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How Location-Based Apps Will Shape the Future of Shopping

The Crux
By Hiawatha Bray
May 1, 2014 12:48 AMNov 20, 2019 4:18 AM


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Excerpted from You Are Here by Hiawatha Bray These days new smartphone apps all seem to want the same thing from us—our latitude and longitude. According to a 2012 report from the Pew Research Center's Internet and American Life Project, three-quarters of America's smartphone owners use their devices to retrieve information related to their location—driving directions, dining suggestions, weather updates, the nearest ATM. Such location data is a boon to advertisers, who use information on our movements to discern our habits and interests, and then target ads to us. With location-aware smartphones, advertisers can transcend the merely local. They can begin beaming us hyperlocal advertising, tailored not just to the city, but to a particular city block. The idea is called “geofencing,” an unfortunate name choice that evokes the ankle bracelets sometimes worn by accused criminals under constant surveillance. The earliest such devices fenced in the user by transmitting a radio signal to a box connected to his home telephone line. If the suspect left the building, the radio signal would fade, and the box would place an automated phone call to the cops. With the addition of GPS and cellular technology, later versions of ankle bracelet technology allowed a greater measure of mobility. A judge might grant a criminal suspect permission to go to her job, her church, and her local supermarket, with each approved location plugged into the court’s computer system. Data from the ankle-strapped GPS could confirm that the suspect was staying out of mischief or send a warning to police when she paid an unauthorized visit to the local dive bar. Geofencing also has uses for the law abiding. A company called Life360 uses it to help parents keep tabs on their kids. The service homes in on location data from a child’s phone and sends a digital message whenever the kid arrives at home or at school—and whenever he leaves. Stroll off campus at ten in the morning, and the parents instantly know. As of late 2012, Life360 had signed up about 25 million users.

Ads Where You Are

When marketers build a geofence, they have no desire to restrict our movements. They want us out and about, constantly traveling past places where we can spend money. Far from building fences, they are stringing trip wires. The goal is to detect our close approach to a nearby business that is looking to make a sale, so the company can ping you with a text message urging you to buy. “I think we were probably almost the first to deploy it at scale, four years ago,” said Alistair Goodman, chief executive officer of Placecast, a San Francisco company that has become the most prominent practitioner of geofencing. “We saw that the physical world and the digital world were going to collide.” Goodman founded Placecast in 2005, convinced that the FCC’s 911 mandate, and the plummeting prices of phones, would bring location-based selling to the masses. “When my 80-year-old father told me he had to have a cell phone,” Goodman said, “that’s when I knew it was happening.” Retailers like Starbucks, Kmart, and the Subway restaurant chain deliver ads through Placecast’s ShopAlerts service. The company also has alliances with U.S. cellular carrier AT&T and the European phone company O2. In all Placecast delivers geofenced ads to 10 million phone users in the United States and Britain. Each potential customer wants to receive the ads; Placecast works on an opt-in basis. For example, a sandwich lover might ask to get a text message when he is within a block of a Subway store. Goodman realizes that nobody wants a constant stream of text messages. With coffee bars and fast-food restaurants on every block, life in a geofenced world could soon become intolerable. So Placecast practices a policy of “frequency capping.” Customers generally get no more than five messages a week, even if many other attractive deals come within range. Subscribers do not need to own a GPS-equipped smartphone, either. “GPS can get you to within 50 feet or even closer” to a local store, said Goodman, but “you don’t actually need that level of precision.” Even a crude location fix obtained by triangulating to the nearest cell towers is good enough for a geofence. Placecast has erected geofences around 262,000 locations in the United States and United Kingdom. The company claims that one out of two consumers who have subscribed to the ShopAlert service has visited a merchant after being notified of a special offer, and 22 percent end up buying something. Of those who spend money, half had not planned to buy anything until their phone suggested it.

Limits on Location

As with other forms of location-based advertising, Placecast’s geofencing system is anonymized, to ensure that the company cannot identify the people it is tracking. Location data are saved for thirty days so the marketing experts can analyze the results of the campaign; after that it’s tossed. Asif Khan, founder of the Location-Based Marketing Association, an industry trade group, says that Placecast and other such companies take great pains to protect sensitive data. But Khan argues that consumers are not all that worried; give them a bargain, and they’ll let you draw a bull’s-eye on them. “Nobody cares about their privacy, as long as they get what they want.” Yet geofencing is rarely used by advertisers. Our cell phone batteries get part of the blame. Geofencing requires constantly recalculating the phone’s position, a habit that shortens battery life. “The battery-drain issue has been an issue for years,” Goodman admits, adding that his company has developed software algorithms that pin down the phone’s location more efficiently. Hardware makers have also tackled the problem. In February 2013 Broadcom, a major maker of the chips used in smartphones, introduced a new GPS chip that is designed to run at full throttle when the user needs turn-by-turn driving instructions. The same chip goes into battery-saving low-power mode when running in the background and watching for geofences. Even if geofencing becomes more energy efficient, it is still not a sound strategy for selling many consumer products. “We’ve found that it doesn’t really work very well,” says David Petersen of sense Networks, because “we as humans don’t really consume things spontaneously.” At least, not very valuable things. Alert someone to a half-price sale on soap at a nearby store and he might pop in. but hardly anyone will pull off the highway and into the mall merely because his phone announces a half-price sale on flat-panel TVs. Even at the lower price, a good TV will cost hundreds of dollars. It is the sort of purchase people think about and plan for. As a result, says Petersen, TVs and pretty much every other big-ticket buy are off-limits for geofencing.

