Yesterday LOC-AID announced that AT&T would be using its technology to provide network-based location information for its subscribers. Many readers may not even know much about LOC-AID, but it’s becoming a key player in enterprise LBS. Executive Editor Adena Schutzberg interviewed CEO Rip Gerber and explains why.
Consumer vs. Enterprise LBS
Let’s face it, most of the conversation and “buzz” about location-based services involve consumer uses. The focus is on how small businesses engage existing consumers. How can they encourage new visitors to come to the store or coffee shop? That’s the gist of the current interest in the Foursquares, Gowallas and Facebook Places of the world.
But what about the enterprise? How do large corporations or governments take advantage of location-based services? They are not in the foot-traffic business and are, instead, looking to tweak their operations to make more money (or lose less) on their many, many customers. They need location-based services to prevent fraud and manage expensive assets, not “reward mayors.” That, in turn, means the enterprise is looking for a whole different way to leverage LBS.
Consumer vs. Enterprise Locating
Consumer apps typically use GPS or Wi-Fi locating. These solutions can have between good and great accuracy and can work decently indoors. On the downside, these solutions do use quite a bit of battery life, so many users switch them off when they are not needed.
The alternative is the dull and boring locating solution based on the cell network, which is sometimes called “network centric” locating. That solution uses cell towers to determine approximate, but often “good enough,” device locations. And, while it’s not as accurate as GPS or as “sexy” as Wi-Fi, it is ubiquitous. There are about 120,000 towers in the U.S. which cover 99% of the population. Another upside: network locating does not deplete batteries at the rate GPS and Wi-Fi solutions do. And, finally, network locating does not require that an app be downloaded. Those reasons tend to push enterprise LBS developers to “network centric” locating solutions.
Saving Time and Money with a Locate
Imagine you are a bank and you want to use proximity to help prevent fraud. You want to be sure that the person using the credit card to pay for his $200 worth of Chinese food is actually in or near the restaurant. Ideally you’d want to ping the cell phone and confirm its proximity to the card (as reported by the machinery when the card is swiped at the restaurant, for example). If the locations match, it’s a good bet the card has not been stolen.
Let’s look at that location pinging application from a software development perspective. The developer would need to take into account that there are four big cell carriers in the U.S. (Sprint, T-Mobile, Verizon and AT&T) and each would have its own network-centric locating procedure and API. How will you build a tool to ask whatever carrier the patron uses for a location? Will you need to build four different apps? No. Luckily all four have selected the same location gateway provider, LOC-AID
. AT&T’s decision was announced today (press release). That means the enterprise developers can build the cell network-based apps against one API to cover all four carriers.
Who are These Enterprise Developers?
Who are those enterprise developers? Think of big banks, credit card companies, governments and large marketers. Their huge user bases require that applications be applicable to everyone, not just the 17% of U.S. handsets that are currently classified as smartphones, or the subset of those users who will download an LBS app. These locating solutions must work for anyone who is carrying a cell phone, a generic, non-smart cell phone with no extra apps installed. It even has to work on those “disposable” cell phones. (And it does.)
There’s big money here for LOC-AID. These enterprise players can and will pay (up to ten cents per locate) for a location. Contrast that with developers of consumer apps who pay “nothing” for the GPS or Wi-Fi locates used in consumer apps. Why will the enterprise pay? Because, as LOC-AID CEO Rip Gerber so deftly put it, “They are replacing a much bigger cost,” such as someone stealing thousands of dollars from a customer’s account.
Running the Numbers
Gerber shared a story to help make sense of the numbers. Say you are making a credit card purchase at Macy’s for some shirts. You swipe the card and the clerk says, “A representative from Wells Fargo wants to speak to you.” You get on the phone and detail your last few purchases or your social security number. The voice on the other end thanks you and approves your purchase. What’s that all about? It’s a confirmation that you are, indeed, “you” and not someone who stole your credit card. Put another way, your transaction came up as a “false positive” in the bank’s fraud prevention process. The cost of that phone call (in addition to your annoyance)? About $30! The ten cents per locate noted above does indeed sound like a bargain now, doesn’t it?
Putting the Pieces Together
While I understand the business argument for using location, I was still a bit fuzzy on how the rest of the story played out. I challenged Gerber. For these scenarios to work, I pointed out, the bank or credit card company would have to have the user’s cell phone number on file. Gerber and I agreed we thought that perhaps 10% of people would have given their cell numbers to their bank card provider. Nope, he noted, it’s more likely to be 40% to 60%. “The cell phone is becoming the primary number for many people,” he confirmed. Further, he noted, banks and credit card providers are working hard to gather those data from individuals who have not yet shared them, pulling those percentages even higher. (I can attest to that; the day after I drafted this article I went to the bank to change the mailing address on an account. The address update form included three different phone number fields: home, work and cell.)
Okay, let’s say the bank does have the patron’s phone number. Can the bank legally get the location of the phone, I asked Gerber? He explained that yes, indeed they can. The fine print in bank and credit card agreements includes language that essentially says these companies can use data you provide to protect you. That, the banks argue, gives them the “ok” to get a location on your cell phone and use it to try to prevent fraud. Gerber noted that the number one fear among consumers today is identity theft, so while scary for some, this process may be heartening for many.
Carriers are Waking Up to Network-centric Locating
So, why don’t we hear much about LOC-AID and these types of uses of location-based services? There are a few reasons. First, the “developers” are not the hip startups that we read about launching their wares at South By Southwest or Where 2.0. These developers are the corporate IT departments, who are less likely to share their stories and apps. Second, LOC-AID is quite happy to be the “Intel Inside” for its customers’ use. Besides, Gerber points out, the relationship you have with your financial institution should not include any names you don’t know. It’s about you and Citibank or you and Fidelity, not you and LOC-AID.
Having made the case for network-based location, Gerber is also realistic that wireless carriers are “late to the party.” But they’ve “woken up,” he notes and are now tapping into location in new ways, and putting more money into his company coffers.