Data
Data 2,953
capacity:
2,953be
capacity: 2,953 1,018
1,018 1,018 1,5561,556 in 1,556
The data embedded in a
Typically, the larger the QR code, QR code more2,953
thecan numeric,
data 1,018
alphanumeric
is embedded withinorit.binary 1,556
The minimum nature. Typically, the
Binary
Binary Binary
Binary
larger
size the QR of
dimensions code, the more
a barcode data isupon
depend embedded within it.capabilities
the resolution The minimum of thesizephones
dimensions
that of a barcode
Data capacity:
Data capacity:
Data
Data 1,817
capacity:
1,817 1,817
capacity: 1,817 554554 554 554 778778 778 778
aredepend upontothe
being used Kanji
resolution
scan
Kanji the capabilities
code.
Kanji
Kanji
of the
This results in aphone that is being
recommended used toofscan
minimum 32 mm the xcode. This results
32inmm,
a recommended
or 1.25 inches minimum of 32 mm
x 1.25 inches x 32codes
for QR mm, in or the
1.25U.S.
inches
thatx contain
1.25 inchesa URL. forThis
QR codes in the U.S.
that contain a URL. This requirement guarantees that all cameraphones on the market can properly
requirement guarantees that all cameraphones on the market can properly read the
Comparison
read the code. of different
In contrast,
Comparison
Comparison code
within
of different
Comparison of
of formats.
Japan
different
code (an Source:
early
formats.
different code
code formats.Denso-Wave
innovator
Source:
formats. in mobile
Source:
Denso-Wave
Source: phone technology) average
Denso-Wave
Denso-Wave
code. In contrast, within Japan (an early innovator in mobile phone technology) average
mobile phones can handle much smaller QR code sizes (.75cm) to extract information.
mobile phones can handle much smaller QR code sizes (.75cm) to extract information.

Below
Below areare examples
examples of QR
of QR codes
codes (provided
(provided by by Kaywa)
Kaywa) with
with differentamounts
different amountsofofdata.
data. The sizes of the
5 5 55
codes
The sizesare proportional
of the codes aretoproportional
the amount to
of data they have
the amount of embedded.
data they have embedded.

Source: Kaywa Source: ITVP Graphics

While the creator of the QR code, Denso-Wave, owns th
The smallest
The square
smallest dot,
square or or
dot, pixel element,
pixel element,ofofa aQR
QRcode is is
code called a module. Just
called as for
trademark
WHILE to the application, it has not chosen to exerc
THE CREATOR OF
result, the use of the QR code is free of any license.
other types of
a module. barcodes,
Just it is types
as for other recommended to have
of barcodes, an empty area around the graphic,
it is recommended THE QR CODE, DENSO-WAVE,
called the an
to have quiet area,area
empty which allows
around theforgraphic,
easier reading of quiet
called the the barcode.
area, This quiet area for
OWNS
TWO TYPESTHE
OF QRPATENT
CODES RIGHTS
QRwhich
codesallows
is ideally four modules
for easier reading wide.
of the QR code. This quiet area for
There are two basic types of QR codes: online codes an
QR codes is ideally four modules wide. AND THE TRADEMARK TO THE
Only a portion of the QR code contains actual data, including error correction Online codes: Online codes are codes that point to an In
APPLICATION, IT HAS NOT
client/server interaction that requires an active Interne
information. The of
Only a portion data
theinQR
thecode
following QR code
contains actualisdata,
highlighted in dark green; the
including Thisother
typically involves the access of a mobile website, t
orCHOSEN TO Examples
another action. EXERCISE THEtypes include:
of service
components identified,
error correction which are
information. Thetypical
data inofthe
all QR
QR code
codes, todefine the data format,
the right
version, positioning, alignment andother
timing. PATENT RIGHTS.
Service Example AS A RESULT, In
is highlighted in dark green; the components identified,
http:
which are typical of all QR codes, define the data format, version, THE USEhttp://www.lowes.com
OF THE QR CODE IS B

mailto: mailto: savingscoupon@lowes.com

positioning, alignment and timing. FREE OF ANY LICENSE.
tel: tel: 8004456937 T

sms: sms: 8004456937 S

For online codes that employ service types, there are t

13 followed for client/server interaction: the direct method
TWO TYPES
OF QR CODES
There are two basic types of QR codes: online codes and offline codes.

ONLINE Online codes are codes that point to an Internet address and trigger a client/
server interaction that requires an active Internet connection or phone service.

