by Andrew Gordon, Private Equity Strategist
Friday, April 25, 2014 : Issue #2279
A Note From the Editorial Director: I’m usually pretty tuned in to the efforts of Big Brother Inc. to snoop into every aspect of my life. But a recent article by my friend Andy Gordon from our sister e-letter Early Investing has me staring at my cellphone, wondering if it’s time to go off the grid. What Andy discovered is unnerving, but too important not to share it with you. My apologies in advance if this information ruins your weekend.
- Andrew Snyder
There is someone
Walking behind you,
turn around, look at me.
There is someone
Watching your footsteps,
turn around, look at me.
- Jerry Capehart
Do you know you’re being followed?
Well, maybe you’re not. But the odds that your daily movements are being monitored by multiple unknown trackers increase every day.
In about a year, I bet there’ll be no maybes about it.
You might as well kiss your privacy goodbye. And you can thank a technology that allows retailers to track where you’ve been via your smartphone. It leaves a trail of breadcrumbs wherever you go, in the form of multiband radio-frequency signals.
Signals that the new iBeacon technology can pick up.
It makes me yearn for the days when I was traipsing through the streets of Moscow, worried about being followed. I was probably being paranoid. This was several years before my CIA stint. On a “mission” for a professor of mine at the London School of Economics, I was meeting with some dissidents Moscow had under surveillance.
You Can Run but You Can’t Hide
At least in theory, I could have shaken my human sleuths. Ah, the good ol’ cloak-and-dagger days.
This new technology poses a much tougher challenge.
Check your smartphone. Is it Wi-Fi enabled?
If it is, then it’s constantly searching for networks to join. In the process, it discloses your location through a unique identifier called a “Media Access Control” or MAC address.
Apple’s (Nasdaq: AAPL) new technology is being spun as the real-world equivalent of shopping sites keeping track of where you’ve shopped online and what you’ve bought (or added to your shopping cart).
If cookies snooping on your online activities bothers you, Apple’s iBeacon will bug the hell out of you. It not only can pinpoint the location of your smartphone, but can trigger an action on it. For example, flashing a map showing you where to go in a store.
It can estimate the distance between your smartphone and the beacon. It can also send your phone a message. If you’re at a coffee shop you’ve been to before, for example, browsing your laptop without ordering a cup of java, it knows who you are. It could send you a message urging you to have a beverage for a more rewarding visit.
You can already see why retailers should flock to it. But while your phone and the iBeacon are gabbing away and becoming fast friends, your privacy is becoming more and more under attack.
Dongles, Sticks and Other Gadgets
Be that as it may, there’s really nothing standing in the way of the iBeacon from being widely adopted. New commercial applications for Apple devices that support iBeacon or third-party dongles, sticks and other gadgets designed to support the iBeacon are being discovered every day. Here’s a brief list of just some of the ways the iBeacon is being used…
Canadian company Turnstyle has placed beacons in about 200 businesses in downtown Toronto. It also operates in American and European cities. The company collects and analyzes real-world user-behavior information. That’s how an Asian restaurant discovered that many of its customers come from the local gym at certain times of the day. To take advantage of this, the restaurant began offering tank tops with its logo.
Euclid Analytics offers a service that uses sensors to analyze foot traffic.
Safeway (NYSE: SWY) and other grocery stores have installed iBeacons to push out coupons at shoppers at a moment’s notice.
Swirl offers SecureCast Beacons for sending marketing messages to shoppers browsing specific locations in a store.
Game developers use the technology for games that feature real world experience (The Real World, Meatspace, Tiny Tycoons and Google‘s [Nasdaq: GOOG] Niantic Labs).
Macy’s (NYSE: M) got an iBeacon for its New York and San Francisco stores.
Major League Baseball is trying out iBeacons for automated check-ins, videos related to location, ticket availability, discounts and coupons.
A startup, Exact Editions, is offering free magazine samples via iBeacon.
Not surprisingly, every Apple store in the U.S. is now outfitted with an iBeacon. Apple has also applied for a patent on an iBeacon-based restaurant reservation system.
This Technology Has Legs
It hasn’t been an entirely smooth ride for beacon technology. Nordstrom (NYSE: JWN) got slammed in the press last summer when it added beacons to 17 of its stores (to analyze in-store traffic patterns). The store abruptly stopped using them.
Turnstyle, for one, is proceeding with caution. Its technology encrypts the identifying databefore it is made available to clients. And the company offers an opt-out feature on its website. Turnstyle is also working with the Future of Privacy Forum, a Washington, D.C.-based think tank that is attempting to get all data-collecting companies to sign up for a universal “do not track” opt-out.
But the bottom line still stinks. Right now, there is no way of knowing if a store is tracking you. Are you comfortable with that? I’m not. But I’ve got a sinking feeling that things won’t improve.
I’ve reviewed a few iBeacon startups looking for funding to date. Haven’t recommended any yet. None have passed my robust rating system.
But I believe the technology has legs. The space should give us at least one really big winner and maybe two or three. Plus about a dozen smaller ones.
So, despite my privacy concerns, I’m keeping a close eye on this sector. It’s going to make some early investors a great deal of money. Besides, I’d rather be snooped on by the private sector than the government.
But it still gives me the creeps.
Good investing,
Andy Gordon
— Investment U