Maps' Last Frontier

A more promising location-based strategy targets the last frontier of navigation—inner space. After a century of innovation in geotechnology, nearly every square foot of land on the planet has been mapped. Step through the doors of a shopping mall or airport, however, and it is easy to get lost. GPS won’t help; satellite signals rarely penetrate the walls. What shoppers need is a good map. Or better still, a good app, one that could display interior maps for thousands of likely destinations. It is a problem being tackled by dozens of companies, from mapping giants like Google to little start-ups with names like Wifarer and Point Inside. And already, their work is paying off. Visit a major airport, museum, or shopping mall in the United States, and there is a good chance that your smartphone can punch up a detailed map of its interior. Google, for instance, has mapped more than ten thousand large structures worldwide and is urging real estate developers to supply their floor plans. The information is displayed in the standard Google Maps interface. Launch the company’s map app and look up Chicago’s O’Hare Airport. If you zoom in for a close-up of a passenger terminal, you will see the names of the shops lining each corridor. Point Inside, based in Bellevue, Washington, and founded in 2009, delivers a much more detailed product. It is has produced maps of hundreds of major venues, all of them easily accessible through a free app. Apart from displaying a simple floor plan, the Point Inside app is searchable. Punch in “Wolfgang Puck,” and you get a listing of the dining entrepreneur’s four restaurants inside O’Hare, along with hours of operation, a description of the cuisine, and of course a map. Shoppers at Walgreens drugstores may never again have to ask which shelf holds the allergy medications. Instead, there is a smartphone app from Aisle411, a St. Louis–based company that has mapped all of Walgreens’ seventy-nine hundred U.S. retail stores. Even before a user gets to the store, he can launch the Aisle411 app. using the phone’s location features, the app displays a list of the nearest Walgreens stores. The shopper can pick his favorite and then peck in a search for allergy drugs. Up comes a simple map of the store with pointers to several locations: allergy medications for kids, travel-size containers for tourists, drugs especially for the eyes or the throat. A shopper in a hurry will know where to find the correct product before he crosses the threshold. The app also features a recipe planner. Peck in an ingredient (fish, for instance) and the preferred method of cooking (grilling, perhaps), and it displays recipes scooped up from a number of online cooking sites. Then it offers to plug the complete ingredient list into its mapping software, showing you exactly where in the store you will find each item. This feature will prove quite handy if Aisle411 succeeds in its goal of signing up major supermarket chains.

Shopping Under Surveillance

The Aisle411 app has an indoor geofencing function as well. By measuring the strength and direction of Wi-Fi signals from several routers in the store, the app can calculate the user’s position to within a few feet—close enough to know that he is strolling down the soft drink aisle. If there is a special on Coca-Cola that week, his phone will let him know just as the brown bottles come into view. Another indoor navigation start-up, Wifarer, uses indoor Wi-Fi mapping to provide step-by-step guidance through malls. Available at a handful of locations, including the Prudential Center mall in Boston, Wifarer lets a visitor enter the name of a particular landmark inside the structure—a bookstore, for instance. The Wifarer app uses Wi-Fi triangulation to show the user’s position on a map of the mall and then displays a dotted line leading to his destination. Another innovative shopping app called Shopkick uses sound to steer shoppers through large retail stores like electronics seller Best Buy. It is high-frequency sound that human ears cannot detect, but comes through sweet and clear to a smartphone. Shoppers can earn discounts and other rewards by launching Shopkick as they enter the store. They are promised more rewards for visiting certain parts of the store to check out special deals on, say, cell phones or video games. Shopkick knows instantly if they comply; by analyzing the sound waves, the app knows each shopper’s position inside the store to within a few feet. It is not unlikely that in a few years, the interior of every major public venue will be mapped with the same sort of precision as our streets. No more getting lost on our way to the food court—surely a good thing. But our access to near-perfect navigation comes at a cost. We may know exactly where we are at all times, but others know as well, whether we like it or not.

Excerpted from You Are Here: From the Compass to GPS, the History and Future of How We Find Ourselves by Hiawatha Bray. Available from Basic Books, a member of The Perseus Books Group. Copyright © 2014.

Image by gpointstudio / Shutterstock

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