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IoT Data, Advertising, and Privacy: a Recipe for Success or Disaster?


The Internet of Things proposes new ways to track and analyze data unlike anything we’ve seen before. The IoT movement will be transformative with predictions by Gartner analysts forecasting 6.4 billion connected things worldwide in 2016, up 30% from 2015, with this number reaching 20.8 billion by 2020. And there is plenty of spending along with these connections. Estimates of total services spending is at $235 billion in 2016, up from 22% from 2015. These developments will cause major shifts in a variety of industries, but most notably in advertising and marketing.

 

Digital + Physical = Digical

One of the most far-reaching implications of the rise of IoT is that the lines between the digital and physical world are getting increasingly blurred. In the IoT business-to-consumer segment, 4 applications stand out from the rest: smart homes, connected cars, wearables, and beacons.

Having a smart home means that your house has learnt your habits and preferences. Based on these, it adjusts the temperature, manages the lights, opens doors, alerts you of intruders, and automates many other things for your convenience. All the smart devices that go into a smart home are opportunities to reach people with ads. As Google told the SEC, it wants to show ads on “refrigerators, car dashboards, thermostats, glasses, and watches”. However, despite these new devices for displaying ads, the device that is by far the most important is the smart TV. Traditionally, the biggest consumer of ad dollars, the TV is evolving to cater to new consumer behavior and preferences and is connected to their digital life by providing new options to advertisers in terms of how narrow they can target their audiences.

The car, the definitive object of the physical world made of steel and plastic, is no longer static without a driver. It automatically opens the door for you when you walk towards it, knows what music you’d like to play on your morning commute, notifies if you’re about to run out of gas, and in some cases, even chauffeuring you around without you having to drive it. In other words, it’s digitally connected to you and is constantly improving itself with continuous software updates. This opens up a whole range of new opportunities for marketers and advertisers. How about a car’s location and maintenance status prompting Pep Boys to remind you to get that oil change over the radio, or Burger King inviting you to come eat a local restaurant with your family based on the amount of passengers in your car? Perhaps creepy at first, but with good measures against privacy violations, potentially lifesaving.

Wearables provide advertisers with yet another screen for receiving messages. However, wearables are more than just another screen. Take the Nike+ Fuelband for example which digitizes people’s physical activity. With the Fuelband and Nike+ sub brands, Nike created an entire community for athletes that not only promotes the brand, but also creates a highly targeted audience. This goes to show that a creative marketing strategy involving wearables can reap major rewards. The key is to get a device to become an integral part of a consumer’s lifestyle and provide value for both parties.

Retailers, concert venues, amusement parks, and others can blur the lines between physical and digital by using beacon technology to digitally communicate with customers when they are in a certain range. Especially retailers are interested in sending customers location-triggered push notifications to their mobile devices. For example, a welcome message when entering a store, a store coupon when walking by the store, or even a specific coupon for a product a customer is looking at at that very moment.

 

Data and targeting

Obviously these new ways of reaching audiences is great for marketers and advertisers. However, the real value of IoT is less about reaching audiences, and more about the data these devices generate.

Technology and people are becoming so close, that data is generated about virtually all types of behavior in the physical world. How much does a person work per week? What are his exercise routines? How much does he sleep? Which stores does he frequent? What TV shows does he watch? What car does he drive and how many miles per week? These questions can now be answered by the plethora of smart devices surrounding us which allow marketers and advertisers to send targeted messages exactly when, where, and how they are most effective to their target audience. So if you thought digital tracking tools like cookies were invasive, the IoT is in a whole new ballpark. Needless to say, there need to be boundaries and rules in place to ensure our privacy is protected. In this way, the IoT can be highly valuable to both users and businesses while making sure no one is taking advantage of anyone else.

 

Privacy and security

The amount of data IoT will generate is very, very large. Even though today we generate 2.5 billion gigabytes per day, some say we’re still in the nascent stage of IoT adoption and the era of Big Data hasn’t even arrived yet. As described above, this data can be used to describe a person and his behaviors in great detail, which begs the question: how far should companies be allowed to go? People around the world have growing concerns about their privacy which puts it high on the agenda of lawmakers. New stricter laws (especially in Europe) and zealous agencies are demanding more and more from companies in terms of protecting their customers’ privacy. It is therefore essential for the advertising industry to not only comply with these laws but also regulate themselves in order to prevent consumer fallout.

While privacy mostly concerns legal business activities, security deals with protecting data and devices from unintended intruders. This is a hot topic today. In the past few weeks we’ve seen how toys, cars, and even baby monitors were easily hacked which indicates that these are not isolated events. In fact, security is an issue that might put the entire adoption of the IoT at risk, as a mere 10% of businesses feel confident that they can protect their devices against hackers. eMarketer found that security is the biggest headache for executives in the IoT industry together with interoperability (or standardization), which is one of the contributing factors to the unsafe environment of IoT today.

The problem with these security issues is that they grow exponentially worse as more and more devices are connected to the internet, especially in industries outside of consumer applications. While surely a scary idea, a hacked toy is not going to put lives at risk. However, cars, agricultural machines, and even factory equipment pose a serious danger to bystanders in case security is breached and control is taken over by someone with bad intent.

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To conclude, the Internet of Things is an extremely promising development for a wide variety of industries. As with most large technological changes there are some teething issues that we need to go through. However, given the large amount of attention this topic gets from businesses, media, consumers, and lawmakers we’re sure these challenges will be tackled in a structured joint approach. Advertisers and marketers should definitely take advantage of the benefits but are advised to keep an eye out for privacy and security issues to ensure long term value.