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iBeacons Usher in New Era of Mobile Advertising in 2014, Raise Old Privacy Concerns

iBeacons Usher in New Era of Mobile Advertising in 2014, Raise Old Privacy Concerns Fernando Bohorquez Jr.
Co-Authored by Alan M. Pate

Remember that scene from Minority Report? The one where John Anderton (Tom Cruise) takes a trip to GAP, virtual billboards call out his name and bombard him with offers as he walks through the mall, retinal scanners flash left and right, an AI hologram offers up his own personal greeting – “Welcome Back to the Gap! How’d those assorted tank tops work out for you?” It’s not quite 2054, and we haven’t quite perfected PreCrime, but ad tech is taking some big steps in the Minority Report direction.

2014 may be the year Apple’s “iBeacon” iOS7 feature changes the game for targeted advertising with its ability to detect customers’ presence and deliver targeted ads. As with almost any new ad tech these days, its adoption isn’t without privacy concerns.

As reported by the New York Times, this Super Bowl weekend the NFL deployed Apple’s iBeacon technology to send users of the NFL Mobile App targeted advertisements based on their physical location in Manhattan or in MetLife Stadium. Fans walking down Broadway received messages such as – “Get your picture taken with the Lombardi Trophy, located between 43rd and 44th streets on Broadway”. Other messages alerted users to merchandise at nearby kiosks as they walked through MetLife.

This iBeacon technology, introduced in Apple’s recent iOS7 update, utilizes Bluetooth Low Energy (BLE) to communicate with nearby devices. (Many Android phones are now also compatible with BLE.) Retailers can install small, cheap low-powered transmitters that can detect the location of nearby phones running their app, and then send personalized messages without a user having to open an app or browse a website. The transmitters allow advertisers to pin down the location of a user more accurately than GPS, down to a just a few feet.

Others beside the NFL are early-adopting iBeacon and BLE. Clothing retailer American Eagle has rolled out transmitters at 100 of its locations, sending users of their app discounts and products recommendations as they walk through the door. And Apple, unsurprisingly, has deployed the tech at many of its locations for use with its new Apple Store App. Another early adopter includes Major League Baseball, which has announced plans to introduce iBeacons in at least 20 of its ballparks this March. This comes on the heels of last baseball season’s experiment with iBeacons at Mets’ Citi Field. During that run, park-goers who had downloaded the MLB app were sent hot dog coupons and embedded videos as they moved about the stadium.

Still, the big game changer for this tech might be with mobile payments. PayPal this past September introduced its “Beacon” USB device for retailers, which utilizes iBeacons/BLE and enables shoppers to make hands-free payments through their PayPal accounts. Beacon detects when a customer with the PayPal app is in a store, communicates their presence with the retailer, and then can process a payment in the background so consumers may "pay with their identity." No cash, cards, tapping, or swiping required.

With more retailers and advertisers interested in iBeacons, and PayPal gearing up for a larger push of its Beacon device later this year, some have raised privacy concerns. iBeacons give companies a new treasure trove of customer information. How do our visitors move through the store? What do they browse? How often does this particular customer visit and how long do they stay? As Marc Rotenberg, the executive director of the Electronic Privacy Information Center, recently speculated in the New York Times, perhaps there’s a risk consumers will not be made sufficiently aware of the seemingly endless ways their data could be used.

Others have raised concerns over the data security of iBeacons. If the iBeacon signals are essentially open and available to be picked up by any phone, this may open the door for hackers or other ill-intentioned individuals to try and intercept sensitive data or track individuals. As Hilmi Ozguc, the CEO of in-store mobile marketing company Swirl, stated in a guest post on Venture Beat, retailers will need to add extra layers of data encryption and security to their indoor positioning beacons to prevent breaches.

While it’s true the tech will almost certainly provide more data into the already expansive amount available to advertisers these days – the interaction between consumer and retailer/advertiser ultimately is still dependent on consumer consent. Consumers have to download a certain retail app that uses iBeacon, turn on Bluetooth, and then enable location services. And really, because iBeacon ads are ultimately dependent on an app, consumers can always just hold down the app icon and click the wiggly black X to permanently shut down any targeted ads or data collection they don’t want.

As we’ve talked about with the rules-of-the-road for privacy before, as long as you’re transparent and upfront with how your company uses customer data (with a privacy policy displayed clearly in your mobile app), you’re likely to stay on the right side of regulators. For those who will be deploying iBeacon tech, the principle is the same – stay transparent and disclose what you’re doing. With iBeacons in particular, it’s probably also a good idea to build a range of options directly into your app. Let users turn off targeted iBeacon ads and location tracking from within the retail app. Doing so will not only prevent some rage deletes, but will generally build trust with your customers. And finally, keep in mind the “creep factor” test. Just because you can do something with tech doesn’t mean it’s a good idea and not a total violation of consumer privacy. “We see you’re browsing microwave dinners for one again – can we recommend some books on dating?” If it would creep consumers out—if it would creep 2054 dystopian Tom Cruise out—it’s likely a data practice to stay away from.

DISCLAIMER: This article does not constitute legal advice and because of its general nature the information provided may not be applicable in many situations and should not be acted upon without specific legal advice based on particular facts and circumstances.

Fernando A. Bohorquez Jr., a partner in the New York office of BakerHostetler, handles commercial, bankruptcy and intellectual property litigation, and advises tech startup and social media companies regarding business law, intellectual property,...

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