This blog is the first of a two-part series. In this first installment, I will briefly explain how beacon technology works, discussing the benefits that such technology provides retailers, as well as the legal and perceptive risks that accompany the technology. In the second installment, I will discuss the somewhat untouched-legal landscape in which audio beacon technology resides, providing possible explanations of how jurisprudence regarding the subject may appear in the future.
It is no secret that the main goal of advertising is to increase consumer awareness, and ultimately, drive sales. There are a variety of ways in which retailers can communicate with their consumers in order to increase sales, and recently, more and more retailers are employing beacon technology in order to accomplish that task. ((See, e.g., Shubhi Mittal, 25 Retailers Nailing It with Their Proximity Marketing Campaigns, Beaconstac (Feb. 11, 2016), http://blog.beaconstac.com/2016/02/25-retailers-nailing-it-with-their-proximity-marketing-campaigns.)) Beacons are small pieces of hardware that use low-energy Bluetooth connections to transmit messages or prompts directly to a smartphone by unilaterally communicating with a mobile application. ((Tony Danova, Beacons: What They Are, How They Work, and Why Apple’s iBeacon Technology Is Ahead of the Pack, Business Insider: Tech Insider (Oct. 23, 2014, 10:25 AM), http://www.businessinsider.com/beacons-and-ibeacons-create-a-new-market-2013-12.))
While targeted marketing using geolocation is not necessarily new, beacons provide certain advantages that geolocation-based services do not. For example, indoor spaces often block cell signals and make it extremely difficult to locate smartphones through GPS ((Id.)), but because beacons are installed within a retailer’s space, each beacon can communicate with consumers’ smartphones as they walk past the beacons, sending relevant messages as consumers navigate the space. ((Joshua Brustein, If Your Phone Knows Which Aisle You’re In, Will It Have Deals on Groceries?, Bloomberg (Jan. 6, 2014, 12:22 PM), http://www.bloomberg.com/news/articles/2014-01-06/apples-ibeacon-helps-marketer-beam-ads-to-grocery-shoppers-phones.)) Furthermore, beacons have the ability to “wake up” an application that a consumer has downloaded, but does not have open upon entry into the store. ((Sabrina Korber, Retail’s ‘Beacon’ of Hope: Shopping That’s Personal, CNBC (May 26, 2015, 12:27 PM), http://www.cnbc.com/2015/05/26/retails-newest-brick-and-mortar-bet.html.)) This ability allows for retailers to advertise to consumers who may not remember to open the application every time they go to that retailer, thus expanding consumers’ exposure to retailers’ messages. ((Id.))
The use of beacon technology has seemingly paid off for retailers. In 2014, a controlled sample study of 25,000 shoppers using beacon-enable apps over a 30-day period found: consumer interactions with advertised products increased by 19x for users who received a beacon message; in-store app usage was 16.5x greater for user who received a beacon message; and shoppers who received a beacon message were 6.4x more likely to keep an app on their phone, versus those who did not. ((Press Release, inMarket, inMarket: Beacons Increase App Usage, Retention, and Brand Engagement In-Store (June 16, 2014, 12:00 PM), http://www.prnewswire.com/news-releases/inmarket-beacons-increase-app-usage-retention-and-brand-engagement-in-store-263302741.html.)) Despite these remarkable stats, beacon technology does not always guarantee that a consumer’s smartphone will be able to receive the beacon’s message—the smartphone’s Bluetooth must be turned on. ((See Danova, supra note 2.)) Though beacon technology had already proved profitable to retailers ((See inMarket, supra note 7.)), new beacon technology has recently emerged to make the “good” even better.
Tracking consumers’ behavior within brick and mortar stores gives retailers only a small look into their consumers’ habits, likes, and dislikes—even smaller if some consumers failed to turn on their Bluetooth. ((See Danova, supra note 2.)) So, where next? Television and Internet, using “audio beacons.” ((Kaveh Waddell, Your Phone Is Listening—Literally Listening—to Your TV, The Atlantic (Nov. 19, 2015), http://www.theatlantic.com/technology/archive/2015/11/your-phone-is-literally-listening-to-your-tv/416712.)) The cross-device tracking concept and purpose of the technology is almost identical to beacons using Bluetooth technology, but audio beacon technology allows for devices to communicate through the emission of inaudible ultrasonic sounds, rather than Bluetooth. ((See id.)) SilverPush, a leading provider of audio beacons functions as follows:
When you visit a website that uses SilverPush tracking technology, the site causes your device to emit an inaudible ultrasonic sound. If any other devices you’ve got lying around—a laptop, a phone, a tablet—has an app installed that includes SilverPush code, it’s listening for that sound. If it hears it, SilverPush knows that the two devices are close to one another and, presumably, belong to the same person…. Certain TV commercials include an ultrasonic audio beacon. Any nearby devices running SilverPush software will be listening for the beacon—if a device hears it, it records the match, allowing the company to figure out what ads users watch and for how long, and add that information to the user’s profile. ((Id.))
Audio beacon technology may also be used in brick and mortar spaces ((See, e.g., Stacey Gray, In-Store Location Tracking: A Holiday Guide, Future of Privacy Forum (Dec. 22, 2015), https://fpf.org/2015/12/22/in-store-location-tracking-a-holiday-guide/)), and according Signal360, a provider of the technology, audio beacons have 35% more mobile reach than Bluetooth-only beacons, as the communication can reach consumers who have their Bluetooth disabled. ((Beacons: Why Audio?, Signal360, http://www.signal360.com. (last visited Oct. 7, 2016).)) While this is a clear benefit to retailers, there remains an undeniable risk of negative public perception, as it seems like a mobile application is always listening—even to consumers’ private conversations. ((Anthony Ha, SilverPush Says It’s Using “Audio Beacons” for an Unusual Approach to Cross-Device Ad Targeting, TechCrunch (July 24, 2014), https://techcrunch.com/2014/07/24/silverpush-audio-beacons/.))
Providers of the technology have attempted to mitigate these concerns by explaining that the software does not receive any actual audio data, rather, once an audio match has been made, the only information that is sent back to the company is the identification code linking the devices. ((Id.)) While these words may be comforting to some consumers, not all are convinced. In fact, users of the Golden State Warriors mobile application instituted a lawsuit against the team for its use of audio beacon technology, alleging a violations of the federal Electronic Communications Privacy Act (the “ECPA”). ((Complaint, Satchell v. Sonic Notify, Inc., No. 3:16-cv-04961-EDL (N.D. Cal. filed Aug. 29, 2016).)) The complaint centers around the issue of adequate consent rendered by the app-user and alleges that the audio beacon technology “listens in” and “records” users’ private conversations without their knowledge. ((Id. at 6-7.)) Whether or not the factual allegations are true will have a crucial impact on the outcome of the case ((See 18 U.S.C. § 2510 (2012) (defining terms in accordance with violations of 18 U.S.C. § 2511(1)(a)), but more importantly, will this lawsuit frighten consumers into deleting apps that employ audio beacon technology?
In the next installment of this two-part series, I will the discuss federal and state legal implications of audio beacon technology, as well as provide solutions for companies that integrate the technology into their apps to minimize their legal risk and most importantly, avoid a decline in sales.
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