CODES
This typically involves the access of a mobile website, the sending of an SMS
message or another action. Examples of service types include:

SERVICE EXAMPLE INSTRUCTION

http: http://www.store.com Browse to a website

mailto: mailto: savingscoupon@store.com Invoke an email message

tel: tel: 800.445.6937 Telephone a number

sms: sms: 800.445.6937 Send an sms message

Source: qrme.co.uk
For online codes that employ service types, there are two general process flows followed for client/
server interaction: the direct method and the indirect method. Simply put, a direct code routes a
user straight to a site/destination, whereas an indirect code takes the user to a third-party server to
be “resolved.”

OFFLINE Offline codes are codes that do not need an Internet connection and are
directly resolved on the phone. This includes data retrieved by the phone

CODES
from the QR code itself, like addresses, text, and phone numbers.

From a standardization perspective, QR codes are established as an ISO (ISO/IEC18004) standard.

Standards have also been accepted by other international bodies, including Japanese Industrial
Standards (JIS) and Automatic Identification Manufacturers (AIM) International, thus assuring
widespread acceptance of QR codes.

14
QR CODE
READERS
QR code reader software must be installed on the mobile phone client in order to for QR codes to be
read at all. And while most Japanese phones today come equipped with a native QR code reader, in
the United States, QR code reader installations are largely a smartphone-based phenomenon carried
out by the phone owners themselves who actively download the software on their own
(vs. preinstallations from the factory).

Notably, research In Motion has preinstalled QR codes on BlackBerry Messenger 5.0 and Google’s
mobile Android operating system supports the use of QR codes by natively including a barcode
scanner (ZXing and Google Goggles in Version 2.2). However, most phone models are not QR code
capable. The iPhone, for instance does not yet come preinstalled with a native QR code reader
(although no less than 25 free or paid third-party iPhone-compatible readers are available via iTunes for
download). Nokia’s Symbian operating system is also provided with a barcode scanner, which is able
to read QR codes.

SOME OF THE MOST NOTABLE THIRD-PARTY QR CODE READERS COMPATIBLE WITH A VARIETY OF PHONE MODELS INCLUDE:

KAYWA NOKIA I-NIGMA

ACTIVE PRINT UPCODE QUICKMARK
SNAPMAZE BEETAGG NEOREADER
SCANLIFE MOBILETAG QUIQR

QR CODE
GENERATORS
It is relatively easy to create a QR code. There are several free QR code generators in the marketplace
for the open standard QR code, as well as proprietary generators for the closed codes.

SOME OF THE MOST NOTABLE QR CODE GENERATORS ARE FROM:

NOKIA RACO SNAPMAZE

WINKSITE ZXING GOQR.ME
I-NIGMA BEQRIOUS MAESTRO
JAXO INVX KAYWA

15
 PROPRIETARY ALTERNATIVES
TO QR CODES
MICROSOFT
tints TAG in less space than a QR code can. As a result, Tag barcodes
to embed more information
much smaller than QR codes, yet hold the same amount of information.
Microsoft Tag is a 2D barcode that was introduced in January 2009 by Microsoft with an intended
utility and use case similar to that of QR codes. Tag barcodes utilize High Capacity Color Barcode
From a backend technological standpoint, Microsoft Tags also differ from QR codes in that
technology, which involves different symbol shapes in geometric patterns and multiple colors and tints
don’t
to embedactually store the data
more information in lessinspace
the code
than aitself.
QR codeAllcan.
theAsTag contains
a result, is a unique
Tag barcodes ID,much
can be which the
application sends
smaller than QR to Microsoft’s
codes, servers.
yet hold the same amountThe servers then send back all of the linked request
of information.
information. This allows for more information or a wider variety of data to be applied to a v
From Microsoft
code. a backend technological
Tags are alsostandpoint,
uniqueMicrosoft
in that theyTags also
allowdiffer
Tagfrom QR codes
creators to inidentify
that theyeach mobile
don’t actually store the data in the code itself. All the Tag contains is a unique ID, which the reader
used to scan one of their tags by using a unique device ID.
application sends to Microsoft’s servers. The servers then send back all of the linked requested
information. This allows for more information or a wider variety of data to be applied to a very small
code. Microsoft Tags are also unique in that they allow Tag creators to identify each mobile phone
used to scan one of their tags by using a unique device ID.

Source: iphonebuzz
Microsoft Tag (right) in comparison to the other standard 2d codes.

