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 increasingly blurry. In terms of business-to-consumer, four applications stand out: smart homes, connected cars, wearables, and beacons.

Having a smart home means that your house knows you. It adjusts the temperature, manages the lights, opens doors, and warns you for intruders based on your coming and going. All the smart devices that allow it 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 exotic new devices to show ads on, one device is by far the most important: the smart TV. Traditionally the biggest gobbler of ad dollars, the TV is evolving to suit new consumer behavior and preferences and is connected to their digital life, providing new options to advertisers in terms of how narrow they can target their audiences.

What used to be a static object of mere steel and plastic, a car is no longer something that merely exists in your physical world. It now knows what music you’d like to play on your morning commute, it automatically opens up for you when you walk towards it, it sends you a message when you’re running out of gas, and it’s even chauffeuring you to wherever you tell it to. In other words, it’s digitally connected to you and it improves itself with software updates continuously. 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 give advertisers yet another screen to display messages on. However, wearables are more than just another screen. Take the Nike+ Fuelband for example (which doesn’t even have a display) which digitizes people’s physical activity. With the Fuelband and Nike+, Nike created an entire athlete community around its brand which will give them enormous brand exposure to their exact target 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 people is great for marketers and advertisers. However, the real value of the IoT to them is not so much in reaching people but all about the data these devices generate.

Technology and people are becoming so intimate 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 allows 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 both 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 the IoT will generate is very, very large. Even though today we generate 2.5 billion gigabytes per day today, some say the era of Big Data hasn’t even started yet because of the early stage of IoT adoption. 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 and 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 follow 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 illegal 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 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.