"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Jarno Vanto, chief privacy officer at Unacast.
After some false starts, location-based marketing is finally hitting its stride. Researcher BIA/Kelsey projects the segment will grow from $12.4 billion in 2016 to $32.4 billion by 2021, a compound annual growth rate of 21.1%.
Google also reports that 56% of its searches on the go now have local intent. Some 50% of those searches prompt a store visit within a day.
While there is confidence in the growth of the proximity industry, there are some variables that could potentially slow it down if not handled well. One big concern is transparency in privacy practices. By not fully explaining their data collection and privacy protection practices, marketers may scare off consumers, even if nothing nefarious is actually happening.
A few years ago, Nordstrom revealed it was using Wi-Fi to track consumers’ movements in its stores, a practice that consumers considered surprising since they were not aware it was happening. Since then, the FTC has cracked down on companies that tracked consumers via their phones without their knowledge or provided unworkable opt-outs.
The FTC has merely prompted marketers to be more covert. Even if companies ensure compliance with privacy regulations about their consumer tracking practices, they are not making their data practices explicit enough to consumers but are burying it in the fine print in their privacy policies. Some 17.6% of consumers say they “always” read terms-of-service agreements, according to one study. I’d venture to say they were highballing that figure.
To make matters worse, the privacy policies often don’t appear on the app itself. Instead, they’re on the company website, which is irrelevant if you’re downloading the app on your phone.
The terms and conditions might also include a provision that the company may “change the terms and conditions ... at any time and without notice to you.” Some companies push the envelope. Last year, for instance, Uber began tracking consumers’ data even when they weren’t using the app, albeit with consumers’ permission.
The classic scenario that often catches consumers off-guard is when app makers include location tracking even if their app doesn’t really need it. They then sell that data to third parties, who use it to target consumers for ads, without explicitly informing the app user.
Surveys show consumers are wary of the idea of location-based tracking, unless there’s an intuitive reason for the tracking or they get something useful out of it. Most of us will trade some privacy for the utility of Google Maps, for instance. However, in cases where the trade-off is less apparent, marketers need to fill the gap or at the very least be transparent.
Currently, pop-up notifications on iOS and Android ask users if they’re OK with being tracked. The notifications don’t mention that the data will be used for ad purposes and stored away. They should.
In Europe, if you visit a website with cookies, the site will tell you so. You can then choose if you want to visit the site or not. A similar practice should be adopted in the US with location data to build trust with consumers. A notification could explain, in simple language, “Your location data may be shared with advertisers and other third parties.” Consumers can then make an informed decision.
Organizations in the location data advertising industry, promoting codes of conduct and self-regulation, have started to implement opt-out tools for consumers to ensure that consumers’ privacy is honored. Not only can consumers’ direct relationship with data-tracking companies get more transparent, but their relationship with third-party data-tracking companies could too.
However, that’s unlikely to happen in the US in the nearest future. In March, the Republican-controlled Congress voted to roll back protections that had limited what companies could do with consumer data such as Social Security numbers and browsing histories. Realizing that such protections are gone, consumers might take matters into their own hands by keeping closer tabs on the data they share.
Meanwhile, the industry isn’t talking about consumer privacy enough. Understanding that is an extra step for marketers and may raise questions from previously unknowing consumers, but this is still a crucial variable in the evolution of the location/proximity industry. Better to be transparent with consumers now and deal with the privacy hurdles before they slow down the growth of a very promising industry.