16
EZCODE
 generate “most data
according to a repre

EZCODE
EZcode is a 2D barcode originally created by the ETH Zurich,
also known as the Swiss Federal Institute of Technology
Zurich, and was exclusively licensed to private company generate “most data 100 percent o
Scanbuy in 2006. Like QR codes, EZcode was created to according to a representative of Sc

QR
allow data activation and transfer via cameraphones. But, as
with the Microsoft Tag approach, EZcodes do not store most
of the data in the code itself. Rather, the code reader decodes
the image on the phone, uploads the code index to a server,
sends it to a database and then returns the listed command
and data back to the phone. As a result, the mobile phone
must have an active data connection.
Aside from its techn
This allows EZcodes to be comparatively smaller that a QR
code and maintain its size regardless of the amount of data
EZCODE
establishing critical
moving forward. Th
associated with the code. This also reportedly contributes to barcode scanner Sca
faster reading of the EZcode and more flexible scanning of the EZcode, when comparedendorsement
to a QR code. from C
EZcode also allows for data analytics and tracking. Any code created by ScanLife and scanned by the QR cod
Datamatrix,
ScanLife app will generate “most data 100 percent of the time; and income and zip date about 10-15%
of the time,” according to a representative of Scanbuy1. Interestingly, althou
Aside from its technology,
to make thewhat is
specifi
Aside from its technology, what is notable about EZcode is Scanbuy’sestablishing critical
recent commercial endorsements
success
due in
to a strategy bya
establishing critical endorsements and partnerships that will be beneficial
moving to the technology’s
forward. Thisadoption
monopolyincludes Scan
on backe
moving forward. This includes Scanbuy’s agreement with Verizon in barcode
May 2010scanner
to have itsScanLife
proprietarymade ava
barcode scanner ScanLife made available for more than 30 of the carrier’s models asfrom
endorsement well as an
CTIA. In additi
endorsement from CTIA. In addition to EZcodes, Scanbuy’s mobile barcode reader also supports
Datamatrix, QR codes, and 1D form
Datamatrix, QR codes, and 1D formats (UPC, EAN, etc.).
Interestingly, although EZcode is a
Interestingly, although EZcode is a proprietary standard, in April 2009 Scanbuy announced intentions
to make the specifications for the
to make the specifications for the EZcode technology globally available to the public2. This mayMicrosoft
Both be due Tag
due to a strategy
to a strategy by Scanbuy to get the EZcode standard widely adopted while still maintaining by Scanbuy
a monopoly to get
open standard QR c
on backend gateway responsibilities. monopoly on backend gateway res

Advantages

• Due to the n
size than tra
                                     
1
http://blog.greattv.com/2010/06/top-10-reasons-scanlife-ezcodes-are-better-than-quick-response-qr-codes-for-u-s-marketers/
Both Microsoft Tags 1 and EZcodes
2  http://blog.greattv.c
http://www.scanbuy.com/web/press-kit/50-scanbuy-will-make-its-ezcoder-specifications-publicly-available-to-become-a-global-open-standard-
open standard QR code:
s‐marketers/ 
2
17  http://www.scanbuy
BOTH MICROSOFT TAGS AND EZCODES BRING SEVERAL ADVANTAGES AND DISADVANTAGES WHEN COMPARED TO THE OPEN STANDARD QR CODE:

ADVANTAGES
Due to the nature of its approach, both Microsoft Tags and EZcodes can be much smaller in size than traditional QR codes.

The size of both Microsoft Tags and EZcodes can remain the same, independent of the amount of information associated
with their codes.

MS Tags and EZcodes allow for robust analytics and user tracking around codes produced with the technologies.

Because of the small amount of information contained in Tags, errors can be handled easily. To encode one byte of
information on a QR code, eight symbols are needed. To encode one byte in a Tag, only four symbols are needed.

Microsoft and Scanbuy are investing significant funds and institutional resources to support their technologies through
software development and business development.

Several major marketers have experimented with MS Tags and/or EZcodes including McDonalds, American Airlines, Sears,
Sprint, CitySearch, US Air Force, Time Warner, Allure magazine and Heineken, among others.

Due to the server-only based approach behind MS Tags and EZcodes, code publishers have the freedom to publish a code
before determining what the content to attach to it is or change the content on an ongoing basis. This cannot be done with
offline QR codes.

DISADVANTAGES
Microsoft Tags and EZcodes are effectively closed standards (vs. QR code which is a de facto open standard). As a result,
the code reader on the phone has to be proprietary to Microsoft or Scanbuy to read the codes, in contrast to QR codes that
are readable by virtually all 2D code readers.

