Apple is changing how location sharing works on iPhones, and the changes may help it solidify control over the burgeoning in-store tracking and retail analytics industry.
In recent years, venture-backed startups like Euclid and Nomi have caught the attention of marketers and privacy advocates alike by using Wi-Fi to recognize the “media access control” (MAC) addresses on shoppers’ smartphones and using that data to track store visits and how shoppers move through the aisles once inside. But Apple’s forthcoming update to its mobile operating system is expected to obstruct this kind of tracking. While the controls might be presented in terms of privacy and user choice, they will also likely leave Apple as the de facto tracker for retail environments.
When Apple releases iOS 8, the latest version of its mobile operating system, this fall, it’s expected to start randomizing an iPhone user’s MAC address, the unique string of 12 digits that’s used to identify smartphones when they connect to Wi-Fi networks. The change was first reported by app developers who have been given early iterations of iOS 8 ahead of its consumer launch. Apple did not return a request for comment.
iOS 8 randomises the MAC address while scanning for WiFi networks. Hoping that this becomes an industry standard. pic.twitter.com/oGsZMtydUo
— Frederic Jacobs (@FredericJacobs) June 8, 2014
Randomizing MAC addresses renders MAC address tracking essentially irrelevant, thus posing a threat to the business models of companies like Euclid and Nomi.
“A big part of Nomi’s value proposition was that you could use it for seamless tracking without an app being involved,” Rachel Pasqua, head of mobility at media agency MEC, said.
Nomi did not return a request for comment.
“We fully support Apple’s decision to add additional layers of consumer protection by randomizing MAC addresses at the device level,” a Euclid spokesman said in statement
Apple stands to benefit from randomizing MAC addresses, however — it entices marketers to use Apple’s in-store tracking technology, iBeacon, which uses Bluetooth and not Wi-Fi to communicate with iPhones.
Apple’s only major potential competition is Google in that only Google has a way to track consumers’ store visits at scale. Google’s Android mobile operating system has an even larger share of the U.S. smartphone market — 50 percent to iOS’s 40.5 percent, according to eMarketer.
Jason Goldberg, vp of strategy at Razorfish, said that Euclid, Nomi and other similar companies will have to start collecting signals other than MAC addresses if they want to grow.
“It’s not a death blow to companies using MAC addresses. They’re just going to have to evolve,” Goldberg said.
Goldberg added that Apple’s motivation for enacting the change is to head off consumer backlash about “creepy” location-tracking practices and, in turn, to prevent consumers from opting out of location-sharing altogether. If consumers turned off location-sharing en masse, they would take away a valuable tool marketers were just beginning to learn how to take advantage of.
“Apple is trying to strike this balance between letting marketers have and use these tools, and having the value of those tools depreciate because consumers grow weary of them,” he said.
The upshot, according to Pasqua, is that retail brands will need to focus more on their owned and operated apps, and on integrating those apps with either iBeacon or another in-store tracking system. Proximity marketing within stores — sending users a coupon when they visit a certain aisle or a loyalty reward for making frequent visits — “is going to be a booming business,” Pasqua said.