Last Friday, the New York Times ran an editorial entitled That’s no phone. That’s my tracker. The authors Peter Maass and Megha Rajagopalan of ProPublica, the nonprofit investigative newsroom, make the point that today’s mobile phones are used only occasionally for phone calls, and instead their main function is to help its owners keep track of the time, our friends, where we go, and how much money we have in the bank.

They suggest a new term for smartphones. “People could call them trackers. It’s a neutral term, because it covers positive activities — monitoring appointments, bank balances, friends — and problematic ones, like the government and advertisers watching us.”

A Finnish company, RapidBlue, would fall into their latter category, as they are building the service that allows advertisers, media companies, and store owners to track customers in the brick and mortar stores. The solution uses public Bluetooth signals that RapidBlue’s receivers picks up, but does not connect to. The company has determined that that their solution can track the movement of 95% of consumers in the Nordic countries, and 91% in Southern europe.

The company got its start in 2010 after they realized the power of location based info, and has since raised around €1 million from Finnvera, the Tekes Young and Innovative program, as well as Angel investors such as Juhani Kuusi, Jorma Nieminen and others. The company hopes to turn over 3-400 000 at end of year, after seeing a turnover of 110k at the end of last year.

I spoke with RapidBlue’s COO, Sampo Parkkinen, who told me their initial product allowed for store owners and shopping centers to track the precise movement of shoppers, using beacons placed though out a store which picked up publicly broadcasted bluetooth signals. From this, managers could track movement of customers in store, almost in real time, and provided analytics like dwell time, visiting frequency, routes, and flow distribution.

Retailers were able to get some insight from these analytics, but the company is now focusing on more powerful metrics directly related to actual sales. With the help of retailers like Marimekko, who opened up their books for RapidBlue, the company dug through consumer movement and combined it with sales data to determine what metrics are the most useful and have the greatest impact for store owners.

The company is waiting for a independent group to verify that their metrics are statistically significant before talking more about them, but they plan to publish their results in a whitepaper sometime next month. One interesting thing to note, however, is that they’ve determined that they really don’t need their tracking hardware placed all over the store to derive meaningful data. All they need is any computer that has buetooth functionality, suggesting that they don’t need to track very specific store movement for useful analytics.

Instead, they can get the data input they need through actual sales data. RapidBlue has partnered with the Point POS terminals, which are part of VeriFone. This combination of sales and customer movement data allows both companies to add value to stores, and gives store managers a dashboard that tells them whether promotions or other variables are working for their store.

In this area the company has received a european-wide patent, which allows stores to generate consumer profiles and track customers much in the same way as a loyalty card, but without customers having to sign up for the service. This allows RapidBlue (and Point) to provide a meaningful dashboard of data for store owners who can quickly see whether a promotion in the window is working or not, for example. Parkkinen points out that smaller stores do not have the resources to put in place and dig through data provided by loyalty cards, making this a competitive alternative.

How do advertisements affect your behavior? There’s an app for that.

Another new development of RapidBlue is that their analytics platform can be integrated into any smartphone though apps downloaded by consumers. For instance, say if you have a the Helsingin Sanomat newspaper app installed on your phone. Aside from providing content to read while on the bus, it can be used to also provide data back to the newspaper about how you move through the city, and what stores you visit.

Before this solution it has been very difficult to track the real-world impact of advertising, but when a media company has a retailer as an advisor, RapidBlue is able to say how the advertisement impacted the behavior of the HS.fi app users. With RapidBlue’s solution, the app scans for bluetooth signals constantly, regardless if the app is open or not. If if finds a RapidBlue physical device installed at retail stores, then it can derive analytics from what it gathers. The mobile app could also use GPS data.

This allows any media company to look at the impact of their marketing campaigns on real world behavior. If H&M runs a full page ad on the front of the Helsingin Sanomat newspaper, then the newspaper can see how that affected the behavior inside H&M.

Privacy Please

When one of RapidBlue’s store monitors picks up a Bluetooth signal, it first hashes the phone’s MAC address (meaning it encrypts and hides your phone’s unique address) and then plugs it into their database for advertisers to use for analytics. Parkkinen says this means they don’t have access to the MAC addresses so they are no longer able to trace anything back to individuals. Instead, their database essentially labels their datasets as phone #203, 204, etc. RapidBlue has actually logged over 2 million phones, mostly in the Nordics, as well as over 1.5 billion location-based data points.

Parkkinen says that they take privacy very seriously, which they really have to do to avoid backlash from consumers. RapidBlue has drawn harsh lessons from a competitor of theirs, Path Intelligence, which has drawn major public criticism in the UK, as well as attention from legislators. Path Intelligence used GMS signals to track consumers’ movement, which has the privacy drawback of it being impossible for users to opt out of, unless people turn their phone off.

RapidBlue uses broadcasted Bluetooth signals, by contrast, which generally don’t need to be on anyways, and can be turned off on an individual’s phone. To never be tracked again by RapidBlue, people can also plug their MAC address into an opt-out form on RapidBlue’s webpage. This deletes their data, and ignores their MAC address whenever it’s picked up again.

What do you make of this?

After talking to Parkkinen, I think I’ve fallen into an “who cares” mindset for this kind of tracking of where my iPhone is, within reason. I hate to come across as an apologist to people very concerned about privacy (who I normally agree with), but I have a hard time feeling outraged that my movements through the city make a bar graph on a clothing retailer’s analytics dashboard move up a little bit, or not.

Essentially, RapidBlue’s solution basically allows retailers to say more definitively whether the new outfits they put on the store’s mannequins are bringing in customers or not. And advertisers will not be able to exploit this type of tracking so effectively to the point where I will no longer have free will. If the data cannot be directly traced back to me, then I’m complacent enough.

The New York Times editorial referenced in the beginning did provide some legitimate privacy issues that come along with this sort of phone tracking, but the issues are systemic to mobile phones. This is the brave new world in which we live, and honestly we should be amazed at how easy it is to track individuals by a mobile phone these days. Just thinking about it, I live right next to the Russian Embassy, so I’m sure the CIA has a better idea of what time I normally fall asleep than I do.

The one concern we all should have with RapidBlue, however, is the security of their data and the strength of the hashes on our MAC addresses. Because I really don’t want people to figure out actually how lame I actually am if my movements all end up on the web one day.

No more articles