As more and more handset manufacturers opt to embed native QR code readers in their phone models from the factory, it
is highly unlikely that all OEMs will choose to embed a reader solely compatible with a protocol that is closed, has a smaller
footprint globally than QR codes and is controlled by a company that may be competitive with the OEM in other industries (i.e.
HP/Palm, Apple, etc.).

Microsoft Tags use three base colors (CMYK), while the QR codes need only two (black and white). As a result, the efficacy
of Tags is much more sensitive to the quality of color printing than QR codes will ever be.

The phone needs to be online to provide any functionality for Microsoft Tags or EZcodes. This differs from offline QR codes
that can provide data embedded in the QR code itself without ever needing to access the Internet.

Microsoft Tags and EZcodes are far newer technologies than QR codes that have been used since the mid-1990’s, and are
simply not as proven as the widely accepted QR code.

Privacy concerns may arise with the server-based requirement of Microsoft Tags and QR codes.

18
 QR CODE MS TAG EZ CODE

Proportional to amount of Remains small regardless of Remains small regardless of

Size of code
data embedded amount of data amount of data

Tech Approach Offline and Online Primarily Online Primarily Online

Interoperable with virtually all Only readable on its Only readable on its
Reader Interoperability
code readers proprietary reader proprietary reader

Robust User Tracking Neutral High High

State of Market Adoption Widely adopted (globally) Limited but growing Limited but growing

A Comparison between QR Codes and Two Key Proprietary Codes

OTHER 2D CODE ALTERNATIVES

There is an increasing number of other competing proprietary 2D code standards emerging in the
marketplace, including:

MOBILE MULTI- Scientists at Edith Cowan University in Western Australia have developed a next-generation 2D
COLOUR code technology called Mobile Multi-Colour Composite (MMCC) 2D Barcode. The MMCC codes are
COMPOSITE high density codes that can store multimedia content such as ring tones, video clips and games in
the codes themselves eliminating the need for mobile connectivity for server support. A provisional
patent has been filed by the creators of the code, Dr. Alfred Tan and Dr. Douglas Chai, as they
attempt to raise capital for mass commercialization of the standard.

JAGTAG Jagtag is an emerging company and standard that delivers multimedia to both smartphones and
standard phones without requiring the consumer to download an application prior to use. The user
takes a picture of the code and sends it to a specified number via SMS.

SHOTCODE Shotcode is a special 2D barcode that was developed by Cambridge University. It is circular in
shape and similar to a dartboard in appearance. The codes themselves do not store heavy data.
Rather, 40 bits of data embedded in data circles around the code direct the Shotcode specific
reader to retrieve data from a server.

SEMACODE Semacode is both the name of a 2D code standard and the Canada-based company that created it.
Semacodes resemble Data Matrix codes and primarily store Web URLs for data retrieval.

BEETAGG BeeTagg is a proprietary 2D code system that allows businesses to embed their visual brand
logo onto the code. BeeTagg has a free version of the software, which might show ads before
redirecting consumers to the destination of the tag. BeeTagg offers built-in metrics and a tag
management interface, similar to those of Microsoft Tag.

3
http://www.gomonews.com/new-dense-mobile-barcode-stores-multimedia-content-no-need-for-net-access/
4
http://interactivesnack.wordpress.com/2010/01/10/2d-codes-qr-code-datamatrix-code-microsoft-tag-bee-tag-and-resources/

19
OUTLOOK FOR 2D CODES IN THE UNITED STATES:
OUR POV
As previously mentioned, the global beachhead for adoption of QR codes was the Japanese market.
However, Japan’s widespread adoption and market success with QR codes has not been easily
duplicated in other markets. In our analysis, Japan was uniquely poised for QR code success due to
positive alignment across four critical factors:

• Consumer Value Perception and Cultural Openness to innovation –

Culturally, Japanese society was (and is) very receptive to technological
innovation and QR codes proved a welcome substitute to typing in
URLs with the complex and relatively broad Japanese language
character set.
• Technological Readiness (infrastructure, camera-ready
handsets, mass pre-installs of reader software on
handsets) – Japan was a first mover in terms of high
speed Internet access via mobile phones and tightly
integrated mobile carriers in Japan and Asia were
proactive in installing 2D-code-reading-software in
consumer cameraphones as a standard.
• Unified 2D Code Standard – A home-grown Japanese
company, Denso-Wave, introduced QR codes in 1994 and
astutely allowed it to become an open standard. This, in turn,
contributed to QR codes becoming the de facto market standard,
making it easy for any publisher to activate against the space.
• Widespread Publisher Support – Industry publishers, from restaurants JAPAN: THEN
to luxury goods manufacturers, readily welcomed QR codes as a means to
augment their commercial messages and programs in market.

