Thursday, October 11, 2007

How to monetize physical traffic

If you take your iPhone out today, it will immediately recognize when you've walked into a Starbucks, by displaying a little green icon that promises to tell you something about your surroundings. It will then let you identify and buy the music playing in the store, using nothing but your phone to pay for and receive the songs.

This is only the beginning of a real blending of the physical and digital worlds. We've taken one more step towards actually living in the internet.

We already live in a world where our personal habits and identifying traits are being tracked, recorded and indexed. Each of us has, with varying levels of anonymity, a dossier compiled in a handful of different databases that knows our spending habits, our consumer brand preferences, how much we earn, where we live, and how many text messages we send in a day.

Some people get uncomfortable about this. But this cataloging is inevitable, won't be reversed, and ultimately leads to greater convenience that far outweighs the risks of compromising that data to would-be hackers or identity thieves. The advent of automobiles suddenly made possible horrific car crashes and potential injury that were unheard of with horse and buggy, but that didn't stop us from driving. And similarly, people won't stop participating in a technologically connected society simply to avoid the risk of having personal data stolen.

But I'm digressing. I want to talk about Starbucks.

As long as you're within the confines of a web browser experience, it's a pretty straightforward task to track your activities, record them, and serve them up as valuable snacks for hungry advertisers. Physical location, however, is one piece of personal data that we don't record very well.


When the technology that Apple and Starbucks concocted to make the iPhone-Starbucks trick becomes widespread, we're looking at some very interesting additional applications. Passive location-based services could introduce services and tools to users that they might not know are available, and could enhance the richness of the experience of simply walking around an urban area. When our locations can trigger localized content to make itself known to us, then we're relieved of the burden of tracking down urgent information on our own.

For instance, if I travel to a new city in a country with a language and alphabet I don't understand, then as things are today, I had better employ some help, or I'll be stranded and lost in no time. Stepping into a train station in Seoul, I'll be lost without a translator or a lucky English translation somewhere. What I'd like to see is the Korail logo pop up reassuringly on the bottom of my phone's screen, prompting me to view current train status, schedules, and fare information, in whatever language I choose. If an announcement is made over the loudspeaker, my phone should receive an electronic version of the announcement's text and provide it to me on my phone, in my language.

Location data could also serve as a password for digital rights management, allowing access to data based upon extremely granular data about a person's physical location:.

For example, sporting event organizers are very protective of the broadcast rights to their content, but if they were able to restrict access to people who were actually in attendance at a particular event, then why not open up the content? Special commentary feeds, audience participation games, extra camera angles and user-requested instant playback could all be served to audiences via their phones.

But most obviously, advertising is the real money-maker for this kind of technology. Advertisers are constantly demanding better ways to target potential consumers, deliver the right message to them, and report on the effectiveness of that message. The advent of ubiquitous location-based data enables unprecedented levels of pinpoint targeting.

Imagine a mother and her teenage daughter walking through a mall. If they're paying attention to their phones, they'd each have access to a host of information on special offers, discounts, sale items, and new launches. But it won't be irritating or irrelevant or intrusive to either of them, because each message will be personally tailored based upon data served to the mall's network via the profiles associated with their phones. Mom won't get the Hot Topic offers, and her daughter won't have to scroll through notes from Anne Taylor. Unless they've both shown through their prior habits that those are their favorite stores, in which case Mom will be notified about the new Skelanimals top she's been considering.

The owner of the local network, in this case the mall, generates revenue from advertisers, whether visitors buy anything or not. For the first time ever, reliable metrics on public space ad message retention become available, and give any owner of a public space a lucrative new source of income. The ability to monetize physical traffic will change the world of commerce dramatically, and bring the 'internet industry' into the brick-and-mortar world.

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