Two months ago, Apple began rejecting content for its App Store that used the iPhone's GPS capabilities to provide location data for advertising. This fueled speculation that the computer giant was getting ready to roll out its own mobile advertising platform.
That's exactly what Apple did Thursday by introducing iAd, a partnership between the company and developers that allows the placement of ads inside applications, rather than have them pop up on searches, the way Google delivers ads.
"This could become bigger than television," said analyst Gerry Purdy of MobilTrax. "The iPhone will grow by a factor of 10 over the next few years, and become much more international. As an open ad platform, it could reach billions of impressions every day."
Apple in February told some developers that if their product "uses location-based information primarily to enable mobile advertisers to deliver targeted ads based on a user's location, your app will be returned to you by the App Store review team for modification before it can be posted to the App Store."
Analysts expect at least some of the spots sold through iAd to be location-specific.
But on Thursday, Apple coupled its mobile-ad announcement with a demonstration of an optional iPhone OS 4.0 privacy feature that will warn users whenever an application is tracking their location. An arrow appears at the top of the iPhone's screen whenever a user is being tracked, and an arrow over an app's icon means it has asked for data within the past 24 hours, allowing the option to block further transmission.
"We're taking privacy several steps further," said iPhone software Senior Vice President Scott Forstall.
Currently, iPhone OS 3.0 simply asks users when they activate an application if they want to allow access to their location data.
"Apple wanted a system that gives people better control over the ability to make decisions about which apps get data," said Jules Polonetsky, director of the Future of Privacy Forum. "A lot of the apps ask once and then have access forever, and you don't know they are continuing to track you. You might want to revoke [access], or you might not."
Users Want More Control
Polonetsky said there is increasing interest in applications and networks that provide greater control of location disclosure, even as social networks like FourSquare and, soon, Facebook, as well as utilities like Google Maps, thrive on location tracking.
Carnegie Mellon University's Mobile Commerce Laboratory in Pittsburgh recently conducted a study on people's preferences about when and how their location data should be shared. Finding a desire for greater control, the laboratory developed a system called Locaccino that allows maximum discretion over data sharing.
Polonetsky said Apple CEO Steve Jobs seems to be "incorporating some features on the wish list of Locaccino" with iPhone OS 4.0.
He also noted that Apple's stated policy of restricting location apps unless they have value for the user is somewhat vague. "It will be very interesting to see how they define value to the user," said Polonetsky.
J.D. Power and Associates wireless analyst Kirk Parsons said consumers may increasingly find themselves targeted by ads that track where they are and what products they are near.
"Depending on who you talk to, the location-based features or apps will be on more devices in the future, as many B2B services can be employed using location-based technology, such as coupon redemption if you walk past a GAP store, for instance," Parsons said.
Purdy added, "The reason mobile advertising is so significant is that your phone is with you all day long and can influence your purchasing more than any other medium, including television."