In contrast to this perfect storm of environmental factors, in the U.S. carriers were relatively slow to
advance the nation’s wireless infrastructure and introduce data-capable phones and mobile Internet
services. This was due to lack of industry coordination, the capital expense implications related to
infrastructure technology and spectrum licenses and fragmented wireless standards.

It has not been until recently that a confluence of positive factors, including the introduction of high-
speed wireless infrastructure; turnkey mobile internet access; smartphone-based innovation and a
critical mass of cameraphones, has set the stage for the American market to even be in a position to
adopt QR codes.

So now that the environmental factors needed for QR code adoption are available in the American
market, will it successfully be adopted en masse?

20
To answer this, we need to examine the attractiveness of each of the four critical factors as it relates
specifically to the American market:

CONSUMER VALUE PERCEPTION AND CULTURAL OPENNESS TO INNOVATION

• Early data points to robust smartphone and mobile application adoption and usage in America.
Indeed, over 30% of Americans now have smartphones according to Advertising Age and Research
and Markets predicts that over half of all mobile phones in the US will be smartphones as early as
2011. Also, according to the Pew Internet and American Life Project, six-in-ten American adults now
go online wirelessly and use of non-voice data applications has grown significantly over the last year.

• Our assessment is that, while the value add of QR code usage would not be as great for Americans
as it was for the Japanese (Americans are already comfortable with inputting URLs into mobile
devices and it is not as inconvenient as it was for the Japanese to input data from their Kanji character
set, for instance), QR code usage does provide enough utility to be valued and American consumers
will continue to integrate mobile data into their lives.

• We see the environment for Consumer Value Perception and Cultural Openness to Innovation within
the US as positive.

TECHNOLOGICAL READINESS

• While America’s technological environment from both a data-ready infrastructure standpoint and
a cameraphone penetration standpoint is more QR code friendly than it’s ever been, QR code
reader penetration is still extremely low (hard figures are difficult to source but the latest data suggests
penetration of QR reader software on American phones may be still as low as 1%).

• A major issue is the inaction on the part of US carriers to require preinstallations of QR code readers
from their handset OEM manufacturers. While several QR code readers are available in smartphone
OS-based application stores, most phones do not come with code reader software preinstalled.
However, Google is taking the initiative to pre-install QR reader software in its latest Android release,
AT&T recently launched three mobile barcode services to push the technology and, increasingly,
proprietary 2D code vendors, such as Scanbuy, are striking deals with carriers to pre-install their
software onto new phones.

• While the lack of QR code reader installs is a seemingly minor barrier to adoption in an otherwise
technologically ready market that will lower in time, we see it as a nontrivial barrier nonetheless and
assess the environment for Technological Readiness for QR code adoption within the US as neutral.

5
http://finance.yahoo.com/news/Research-and-Markets-bw-1529248141.html?x=0&.v=1
6
http://pewresearch.org/pubs/1654/wireless-internet-users-cell-phone-mobile-data-applications

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UNIFIED 2D CODE STANDARD

• What is often critical for any new product innovation to gain widespread market adoption is an
established or de facto standard for the core technologies associated with that innovation. However,
in the American market, the 2D code market is becoming increasingly fragmented with the
introduction of competing proprietary standards from companies such as Scanbuy and Microsoft. In
our view this will, in the near term, hinder the creation of a unified standard for 2D code activation
which, in turn, will have negative effect on market and industry adoption.

• Numerous proprietary codes will inevitably, in our view, bring about heightened confusion on the
part of the consumer, increased market fragmentation and create an additional hurdle to adoption as
not all readers are compatible with all codes. And while most readers are compatible with the QR
code standard, proprietary readers are not generally compatible with other proprietary codes.

• Due to these factors, we see the environment for Unified 2D Code Standard within the US as negative.

WIDESPREAD PUBLISHER SUPPORT

• In the area of publisher support, brand marketers, ranging from Ralph

Lauren, Nike and Ford to Heineken, HBO and HSBC, have been
increasingly experimenting with 2D codes for marketing campaigns
and adopting them for consumer programs. The relatively low
costs associated with activating QR code efforts (not including
any costs associated with multimedia content development,
agency services, etc.) is likely supporting this trend.

