Verizon, AT&T, Sprint Feel The Heat From Location Data Sharing

It brings in customers, and matches them with the products they want at the right time. It helps determine what offers and discounts might trigger purchases. It is part of the digital bloodstream of voice-activated devices such as Amazon’s Alexa, along with connected cars.

Real-time location data continues to gain a larger role in eCommerce and digital marketing, according to various surveys, case studies and analyst reports. So, when major U.S.-based wireless carriers said this week that they would stop sharing such data to controversial aggregators, concern justifiably emerged about what impact that might have on payments and online retailing.

The basic answer? Way too early to tell, even though the carriers’ decision can be interpreted as a small, but potentially meaningful, victory for privacy rights and data security at the expense of corporate revenue. The slightly more thoughtful answer? The real-time location data trend has far too much fuel powering it that major changes stemming from this news appear unlikely, at least for now.

Even so, the news does merit a look at the importance of real-time location data, and what payments and commerce stand to lose if this development does spark similar action — hardly an outlying possibility, given increasing consumer and regulatory pressure to toughen up privacy and data security standards.

Location Data Firms Take a Hit

Here’s what happened: Verizon, AT&T and Sprint will reportedly stop selling data about the location of individual consumers to LocationSmart and Zumigo, which then sell that data to other businesses for a variety of tasks, including online marketing and fraud prevention. The moves followed accusations that the real-time location data was sold to a prison technology company that boasted it could track any U.S.-based cell phone in seconds — a charge that raised the ire of Senator Ron Wyden from Oregon.

T-Mobile, meanwhile, has said it will “not sell customer location data to shady middlemen,” according to The Wall Street Journal (WSJ), which also reported that the data aggregators have denied wrongdoing. There was no immediate indication Wednesday (June 20) that wireless customers would notice the changes, at least immediately, or that other data-aggregation firms would face similar punishments.

Still, it is difficult to see how this news does not lead to more attention about how location data is accumulated, packaged, sold and used by companies competing in the digital space — especially in the aftermath of the Facebook–Cambridge Analytica data security controversy. (Granted, consumers do not seem to have shied away from using Facebook, but government authorities are still investigating the matter.)

Location Data Stakes

The stakes for real-time location data sharing will certainly keep increasing. To take one of many examples out there, a survey by location data firm Factual of 700 location data buyers in the United States recently found that 80 percent of those respondents credit such data with increasing the effectiveness of advertising and marketing campaigns.

When it comes to mobile marketing, the survey found that 85 percent of respondents experienced growth in their customer bases as a result of location data, with 83 percent reporting higher customer engagement and 77 percent gaining a “deeper knowledge of customers’ needs and interests.”

Other data about the ties among location, payment and commerce support those points. Consumers tend to visit merchants within five miles of home for purchases such as groceries, gas and restaurant food — underscoring the importance of using location data to craft effective online marketing message and retail offers.

Moreover, the “majority of consumer engagement with brands — 85 to 95 percent — happens through local listings, local web pages or other local search results,” according to a report, which added that “50 percent of brands are using location data to target consumers,” and that “25 percent of leading brands’ marketing budgets are spent on location-based marketing and projected to rise.” In 2016, in fact, “$12.4 billion was spent on location-targeted ad spending by U.S. brands, and that figure is projected to rise to $32.4 billion by 2021, equivalent to 45 percent of all mobile ad revenue.”

What’s Next?

And that’s not all.

The larger role being played by location data is highlighted by Amazon’s view of how that information can appeal to consumers — after all, whatever Amazon does is almost always imitated, copied or reacted to by the wider payments and commerce industry. The eCommerce firm keeps beefing up the location capabilities of Alexa, including rolling out a new API that enables developers to build skills that deliver food and groceries to a customer’s home or provide directions to a store.

So what’s next for location data sharing in light of the developments this week with those wireless carriers? More control over that data seems likely, at least according to the WSJ.

“Chirag Bakshi, Zumigo’s founder and chief executive, said Verizon told his company it has until November to agree on a solution that more tightly controls customer data,” the newspaper reported.

There may also be more focus on exactly how companies gain consent from consumers to share their data, the paper added. Meanwhile, Wyden doesn’t seem like he’ll back off from pressuring wireless carriers to end relationships with controversial location data firms, or how that data is used, given the aggressive tone of his recent statements.

What that means for the role of real-time location data sharing in payments and commerce remains unclear, but more scrutiny does appear to be a reasonable bet.