When Apple sneezes, the world takes interest in ear-nose-throat medicine. So upon learning that their iPhones have been building a bloated file of location data, consumers started wondering if mobile service also means mobile surveillance.

Add the unrelated but scary hacking of Sony’s PlayStation and Online Entertainment networks, and suddenly people are thinking about the data they are shedding and who’s picking it up.

Location is the bonanza of 2011. Companies are chasing hundreds of billions of dollars in potential revenue by trying to learn where consumers are, where they’ve been and even where they may be going.

“Through mobile we are getting data which as marketers we haven’t had access to before,” said Michael Collins, CEO of mobile marketing firm Joule at a recent conference. “We’re beginning to see the full life patterns of the consumer.”

Is this creepy (they know all about you), or great (marketers offer you stuff you actually want, rather than things you couldn’t care less about)? It depends on what you value, what you understand, and how much control you end up having.

(Full disclosure: Through my employer, I consult with consumer companies as well as marketing and PR firms on mobile technology and services.)

Suddenly an issue

Consumers aren’t the only ones suddenly wigging out about privacy. Due to bad press, Congressional hearings and pending legislation, advertisers are, too.

That was clear at The Mobile Upfront conference–a gathering of suited ad execs at the swanky Edison Ballroom in midtown Manhattan on May 11.

“Yes there are a lot of things you might want to do with data collection with mobile, but right now, its’ such a sensitive area we advise [our clients] to go far on the side of caution,” said Andy Wasef from interactive marketing firm MEC.

The talk was very different a day later and across the river at the Geoworld Summit, a gathering of jeans-wearing entrepreneurs at a loft in Brooklyn’s hip DUMBO neighborhood.

These folks are building the brave new world of mobile tracking.

Consider Buzzd, a free app that lets people see what places around them are hopping based on checkins (say on Foursquare) and comments people are posting.

Buzzd makes money through a service called Local Response. It collects all that location information to help companies figure out what a person is up to and ping them with ads, offers, or even thank-yous for their patronage.

How do people feel about that? Three out of five are clicking on the ads and other messages that pop up, said Nihal Mehta, the CEO.

From there, the tech gets more intense. A company called Xtify, for example, provides an online service that allows smartphone applications to keep a running tab of where the phone goes.

“This device always knows where it is,” said CEO Josh Rochlin, holding up his cellphone. “This device started the day in New Jersey, made its way to SOHO, lost its way in the subway and then reemerged in DUMBO.”

What’s that good for? The DailyCandy Stylish Alerts app, for example, uses it to send recommendations for hot spots and events close to where users currently are.  Rochlin said that, if DailyCandy chose to, it could also allow the app to send recommendations based on where people have been.

Is that stalking? Rochlin stressed that the apps using his service can only track location data if the people authorize it. And they track the comings and goings based on a random number assigned to the app using their service. According to him, they actually aren’t able to associate that number with the identity of a real person carrying the cellphone.

Another example brings the story full-circle back to Apple. Skyhook allows cellphones to determine their location using GPS and signals from nearby Wi-Fi hotspots and cell towers. It once did this for the iPhone, though Apple now has its own system – the one that launched this privacy controversy.

Skyhook still provides the service to many other devices and apps. With that info, Skyhook can tell where people are gathering. And now, it can maybe tell their ethnicity and other demographic info, the CEO Ted Morgan explained.

Marketers have already determined the ethnic makeup of neighborhoods – defined geographically by the “Zip+4” postal codes. Now Skyhook can match that info to its location data. So, given that most people in a certain area are likely Latino, Skyhook can guess how many Latinos are out on a given night, or which businesses in a neighborhood are pulling in the most African Americans. (It doesn’t track actual people, just the anonymous volume of traffic in an area.)

Is that a kind of “racial profiling”? Junkmail senders have been doing that for decades. But it may feel more intense when the data collection is realtime and you unwittingly fuel it.

So is it creepy?

Joe Meyer, the president of HopStop, believes that location tech isn’t a problem when people give their information in exchange for a service – driving and public transit directions, in his case. What he finds creepy is companies secretly collecting data and keeping it long-term.

That’s what people feared about the iPhone, although the data didn’t go to Apple or anyone else, as the company eventually clarified in a letter to consumers. But what if it does go to some anonymous company’s hard drives?

It’s hard to argue against that second scenario being creepy. But do regular consumers distinguish between scenarios one and two

These tech pioneers may overestimate how much people think through what click-to-authorize really does. If they had thought more, the iPhone’s data collection shouldn’t have been so surprising.

People need time, though, to get used to how new tech affects them. And location tracking is extremely new.

Consumers have taken a leap of faith on tech and privacy before. “Experts” once doubted whether people would use credit cards online. They do and continue to, even after massive break-ins like the ones that Sony customers suffered.

But consumers first need to know how tech privacy works and what exactly they are trading for what payoff. It’s impossible to know that yet, with both the technology and its uses still undetermined.

(Seán Captain is a consumer strategist with market insights firm Iconoculture.)

 
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