• Additionally, major Web services players in the market

including Google (through its offline QR code-driven
Android application downloads and QR code-based
‘Favorite Places on Google’ program) and reportedly
Facebook, are putting their weight behind QR codes which is
helping raise consumer awareness. Continued industry backing will
effectively subsidize the (rather heavy) costs of educating the
consumer en masse. US: NOW

• We are encouraged by the amount and quality of top brands in the US marketplace that have engaged
in QR code related initiatives. As the breadth of these first movers appears to be rising, we see the
environment for Widespread Publisher Support within the US as positive.

22
CONCLUSION AND OUR
RECOMMENDATION
Several negative factors still prevalent in the U.S. market will create resistance to widespread adoption
of QR codes:
• Low levels of QR reader penetration
• Lack of consumer education and awareness
• Lack of preinstalled QR code readers
• Lack of unified 2D code standard

However, we believe early indicators point to positive momentum in the marketplace regarding eventual
mass adoption. In particular, robust smartphone sales and application adoption as well as increasing
experimentation by top brand marketers and support from industry combine for a strong union of
factors that will contribute to continued adoption from a small but growing base.

Specifically, we see experimentation with QR codes as a valid opportunity for marketers to:
• Institutionalize learnings in the 2D code space quickly for competitive advantages against
late-adopter competitors
• Identify the most digitally savvy early adopters among their customer bases for
continued engagement
• Create buzz as tech-savvy operators within their respective industries
• Educate their consumers around the subject of QR codes
• Optimize use of pre-existing assets (i.e. multimedia content, CRM systems, etc.)

In light of this, we recommend:

• Using a limited “test and learn” approach that will be beneficial in not exposing material risk to
mainstream marketing activities while still allowing for substantial knowledge gathering and non-
traditional consumer engagement.
• Complimenting any in-store, outdoor or print publication-based QR code promotion with
a complimentary SMS option or mobile web (self-directed) option for engagement, where
applicable. Due to the low levels of QR code penetration in the US, this dual pronged approach will
ensure engagement by most mobile consumers. In contrast to QR codes, SMS is a mainstream
function among mobile users: 96% of US cell phones are SMS capable (CTIA) and over 1 trillion
text messages were sent in the US in 2009. Additionally, 70 million consumers use the mobile web
regularly (CTIA).

23
• Leveraging the global de facto open standard, QR codes (instead of proprietary codes
such as Microsoft Tags or Scanbuy’s EZcode), as it is the lowest common denominator
among 2D code readers in terms of inter operability and there are inevitably extra costs associated
with aligning with a proprietary code standard. Additionally, if both Google and Facebook put their
collective resources behind QR codes, which they likely will as they enter the space, it will increase
the odds of such a standard taking hold in the market. At the very least, under such a scenario,
all competing proprietary standards would be forced to make their readers interoperable with QR
codes, which most of them already are currently. Additionally, QR codes support data tracking
through the indirect method and allows embedded data to be retrieved from the code without a
wireless connection (unlike several proprietary standards). Lastly, if a proprietary standard does
eventually become dominant in the marketplace, there will always be opportunity for marketers to
make a transition to that standard as switching costs from the QR standard to a proprietory one
should remain relatively low for publishers in the near to medium term.

Before embarking on a QR code-centric campaign, marketers must understand that any QR campaign
in the U.S. market at this stage in its adoption will not be effective for mass market initiatives where
broad reach is a goal. Instead, it will likely only be relevant towards a small base of early adopter/
influencer audiences. However, marketers’ efforts in this space will provide a value added experience
for the tech savvy among their audience bases, help elevate the technology’s exposure among
consumers and likely spur the technology’s adoption overall.

In conclusion, we view QR codes as a promising technology that, if adopted in earnest in the U.S.
market, would provide marketers in the world’s #1 economy with a unique channel for bridging
offline and online consumer behavior for incremental brand engagement. However, the 2D code
consumer market, while highly developed in Japan, is still in its very nascent stages in America.
It will require time and continued commitment from industry to evolve. Thoughtful, cost-effective
and limited experimentation for early learnings and buzz are recommended for marketers’ first forays
into the space.

PREPARED BY
Edwin Philogene
VP, Associate Director, Business Planning and
Digital Strategy
BBDO
For The Digital Lab

24